New Zealand rental market slowing

Confidence in the rental property market in New Zealand is at its lowest point for four years despite rents rising, according to a new report.

Rental property has given the best returns of a property investment, according to the survey by ASB, one of the leading banks and investor providers.

But in the three months to June confidence in rental property providing the best returns has dropped three points to 16% of those surveyed. That brings rental property back to level-pegging with bank term deposits,

'The weak housing market has seen prices come under pressure, with equity in investment property retreating along with prices,' said ASB head of investment services Jonathan Beale. 'This may be challenging some investors' perceptions that the strong capital gains of recent years will continue into the future,' he added.

Real Estate Institute figures show the national median house price is down about 3.5% to $340,000 since November last year. Before that dip, prices had doubled in the previous five years.

Analysts now expect house prices to drop about 8% this year as the market weakens, and as much as 13% over 18 months.

But there is also good news for rental property investors. Official inflation figures show that housing rents rose 3.1% in the past year. But even that was outpaced by overall inflation of 4%.

Meanwhile, the ASB survey also found that confidence in term deposits has remained stable at 16% and confidence in bank saving deposits is not far behind at 15%.

Confidence that shares would produce the best return dropped from 9% to 5% in the March quarter after another period of market volatility, but rose back up to 8% in the June quarter.

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