Shares outperform property, but not popular investment choice


There is no sign of the property market slowing down, if the latest ASB Investor Confidence survey is anything to go by.

Their 'own home' was the number one choice when people were asked which investment they thought would provide the best returns over three months.

It was the choice of 21 percent of people surveyed, with 18 percent selecting rental property.

Shares were selected by just six percent of people surveyed. That's despite New Zealand shares outperforming property over the past 12 months.

The NZX50 share index rose 23.3 in the 12 months to July, while New Zealand residential property prices rose 14 percent over twelve months, according to QV figures released yesterday.

Their own home was not only the most popular choice when people were asked which investment would perform the best, it was also the main investment for 36 percent of those surveyed.

ASB's General Manager of Wealth Jonathan Beale says the perception of the home as an investment is unusual by traditional investment standards.

"Thinking of your home as an investment is not a great idea. Yes, it's wise to pay off your mortgage as quickly as possible to be debt-free, but your house is first and foremost the roof over your head, not a financial tool to make us wealthy."

The 'own home' choice of best investment (21 percent) was followed by:

Term deposits are rising in popularity at the same time that term deposit rates are falling.

Mr Beale says: "The low point in investor confidence last quarter has led to a slight increase in the use of safer investment types, such as bank savings and term deposits."

"It's astonishing really, when you consider the performance of the NZX over the last year, that people feel more positive about the returns from term deposits.

"The hidden story here really is the New Zealand share market."

Mr Beale says Kiwis naturally don't like investing, and are very focussed on property, with memories of the 1987 crash still lingering.

"It seems New Zealand is still not investing in the share market because of what happened in the 1987 sharemarket crash."

He says it is possible that the low ranking for KiwiSaver is partly because many people still do not think of it as part of their overall wealth. This could change as people approach retirement age.

A rise in the funds invested in people's KiwiSaver accounts will also likely boost people's awareness of KiwiSaver as an investment.

ASB says overall investor confidence rose significantly in the three months to June 30.

A net 9 percent of people believe the return on their investment will get better in the year ahead, compared to a net 3 percent in the first three months of the year.

The "net" figure is the difference between the number of people who feel the return on their investments will get better and those who feel the returns will get worse.

Investor confidence has been sliding since the June quarter of 2014, when it peaked at a net 29 percent.

ASB's Jonathan Beale says China's stock market volatility drove big dips in confidence in the September quarter of 2015 and the first three months of this year.

"The improvement in confidence over the last three months suggests investors have realised significant events in China were not the end of the world. In the end, it had minimal impact on fund performance; it was more a confidence thing."

"We can take the same lessons from the market volatility that followed Brexit more recently. These types of events happen and are not a reason to not invest or take your money out."