ASB Investor Confidence Survey Q3 2019

Investor Confidence in need of a spring boost

  • Investor Confidence has fallen from nett +15% to nett +8%, a more than three-year low. 
  • The decline has in part been driven by declining confidence in housing, particularly in Auckland. 
  • Low term deposit rates are also impacting the mood, and confidence in the returns from managed funds and KiwiSaver has slipped over the quarter.
  • Confidence in return on investments differed significantly by age group.

Investor Confidence has fallen to a three-and-a-half year low, as confidence in the return on a number of products and assets slipped over the quarter.

"There's not one big thing that has dented confidence in recent months. It’s more a case of expectations about the  returns on a number of investments slipping over this period," says ASB Senior Economist Chris Tennent-Brown.

The latest ASB Investor Confidence Survey shows confidence has fallen from 15% to 8% in the last quarter, driven by an increase in people feeling returns on their investments will worsen in the coming 12 months, up from 13% to 19%.

According to Tennent-Brown, the housing concerns evident in this survey have been ongoing for a while now, but he says there is potential for improvement over the coming quarters.

"It's really interesting that confidence continued to wane in Auckland, at a time when we think the clouds are starting to clear a bit. We now have very low interest rates, the Capital Gains Tax concerns have gone, and the busy period for home sales is upon us," says Tennent-Brown.

"I think the signals people will get from the market itself over the months before Christmas could really swing perceptions.

"We are expecting a reasonable sales period over the coming month or so, before we head into the quiet holiday period," says Tennent-Brown.

Sliding property perceptions continued in Auckland over the quarter. Views of investors' own homes as providing the best investment return dropped from 15% to 14%, and  views for investment properties fell from 21% to 19%, both softening a tad after larger falls in earlier quarters.

In contrast, confidence regarding rental properties outside of Auckland picked up, lifting from 12% to 15% over Q3.

"Outside of Auckland, the combination of lower interest rates, rising rents and house price gains all seem to be buoying confidence. We've seen reasonable house price appreciation in a number of areas outside of Auckland over the past year, and I think that’s what is helping sentiment," says Tennent-Brown.

Perception of returns in the coming year were significantly different between those under, and over 50-years-old.

On average, 33% of those under 50 felt returns on their investments would be better in the coming year with just 10% feeling returns would be worse.

In contrast, just 16% of over 50-year-olds felt return on their investments would be better in the coming year, whereas 30% felt returns would be worse.

Most respondents viewed term deposits, managed investments or superannuation as having the worst return on investment in the coming year, while KiwiSaver and own home were viewed positively.

"Term deposits have been the main investment for a large number of New Zealanders for years. The returns have been particularly important for savers wanting an income stream in retirement," says Tennent Brown.

"Kiwis were able to get much higher returns on term deposits 10 years ago, but rates have been falling over the past decade. Now the rates people get are below 3%, which we haven’t seen since the 1960s. So it’s not surprising this is frustrating savers and denting confidence in the older age brackets of the survey," says Tennent-Brown.

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

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