Investors play safe in housing

Investors play safe in housing

By NICK CHURCHOUSE – The Dominion Post

Wealthy investors still have their fortunes in housing, making them the most conservative investors in the Asia Pacific region, a survey shows.

The seventh quarterly ING investor dashboard survey canvassed investors with portfolios worth more than US$100,000 (NZ$173,000) in 13 countries.

ING investment strategist Stuart Millar said New Zealand investors always had the most conservative asset allocation, with 63 per cent of them holding residential property investments.

Housing had provided huge profits in recent years but was now looking less profitable over the long term and Kiwi investors were pessimistic about the sharemarket, with half expecting declines in the second quarter of 2009.

“In the fourth quarter [of 2008] investor sentiment dropped off a cliff,” Mr Millar said.

“The fact it has improved since then and equity markets have made new lows is probably a signal investors are becoming more resilient to the bad news.”

That could be seen as a potential shift in the outlook for growth assets.

“If you had a conservative portfolio it might make sense to [talk to your financial adviser about] adding some growth assets.”

More than 80 per cent of investors said they had no concern that the United States economy and government bailout package would affect their investments, which Mr Millar said reflected the typical safe style of Kiwi investors.

Regardless of that, he admitted one of the largest hurdles facing investors was how to gauge the increasing cost of borrowing.

“If you are an investor you want to lock in your rates for a period but at the moment those rates are quite high, reflecting the lack of credit availability.”

Without certainty over capital access, most investors were inclined to sit tight, a situation supported by the survey finding that 55 per cent of investors had not decided what investments to make in the second quarter of 2009.

Only 6 per cent were intending to invest more, while 39 per cent would reduce their active portfolio and hold more cash.

The level of conservatism in New Zealand did insulate investors from the shocks seen around the world, but also dampened the possible benefits.

Overall local investor sentiment was 26 per cent worse than the same time last year, similar to the drop in Australia.

Nine of the 13 markets surveyed fell into the pessimistic range, but the overall Pan-Asian index recovered to a “neutral” range largely because of optimism in China and India.

Mr Millar said the Chinese were upbeat because of fiscal injections of about 4 trillion yuan (NZ$1 trillion) from the government, and India’s demand was largely domestic so it was not affected as much by the rest of the world’s worries. “They are still growing so there will be plenty of investment opportunities there.”

One in five New Zealand investors surveyed had investments in China.

Mr Millar said the proximity and growing involvement with China lent itself to stronger private investment links.