Rentals most popular despite share surge

The belief in property was even higher in Auckland. Photo / Natalie Slade

Term deposits shoved into second place, quarterly survey shows.

Rental property is back on top as the most popular place for people to invest their money despite a stellar run from the New Zealand sharemarket last year.

A quarterly survey undertaken by the ASB bank found 19 per cent of those questioned believed property was the best place to make money for the last three months of 2012.

Rental property overtook term deposits which have been the most popular place to invest since the start of 2010, apart from one three-month stretch last year.

Bank savings accounts were seen as the worst place to invest with just 6 per cent support, while publicly listed shares were only slightly better at 7 per cent.

Bank savings accounts have been paying interest of between 2.5 to 3 per cent for on-call savings while term deposit rates are around 4 to 5 per cent a year.

Conversely, the New Zealand sharemarket's NZX-50 index gained more than 24 per cent last year - its best year since 2003.

Jonathan Beale, head of wealth advisory at ASB, said appetite for rental property was nearly back to where it was before the global financial crisis, when it averaged around 22 per cent. "Property prices are front page news again."

And the belief in property was even higher in Auckland.

The survey found 24 per cent of Auckland respondents believed property was the best place to make money, up from 23 per cent in the previous quarter.

Property hit a low point of 13 per cent in 2011 after the National-led government tweaked the tax benefits in a bid to level the playing ground between property and other types of investments. But the move seems to have failed to dampen enthusiasm for bricks and mortar.

Critics of high house prices say the tax system still favours property investors. Last week Auckland accountant Alan Dudson said property investors could still deduct the cost of rates, insurance, maintenance and mortgage interest against their rental income.

"An investor has the huge advantage of being able to gear his or her portfolio to pay little tax on their investments and deliberately offset any further loss against other earned income."

Beale said it was a surprise term deposits remained so popular.

"It is a surprise term deposits are up there when rates are low, especially when you look at the New Zealand sharemarket, which is steaming ahead. It goes to show how many people don't have shares."

KiwiSaver and managed funds were the next most popular at 14 per cent. That is the highest level KiwiSaver has hit since it was launched in 2007.

Overall investor confidence remained flat at a net 13 per cent - the same level as the previous quarter.

Beale said flat was not bad considering the concerns around America hitting its fiscal cliff at the end of last year. "All that international stuff does flow over even if people may not understand it."

At the end of 2009 net investor confidence hit a high of 30 per cent. Beale did not see a return to that level in the short term.

The survey data was based on 660 online interviews with adults aged 18 years and older throughout New Zealand.