Recovering economy and other factors influence sentiment about returns
Investor confidence continues to improve a year after the COVID-19 pandemic hit the country – with a recovering economy, low-interest rates, the red-hot housing market, and impressive market recovery influencing sentiment about returns over the coming year, according to ASB.
The latest ASB Investor Confidence Survey revealed that investor confidence has finally entered the positive territory. The nett investor confidence (the difference between those that think investment returns will improve versus worsen in the coming year) has increased from -11% in Q3 to +2% for the three months to December following an increase the previous quarter from a survey low of -25% in Q2.
It also revealed that a record 25% of respondents ranked the family home as providing the best investment return. Meanwhile, views of rental property providing the best return remained flat for the third consecutive quarter.
“It’s great to see confidence recovering, which is understandable given things are going so much better than we expected only six months ago. Financial markets are performing well, and that’s having a positive impact on investments like KiwiSaver and managed funds, as well as direct investments in the sharemarket. However, this is being tempered by concerns about low-interest rates, the high valuation of property and shares, and uncertainty around COVID-19,” said ASB senior economist Chris Tennent-Brown.
However, general confidence is lower among those over 60 years old, with those under 30 the most optimistic, reflecting where the different age demographics tend to hold their assets.
“Generally those over 60 tend to have more income-focused investments, including term deposits, whereas the majority of under 30s are invested in KiwiSaver funds are likely to be the significant investment asset, and their own home if they have managed to get on the property ladder,” Tennent-Brown said. “It’s understandable they’re feeling confident given that KiwiSaver balances have recovered to pre-COVID levels, as well as the current strength of the property market and benefits of low borrowing costs.”
He said uncertainty around COVID-19 continues to affect overall sentiment, which is understandable.
“There is still a way to go for a full recovery in confidence, but it is good to see another quarter of significant improvement,” he continued.
“As the long-term picture becomes clearer, we should see confidence for many investments continue to lift. However, offsetting forces include housing affordability, low-interest rates impacting savers, and the continued impact of COVID-19, despite the hopes pinned on the roll-out of vaccines this year.”
