Investor confidence down

Investor confidence is down. That's no surprise considering the events taking place in markets. The sharemarket is taking a hammering, the housing market in New Zealand is slowing and the US economy looks to be heading into a recession.

Monday, February 18th 2008, 12:00AM

by The Landlord

The latest ASB investor confidence survey, taken in the December quarter shows investor confidence stands at 19% down from 22% in previous quarter and the survey high recorded in the second quarter last year.

What is surprising though, from the survey, is that investors' return expectations for managed funds and rental property.

On a national basis, the survey shows that an increasing number of people expected managed funds to give them a better return than rental property.

ASB Head of Investment Services, Jonathan Beale, says "month-by-month results show confidence in rental property had a rocky ride, plunging in October to 17%, as the US sub-prime market got a high profile. Confidence strongly rebounded to 26% in December to retain top position, matching the confidence record set for this asset class back in October 2005.

"It may be that bricks and mortar are seen as safe, despite the fact that the local housing market is showing some signs of slowing and interest rates are higher."

The survey shows there are quite different attitudes to rental property throughout the country. In the upper North Island there is a very strong view that rental property will give a superior return to managed funds. In the South Island rentals are still ahead of managed investments in terms for being perceived to provide better returns, but the difference is only three points compared to 13 in the top of the North Island.

What's more, the gap is narrowing between the two investment types down south.

Chart 1

This chart for the top of the North Island shows a gap between rental property (24%) and managed investments (11%) of 13 points, which is the largest gap among the three regions.

Top North Island

Chart 2

In the Lower North Island, rental properties are again considered to provide better returns than managed investments (a 6-point difference).

Lower North Island

Chart 3

In the South island, rentals are still ahead of managed investments in terms for being perceived to provide better returns (a 3-point difference), although the gap is narrowing and is the narrowest among all three regions in this quarter.

South Island