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Investors' confidence pushed up by housing survey


Tuesday 28th January 2003

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Investor confidence is rising thanks to the strong housing market, a quarterly survey of investment confidence says.

The ASB Bank's December quarter survey reveals that overall confidence is up 6 percent on the previous quarter, meaning that a net 18 percent of respondents are positive about their future returns.

Residential rental property moved into first place as the best place to have one's money for the first time since 1999, said the survey. Sixteen percent of those questioned believed it would give the best return, up from 13 percent last quarter.

Those with most of their money in housing were particularly optimistic, with a net 32 percent expecting a better return this year.

Roger Perry, ASB's chief manager of investments, said the 12-month upturn in the housing sector had taken time to filter through to confidence , but it signalled more people could consider investing in residential property this year, prolonging the market's strength.

Continued high migration was likely to be another factor , he said. "Although the Government recently tightened the entry criteria for migrants, there is still a backlog of applicants who will flow into the country in 2003."

The confidence survey follows a specific housing confidence survey done by the ASB in December, which showed "cautious optimism" that house prices would rise and that more people believed interest rates would remain static .

ASB's chief economist Anthony Byett said modest price gains were forecast for the rest of the year.

After housing, term deposits were the next most popular choice of investment, with confidence nearly doubling to 14 percent.

Confidence among those with the bulk of their money tied up in terms deposits jumped from an all time net low of 27 percent to a net 58 percent.

Mr Perry said this was likely due to the strength of New Zealand's economy and high interest rates, although this could be dented after last week's signal from the Reserve Bank that interest rates could ease later in the year.

Managed investments were also up slightly at 14 percent, after taking a battering due to falling offshore equity returns. Optimism about that type of invesment dropped four points to 13 percent in the previous quarter.

Mr Perry said the risk of local economic effects from possible war in Iraq or the global economy appeared to be lower, although it still presented some uncertainty.

The US seemed unlikely to risk a long-term war . "It's short and sharp and you see passing effects for a month or two.

"Therefore we can expected investors' overall confidence to remain reasonably strong in the coming quarters."

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