Investor confidence in the country’s housing market is at sixes and sevens, with the latest ASB Investor Confidence Survey showing perceptions that respondents’ own home will provide the best return on investment are at an all-time high in the regions, but at a four-year-low in Auckland.
Nationally, 22% of respondents viewed their own home as providing the best return on investment, however this masked a regional split. Some 26% of respondents from outside of Auckland viewed their own home as the best investment compared with just 15% of those in Auckland - down from 22% the previous quarter.
ASB senior economist Chris Tennent-Brown says the latest survey reflects uncertainty from a number of factors across the country.
“The interesting thing within our latest survey is just how all over the place sentiment is regarding housing. For example in Auckland, confidence in respondents’ own home providing the best return has fallen to the lowest level in four years. Furthermore, confidence in Auckland rental properties – although it picked up a little bit in the last quarter – is also low,” says Tennent-Brown.
“From a price perspective the Auckland property market has been going nowhere for the last few years. It’s expensive, you have foreign investment rules and bright-line tax tests impacting investors, recent uncertainty over capital gains tax, and just outright poor affordability because prices have gone up so much in earlier years – all weighing on the mood. It’s had support from lower interest rates and population growth, but not enough to overcome all these other negatives,” says Tennent-Brown.
“In contrast, if we look at the rest of the country outside of Auckland, confidence in respondents’ own home has never been higher. We’ve seen prices going up in a lot of areas outside of Auckland as low interest rates help people to make their purchase, and buyers look beyond Auckland,” says Tennent-Brown.
Despite the increase in owner-occupier home confidence outside of Auckland, confidence in rental properties remained flat at 13%.
“No matter where you are in New Zealand, rental property is being impacted by these uncertainties – tax changes, Loan to Value Ratio restrictions, and until recently, the uncertainty around whether the Capital Gains Tax could come in. However, the Reserve Bank has just cut interest rates which is positive for the housing market everywhere. We expect the latest dip in mortgage rates will provide a bit of support to the market, and lift prices in areas where they’re not overstretched. In contrast, for parts of Auckland we continue to think prices won’t be going up for a while, but they aren’t expected to fall either,” says Tennent-Brown.
Beyond the mixed forces stemming from housing sentiment, the latest survey shows overall investor confidence has recovered by 5% from the two-year low in Q4, 2018. This recovery is being driven by fewer people feeling things will get worse, rather than an increase in the percentage of those feeling more positive.
“It’s pleasing to see that sentiment has lifted, given the strong recovery we have seen in sharemarkets this year,” says Tennent-Brown. “However, it remains disappointing to see investor confidence in growth-orientated investments remaining so subdued, at a time when sharemarket performance has been so good. The New Zealand sharemarket has provided stellar returns over the past few years, and that’s flowed through to some very strong returns for KiwiSaver and managed funds. Yet shares, KiwiSaver, and managed funds all trail rental property and even term deposits when it comes to perceptions about the investments that will provide the best return,” 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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