11 November 2021
Confidence among New Zealand investors has returned to pre-pandemic highs this quarter, with Aucklanders significantly more confident than the rest of the country despite being in extended lockdown during the survey period.
The latest ASB Investor Confidence Survey shows nett investor confidence - the difference between those that think investment returns will improve versus worsen in the coming year - has lifted from 14% to 25% for the three months to October, matching the last peak in Q1 2017.
Confidence in Auckland meanwhile reached a more than seven-year high, lifting from 18% to 31%.
ASB senior economist Chris Tennent-Brown says the results are at odds with the general malaise of lockdown.
"It's been a very interesting quarter with the emergence of the Delta variant of COVID-19 in August and the subsequent lockdown of the country. We would have expected this to have more of an impact on confidence, but the results have shown the opposite. Investor Confidence has rebounded to its highest level in almost five years, and Aucklanders - who have been in lockdown for almost three months now - were the most confident they've been in more than seven years in this latest survey."
Nett 24% of South Islanders thought investment returns would improve in the coming 12 months, compared with 27% of those in the upper North Island, and 23% of those in the lower North Island.
"Investment confidence seems to have been resilient to the latest lockdown, in a similar way to the strength we have seen in business confidence surveys over recent months", says Mr Tennent-Brown.
"If we look at the various investment options, it's a mixed bag. Confidence in most bank products increased slightly, as did confidence in respondents' own home as the best investment for returns. Interest rates have moved higher for term deposits and this is flowing through to confidence in bank savings products.
"There doesn't appear to be one main driver behind the more upbeat Auckland view, although we do see higher confidence than the rest of the country in KiwiSaver, Savings Accounts, Shares and Term Deposits.
"Meanwhile rental property confidence dipped, most noticeably in Auckland where confidence fell from 23% to 15%. Of all the investments monitored, a rental property is the most hands on to manage, which could explain the impact we're currently seeing to Auckland's results.
"The very high levels of confidence we're seeing are encouraging, particularly given the day-to-day frustrations about lockdown. We expect that people are focusing on the longer term and, importantly, are more confident that lockdown is not going to have a big impact on their investments," says Mr Tennent-Brown.
In comparison to the +25% recorded this quarter, Investor Confidence dropped to -25% in the second quarter of 2020 at the peak of the first Level Four lockdown.
"Since the previous major lockdown, the labour market has held up well, reflected in very low unemployment. House prices have appreciated strongly, and investments haven't been volatile like they were a year ago when the pandemic first hit and sharemarkets dropped significantly.
"Overall, the huge uncertainty and associated market volatility we saw in early 2020 has not been repeated during the latest wave of the pandemic both here and abroad. That has really buoyed people's confidence. Although COVID-19 is having a health and economic impact, personal investments have largely performed well over the last year and investors are telling us they expect this to continue."
ASB reports covering a range of commentary can be accessed at our ASB Economic Insights page: https://www.asb.co.nz/documents/economic-insights.html