It seems many homeowners think that their home is a great investment, but an ASB economist believes otherwise.
ASB’s latest investor confidence survey revealed a 3% increase in confidence in the December quarter, which may have been driven by people’s perception of their homes – with almost a quarter of the respondents believing that their home was an investment that would most likely provide the best return over the next year.
However, Chris Tennent-Brown, senior economist at ASB, warned homeowners that the details behind the increase were disappointing.
“The spring burst we've seen in the housing market has boosted confidence, but I really struggle with the idea of investor confidence being driven by an investor's house rather than things like KiwiSaver, the share market or investment property,” Tennent-Brown said, as reported by Stuff.co.nz. “It's problematic, because we know that simply relying on your house going up in value isn't an investment strategy.”
“While it's encouraging to see some expectations lift, we would like to see more diversification in investments, particularly as both KiwiSaver and the sharemarket had a stellar year in 2019, and are likely to continue providing solid returns over the long run.”
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Meanwhile, the percentage of people expecting best return from rental property dropped from 17% to 13% in the quarter, which proved that increasing rents and low interest rates were not offsetting the other issues faced by property investors.
“We'd like to see more confidence in investments outside of housing,” Tennent-Brown said. “But it's a big ask, the love affair with housing just keeps on going, as we have seen over spring.”
“I encourage people to have a look at their KiwiSaver returns over 2019 – it's been a very good year for investments, with some very strong returns from a number of different funds. It would be nice to see those returns flowing through to an increase in confidence in KiwiSaver.”