Real estate more appealing to SMSFs in turbulent share market: Belle Property
The current turbulent market will encourage more buyers to use their self-managed superannuation funds to buy property, according to Belle Property CEO Peter Hanscomb.
“Superannuation funds themselves have recently provided very low return on investment due to the current challenging economic conditions,” he says.
“Property is turning out to be a far more appealing investment opportunity given its consistency in capital growth and return caused by a growing population in Queensland.”
According to Hansomb, property is generally not as susceptible to market peaks and troughs as the share market, and therefore provides a safer environment for investors.
One of the most beneficial aspects of investing using an SMSF is that all costs associated with the property are paid by the SMSF.
This includes council rates, land tax (if it applies), loan fees and repayments, maintenance and repairs conducted on the property and the property management costs.
“This is particularly appealing, given the recent astronomical hike in stamp duty in Queensland. Most buyers would be keen to not have to be directly responsible for this added tax,” Hanscomb says.
Another advantage, he says is that the SMSF also receives all proceeds of rent or other income into a low-tax environment, and can improve or renovate the property as any other investor may.
“Despite home buyer and investor confidence being slightly shaken recently by the stamp duty increases, the local property market is actually currently providing a number of incentives to invest now.
“Interest rates are still low, and due to property values having stabilised, it is very affordable right now to enter the market at all price points.”
A survey carried out by Mortgage Choice found that about 15% of first-time property investors on the Gold Coast plan to use their self-managed super funds to buy their first investment property.
Nearly 6% intend to use their SMSFs to purchase the property in its entirety, and about 9% expect to use their super to help supplement other sources of funding.
About 6% of first-time Sydney investors and 5% of Melbourne investors plan to tap into their super funds when making their first property acquisition.
The March Multiport SMSF Investments Pattern Survey found that a least 13% of the 1,400 SMSFs administered by the firm are borrowing to invest using limited-recourse loans. (Multiport will publish an updated report over the next couple of weeks.)
The average property loan among Multiport client funds is $200,000, compared with $110,000 for shares and managed investments. And 56% of the loans taken by these SMSFs are invested in property.