Investors opt for fixed rate deposits | Rotorua News | Local News in Rotorua

Rotorua investors are following the national trend, opting for lower risk investments and favouring fixed-rate term deposits over rental property.

A quarterly investment survey by the ASB showed term deposits were perceived as the investment giving the best returns for the seventh consecutive quarter. Rental property, which led by a significant margin five years ago (see graph), remains in second place for the second year in a row.

Spicers financial adviser Allan Williams said property had definitely lost some of its appeal in recent years.

"People seem to be more wary of rental property because the chance of capital gain is not as great as it was and many people, who have had to sell, have had capital losses."

Williams said tax changes had affected the attractiveness of rental property as an investment.

"Because of continuing low interest rates, people are looking at shares as they can provide a dividend yield in excess to bank deposits, in many cases, as well as a chance of capital gain."

He said markets declined significantly when Kiwi Saver was first launched, but it was no surprise to see it ranked third in the survey.

"People lost a bit of confidence, however, markets have picked up over the past 12 months and Kiwi Savers are experiencing better results - especially as [members] would have been making regular contributions and so continuing to buy investments when the market was declining."

Williams suggested the continuing popularity of term deposits could be because of experiences some investors had with finance companies and investment markets. He said people were now quite risk averse, but that was slowly changing. "I have been experiencing a lot more interest from investors as they start to realise the great buying opportunities that are out there."

Craigs Investment Partners' Tom Davies said he was seeing money being pulled from rental property, particularly in the commercial market.

He puts this down to the state of the market, the tax changes around property investment and the costs of owning properties. "People are looking at what the net return is, not just the gross rental."

Most people were tending towards fixed-interest investments or low-risk shares, which he said were getting "reasonable returns".

He said Kiwi Saver investments were, in fact, managed investments, but were probably ranked higher than other managed investments because of the government and employer contributions on top of the investment returns.

Davies stressed the need for a balanced portfolio, covering a range of investment types, to get a better average return and lower overall risk over time, and said it was important to include elements that would increase capital worth to keep ahead of inflation.