SMSFs' investment in property continues to grow

By Larry Schlesinger
Monday, 29 August 2011

Self-managed super funds continue to invest in property, according to latest research by the Australian Tax Office.

Over the March quarter SMSFs invested an additional $500 million in direct real estate.

This increase coincides with the appeal of DIY super funds continuing to grow, with $3 billion added to SMSFs over this period, taking the total invested to $418 billion held by 7,500 funds.

The growing appeal of property follows new rules introduced in July last year that have made it easier for SMSF to borrow to invest in property.

The popularity of SMSF loans has spurred mortgage broker Mortgage Choice to review whether to add self-managed super fund loans to its product offering.

Mortgage Choice CEO Michael Russell says a sub-committee is investigating the risks and opportunities of offering the product and will report back to the executive over the next two weeks.

Currently three banks – St George, Commonwealth Bank and Westpac – offer SMSF loans.

Russell says the mortgage broker will tread cautiously: “It is a relatively new concept and we have not done SMSF lending before, so it is a new product to a borrower that we have never lent to before.”

A number of mortgage brokers already offer SMSF loans with industry body the Mortgage and Finance Association of Australia, arguing that there is “no evidence of any abuse which requires regulatory intervention”.

Mortgage brokers require a financial services licence (in addition to a credit licence) to be able to offer advice on SMSF loans.

For more about SMSFs investing in property, see our e-book 16 questions self-managed super fund trustees should ask before investing in property.

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written by First out best dressed, August 29, 2011

With prices expecting to flatline over the next decade those retiring earlier will clearly have the advantage of selling out before those that came later- it pays to be at the front end of the herd. Since prices are likely to stagnate rather than fall earlier retirees can cash out and crystalise all the growth tax free, and reinvest into higher yielding assets providing higher income- also tax free!