According to the most recent report from the SMSF Professionals’ Association of Australia (“SPAA”) called “Intimate With Self-Managed Superannuation”[i], more and more people who have set up their own self-managed super fund (“SMSF”) are investing in residential property. In fact the number of assets held in residential property almost doubled over the period of the report, increasing from 5.6 per cent in 2012 to 9.9 per cent in 2013. This investment in residential property came at the expense of cash and share allocations.
The report, which was released earlier this year, was based on SMSF adviser and trustee research, including a focus group and an online survey. It is designed to provide a “snapshot” of the SMSF industry as seen by superannuants and the professionals that advise them, including financial planners, accountants and practice principals.
Main findings from the report included:
- One third of SMSF trustees are considering investing in residential property in the future through their super fund.
- Among those trustees who have invested in property through their self-managed super fund, most have made the decision to do so by themselves. The report states that over 67 per cent of financial advisers said that residential property investment decisions were instigated by their clients. When they do seek advice from professionals such as accountants or financial planners, the discussion tends to concentrate on topics such as the loan structures that SMSF’s can use to help with buying an investment property. This suggests that trustees are using professional advisers not so much to tell them where to put their money, but rather how to do it.
- One of the reasons trustees are confident in their own choices for investment could be that the overwhelming majority of superannuants stick to what they know best. This is unsurprising considering most investors will gravitate towards investments they know the most about – whether it is cash, shares in large Australian companies such as banks or residential property. It is also easier than ever before for trustees to gain access to the research they need by themselves to make sensible and practical investment decisions.
- The age group over 50 continue to account for the greatest number of self-managed super funds, however professional advisers are reporting increasing interest in setting up an SMSF from within the 41-50 age group, followed by those in the 31-40 age group. The report also found that those in the younger demographic tended to be more interested in longer term goals, and understand the risk to reward ratio between short and long term strategies.
- According to the report trustee’s confidence in their investments is rising, thanks “largely to a turnaround in investment performance from previous years. Levels of confidence also appear to be strongly linked with how well SMSF trustees and super fund members are tracking in meeting retirement objectives, with 66.7% of trustees reasonably confident they will meet their retirement objectives.”[ii]
With a steadily rising property market and attractive investment opportunities, the trend for SMSF’s investment in residential property is unlikely to decline any time soon. The key to making decision on SMSF investment, and particularly residential property investment, is to conduct your own extensive research into the topic, but also taking advantage of relevant financial advice. If you are considering investing in property as a nest egg for your retirement, then it is also important to get advice from property investment experts such as Ironfish who can provide sound investment strategies, quality products and ongoing support.
[i] SMSF Professionals’ Association of Australia (SPAA) and Russell Investments, “Intimate with Self-Managed Superannuation”, 2014.
[ii] Ibid., p. 5.