Houses still favoured investment

Residential property remains New Zealanders' favourite investment despite widespread predictions that house prices will fall, according to the ASB Investor Confidence report.

Some 23 per cent of respondents to the quarterly survey said they expected residential property to provide the best return, up 2 percentage points from the second quarter.

"This result flies in the face of continued speculation that the housing market is approaching the end of a cyclical upswing," said James Mitchell, head of relationship banking and financial services at ASB.

"It is consistent though with the continued average house price gains we are seeing at present."

Savings accounts and term deposits were expected by 12 per cent of people to deliver the best returns, up 1 percentage point.

Just 9 per cent of people thought shares would provide the best return and 10 per cent expected managed funds to perform best.

Overall investment confidence bounced back slightly in the third quarter after hitting a two-year low in the second quarter.

A net 13 per cent of respondents said they expected returns from their investments to be better in the coming 12 months than in the past 12 months, up from the 10 per cent who expected better returns three months ago.

"The small lift in confidence is consistent with the sharemarket hitting highs over the quarter and property prices continuing to generally rise," Mitchell said. "It is noticeable, though, that more people are saying they expect their investments to stay the same this year, rather than be worse or better.

"This more cautious note over the last couple of quarters is also consistent with widespread expectations that the business environment will get generally tougher over the next 12 months."