NZ investors' love affair with rental properties appears to be fading

New Zealand investor confidence in rental property has cooled in the past three months, and the popularity of other investment classes is gaining momentum, according to the latest ASB Investor Confidence Report.

Tuesday, May 18th 2010, 12:00AM

by The Landlord

The 2010 first quarter report indicates that investor attitudes are changing as the recession fades and as speculation mounts about loss of tax breaks for property investors in Thursday's budget.

"Markets are gaining some stability and the doom and gloom of the recession recedes," said ASB head of investment services Jonathan Beale. "All investment classes surveyed, with the exception of rental properties, shifted upwards in favourability as offering the best rate of return. Investors are now looking at a range of options to get the best returns they can on their capital. They are also more measured in their outlook."

This is reflected in investor confidence simmering down from record highs late last year. A net 23% of investors are expecting a better rate of return over the next 12 months, a fall of seven points since the December 2009 quarter.

About 17% of investors regard rental property as offering the best rate of return, though the gap over bank savings accounts and term deposits; both at 16%, has shrunk.

Managed investments at 10%, shares on 8% and KiwiSaver's 6% have all crept upwards as being favoured asset classes for better returns.

"Managed funds have done well over the past 12 months as they recover from the slump, and investors are starting to see their value as a long term investment option," said Beale.

The survey reveals that current KiwiSaver usage is up two points to 37%, the highest ever level recorded in the survey.

"More kiwis than ever have signed up to a KiwiSaver scheme to save for their retirement," Beale said. "It's been nearly three years since KiwiSaver was launched by the Government, so KiwiSaver schemes will now have a reasonable track record on which investors can judge performance. It's a good time for New Zealanders to take stock and review how their retirement savings are going."

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