Cautious investors return to term deposits

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Rental property remains out of favour following tax changes earlier this year, while term deposits have reached near-record highs because of the security they offer, according to ASB's Investor Confidence Survey released today.

Investors have become more cautious, with confidence slipping 4 percentage points in the September quarter, in part due to the damaging Canterbury earthquake in September, the collapse of South Canterbury Finance and the Southland snowstorm.

Net confidence eased to a net 15 per cent for the three months ended September 30, continuing its gradual decline from a peak of net 30 per cent at the end of 2009.

The index has returned to about the same level as the third quarter last year, and is well above the 3 per cent registered two years ago.

"Overall investor confidence has dropped, with a sharp dip of 7 points in the month of September alone," said Jonathan Beale, ASB's acting general manager of private banking and wealth management.

Twenty per cent of respondents favoured term deposits, one point below record highs two years ago.

"Before the financial crisis, term deposits languished well below rental property as the investment that offered the best returns," Beale said.

"However, over the past two years the two investment classes have had more mixed fortunes. Intense competition in the market for term deposits is also likely to be having an upward impact."

Rental property remained at last quarter's four-year low, equal with bank savings accounts at 14 per cent, after changes to property tax in the May budget.

"Property prices also remain flat across much of the country so investors may well be feeling cautious about the returns offered in the post-recession housing market," Beale said.

Managed investments improved by 1 point to 11 per cent, with KiwiSaver stable at 9 per cent and shares down 3 points at 5 per cent.

- NZPA