The shine has come off rental property ahead of tomorrow's budget, according to the latest ASB Investor confidence report.
ASB head of investment services Jonathan Beale says the attitudes of investors are changing as the recession fades and as speculation mounts ahead of the Budget.
The first-quarter report showed rental property declined in popularity as the investment option that offered the best rates of return, with other investment classes now gaining momentum.
"Markets are gaining some stability as the doom and gloom of the recession recedes.
All investment classes surveyed, with the exception of rental properties, shifted upwards in favourability as offering the best rate of return.
Investors are now looking at a range of options to get the best returns they can on their capital.
They are also more measured in their outlook.
"All eyes were on the Budget for confirmation of expected adverse changes to tax on property investment, Mr Beale said.
In terms of the best rate of return, rental property at 17%, was now only 1% ahead of bank savings accounts and term deposits, both at 16%.
Term deposits had jumped a net 4% in the survey, possibly reflecting the recent pick-up in interest rates as the Reserve Bank readied itself to lift the official cash rate in coming months.
Managed investments (10%), shares (8%) and KiwiSaver (6%) had all crept upwards as being favoured asset classes for better returns.
"Managed funds have done well over the past 12 months as they recover from the slump.
Investors are starting to see their value as a long-term investment," he said.
The survey showed current use of KiwiSaver was up 2 points to 37%, the highest ever level recorded in the survey.
NZ Property Investors Federation vice-president Andrew King told the Otago Daily Times that proponents for increasing property tax frequently referred to 2008 when the industry made a combined $500 million loss.
"However, this is the largest loss the industry has ever made, primarily due to high mortgage and interest rates."
Inland Revenue data provided by the federation showed rental property had only made losses in two of the past 28 years which Mr King said showed that rental property was primarily a taxpayer.
"With interest rates reductions over the past 18 months, we expect the losses of the last two years will reverse, and the industry will once again be a net taxpayer."
There were about 250,000 rental property owners in New Zealand providing about 400,000 rental properties.
That corresponded to 1.3 million people who invested in KiwiSaver alone.
There was more money invested in both the NZX and managed funds in New Zealand than in rental property, Mr King said.
According to Statistics New Zealand, there was $55 billion invested in the sharemarket and $61 billion in managed funds.
That compared with up to $40 billion in rental property.
