With low mortgage rates and rising rental returns, New Zealanders have returned to property as their favoured investment.
For the first time since the beginning of 2010, rental property came out top in ASB's latest quarterly investor confidence survey of investments that people felt would give them the best return.
ASB wealth advisory head Jonathan Beale said 19 per cent of investors surveyed believed rental property offered the best returns, up from 14 per cent in the last quarter. Kiwis' enduring love affair with rental property had rekindled, after 24 months in the cold.
"The low-interest-rate environment seems to be influencing investor perceptions markedly. Investors appear to be moving away from the traditionally lower-risk investment options, and searching for those with the potential for higher returns."
Property Investors' Federation president Andrew King said sentiment was swinging back to rental properties, with cashflows looking positive. "Investors feel the market isn't going to go backwards and, in some areas like Auckland and Christchurch, it is starting to go forward ... that starts to give people confidence.
"They're going to be making better cashflow, due to good rental returns and low interest rates."
With the cost of overseas funding reducing recently for banks, mortgage rates have also been cut. Kiwibank created a 4.99 per cent one-year fixed rate for people with 30 per cent equity, and the other big retail banks followed suit.
ANZ National yesterday began another round of fixed-rate mortgage cuts, dropping its two-year rate to 5.49 per cent and its 18-month rate to match Westpac's 5.55 per cent.
The property market has been improving, with the number of houses sold nationally in April up 14 per cent from a year earlier. But prices eased to a median of $365,000 in April, after a record high of $370,000 in March.
Rising house prices in some areas were encouraging buyers into the market, King said. "It's making more people think they want to get in now, before things really heat up and start to take off."
Real Estate Institute chief executive Helen O'Sullivan said the people investing in property were mostly habitual investors, not newbies. "It's people who know their onions, have done their research.
"They are still very rational purchasers, investors. They don't fall in love – they do the numbers." They were investing in property for cashflow,, not looking at capital gain."
Anecdotally Auckland and Christchurch appeared to be the most popular areas with property investors, as well as pockets of Dunedin.
O'Sullivan said rental prices were likely to continue to rise in Auckland, with supply of rental properties failing to match demand.
In the ASB survey, 16 per cent of respondents said term deposits would give the best returns while 13 per cent favoured managed investments and superannuation, 10 per cent selected Kiwisaver and public shares and 8 per cent thought a bank savings account provided the best return.