Property gets harder for SMSFs as downturn bites

Sep 17, 2018, 10:24 AM

SMSFs are reducing exposure to property in their asset allocations, reflecting wider trends in  the property downturn hitting Sydney and Melbourne markets.

An SMSF investment patterns survey from SuperConcepts reveals the asset allocation to the property sector decreased from 19.5% to 18.9% for the June 2018 quarter.

“We’re seeing the start of a trend that will be sustained particularly as the residential market softens and property is becoming less available to SMSFs as an investment option,” says Phil LaGreca, SuperConcepts Executive Manager of SMSF Technical and Strategic Services.

“It’s not just residential though, we expect property allocations in SMSFs overall to continue falling as access to finance tightens and lenders start to increase their interest rates.

“Forty per cent of the properties owned in the survey used borrowings to buy property and the conditions around that are being tightened.

“Based on performance of the A-REIT the allocation should have increased to 19.9%.

“However as direct residential and commercial property allocation represents about 83% of the total property investments, the figure has fallen,” says Mr LaGreca.

A total of 962 residential or commercial properties were owned by the 2600 SMSF funds covered in the SuperConcepts survey.

The split was 30% commercial versus 70% residential, compared to 42% commercial versus 58% residential based on value.

The average value per property was $681k for commercial property and $410k for residential property.
SuperConcepts undertakes a quarterly analysis of its SMSF client investments to get a closer insight into how SMSF trustees invest and to identify emerging investment trends.

The survey covers 2,600 funds, a sample of the SMSFs SuperConcepts administers and the investments they held at 30 June 2018. 

Funds are administered on a daily basis which ensures data is based on actual investments and is completely up to date. The assets of the funds surveyed represent around $3.2 billion.

The full report is expected in coming weeks. 

Media contact: 
Garth Montgomery
0408 864 851