Sharemarket Bounce And Buoyant Auckland Housing Market Reflected In ASB Investor Confidence Survey

Published: Tue 27 Oct 2020 12:12 PM
Investor confidence has recovered significantly in Q3, climbing 14 points from the previous quarter’s record low.Aucklanders’ continued confidence in the housing market was a key factor.Low term deposit returns, which are expected to go even lower, are acting as a counterbalance
Confidence among New Zealand investors has recovered significantly in the past quarter thanks to a stabilising sharemarket and the better than expected housing market, according to ASB.
The latest ASB Investor Confidence Survey shows net investor confidence – the difference between those that think their return on investment would get better or worse in the coming year – has lifted from the previous quarter’s record low of -25% to -11% for the three months to September.
This coincides with ASB economists aggressively revising house price forecasts in recent weeks, saying the ‘housing correction’ has passed, and predicting annual house price inflation will peak at 12% for the year to June 2021.
ASB senior economist Chris Tennent-Brown says, “Going into lockdown, many pundits and government agencies forecast a material housing market correction to accompany New Zealand’s deepest economic recession in decades. We were less pessimistic with our prediction of a 6% fall in prices, but some were suggesting house price declines well into double-digits.”
“Fast forward a few months and national house prices have bounced back to fresh record highs. Uncertainty is never good for confidence but as the COVID picture in New Zealand has become clearer, a rising tide of confidence has been reflected in this survey.”
But Aucklander’s confidence did not extend beyond the housing market. The resurgence in confidence was mainly driven by those outside of Auckland, where confidence increased from -23% to -7%, compared with Auckland where the increase was a more muted -19%, up from -27% in the June quarter.
The overall lift in confidence did not translate into a materially more positive view in investor expectations for any particular investment class, however, with confidence in shares providing the best return on investment down 1% to 11%, and own home and rental home unchanged at 20% and 19%, respectively.
Mr Tennent-Brown said there are a number of factors affecting investor sentiment as a whole.
“There is so much uncertainty at the moment, which is causing a lot of volatility for investments like shares, KiwiSaver and managed funds.
“In the regions we have seen a slight dip in expectations for housing – both rental and own home – whereas in Auckland we have seen expectations lift, resulting in a net unchanged result across the country.
The factors influencing Auckland’s housing market, which include increasing demand and a more positive than expected outlook for the labour market, mean house prices are likely to continue climbing in Auckland, and we expect to see this reflected in coming quarters in terms of investor confidence. But we don’t think the gains will be focused on Auckland – prices across the country should garner support from the combination of low interest rates and the economic recovery.”
Confidence was also split by age, with 32% of under 40-year-olds expecting return on investment to improve in the coming 12 months, compared with net 21% of 40 to 49 year-olds, net 20% of 49 to 50 year-olds and just net 11% of those over 60.
“Young people with long investment timeframes are well positioned to invest in growth assets like shares that have been volatile but strongly positive since the dip in March. In contrast, older investors with more of an income focus are being impacted by the low interest rate environment, and not expecting it to improve,” says Mr Tennent-Brown.
The latest survey also showed some of the shine had come off KiwiSaver in the past few quarters. In the three months to March this year, KiwiSaver was viewed as the best bank product for return on investment at 16% - significantly higher than term deposits, managed funds or a bank savings account. Confidence dropped to 12% in the June quarter and 11% this quarter.
Mr Tennent-Brown attributes the mood shift to the swings in members’ balances over the year, with record high KiwiSaver returns in 2019 boosting confidence in the first quarter of the year, and COVID uncertainty and falling fund balances contributing to the decline in the second two quarters.
“It’s been a volatile year for sharemarkets, and that’s flowed through to investments like KiwiSaver. But hopefully people have stuck with their long-term strategies and seen a decent recovery in KiwiSaver balances over the past six months,” says Mr Tennent-Brown.
“Overall investor confidence still has plenty of room for improvement. Uncertainty always leads to a lack of confidence in a range of areas, including financial standing and investments, but we have a lot of positives in New Zealand which are helping ease some of that uncertainty and discomfort that investors are feeling,” says Mr Tennent-Brown.
ASB reports covering a range of commentary can be accessed at our ASB Economic Insights page:
ASB Bank
Helping you get one step ahead.
In 1847, ASB opened as the Auckland Savings Bank with the pledge: 'to serve the community; to grow and to help Kiwis grow'. And that is very much what ASB is about today.
ASB is a leading provider of integrated financial services in New Zealand including retail, business and rural banking, funds management and insurance.
ASB strives to consistently provide its customers with outstanding service and innovative financial solutions. They're dedicated to providing simple financial products that allow their customers to bank with them how and when they want.
We all have our own ways to measure progress, and our own stories about the things that matter to us. Whatever way you choose to measure progress, and whatever your goals, ASB is there to help you get one step ahead.
Contact ASB Bank

Next in Business, Science, and Tech

Largest Drop In Terms Of Trade In A Decade As Dairy Export Prices Sour
By: Statistics New Zealand
Election Boosts October Job Numbers
By: Statistics New Zealand
New Year Border Exception For Seasonal Workers In The Horticulture And Wine Industries
By: New Zealand Government
Discovery, Inc. Completes Acquisition Of New Zealand’s Mediaworks TV Ltd
By: Discovery
Big Year Underway At Albatross Colony
By: Department of Conservation
ASB Survey Reveals Majority Of Kiwis Expect House Prices To Keep Climbing
Births And Deaths: Year Ended September 2020
By: Statistics New Zealand
NZ Economy Holding Up Well Amongst The Developed World, Forecast To Finish The Year Down 3% On 2019
Govt Goes “hard And Early” On RSE Workers
By: ACT New Zealand
Bringing RSE Workers Back The Right Move
By: Business NZ
Cream Of The Crop Will Get To Market
By: Auckland Business Chamber
Horticulture Industry Appreciates Government’s Decision On RSE Workers
By: Horticulture NZ
Skyrocketing house prices: Economist says Reserve Bank, govt, trying to address pandemic
NZ Govt Considers Making House Prices Part Of RBNZ Mandate
By: XE Money Transfer
Māori Population Estimates: At 30 June 2020
By: Statistics New Zealand
View as: DESKTOP | MOBILE © Scoop Media