SMSF direct property investment at a three-year high
As we look to what's ahead for 2012, Property Observer is republishing some of our most noteworthy stories of 2011.
Industry funds are gearing up to allow their members to invest directly in property at a time when self-managed super fund trustees have upped their exposure to bricks and mortar to the highest level in three years.
The $17 billion Cbus industry super fund, which has 655,000 members, is preparing to launch a direct property offering to their members next year.
Cbus Super is likely to allow its members and SMSFs to invest in a “combination” of assets. Cbus has $2.3 billion (14% of total assets) invested in property, with about $1.1 billion invested through its 100% owned property developer, Cbus Property. Assets include 8 Exhibition Street in Melbourne and 550 Bourke Street in Melbourne.
According to Multiport, direct property allocation among 1,600 DIY funds it manages, increased in the September quarter to 14.5% compared with 12.8% a year ago.
This rises to 16.8% when managed investments are included, meaning property as an asset class among SMSF portfolios is at highest level since December 2008.
In contrast, the allocation of Australian shares in SMSF portfolios continued, to fall dropping to 36% of the investment mix compared to 40.5% a year ago.
Nearly a quarter (24.7%) of SMSF funds are now being invested in cash and short-term deposits, up from 21.8% a year ago, while fixed-interest investments account for 14.1% of portfolios compared to 12.2% a year ago.
“As gearing within SMSFs continues to increase in appeal, perhaps exacerbated by current share market uncertainty, trustees are turning to property and gearing. Companies are developing products to make this process easier for trustees,” says Multiport CEO John McIlroy, Multiport released its own property gearing package earlier this year.
Property investment over last 12 months:
| 30 | 31 | 31 | 30 | 30 |
Direct Property | 12.8 | 12.4 | 13.7 | 13.7 | 14.5 |
Listed Property, Managed Funds & Syndicates | 3.5 | 3.3 | 2.4 | 2.3 | 2.3 |
Total % | 16.3 | 15.7 | 16.1 | 16.0 | 16.8 |
Source: Multiport Pty Ltd
The survey found that around 16% of the funds are currently using a limited recourse borrowing arrangement, with more than half of these (53%) doing so to invest in property and the remainder in financial assets.
The average property loan amount remains at around $217,000, compared with $238,000 against financial assets.
The overall asset allocation break-up as at 30 September 2011 was:
Sector | 30 | 31 | 31 | 30 | 30 |
Cash and short term deposits | 21.8 | 21.9 | 21.8 | 22.8 | 24.7 |
Fixed Interest | 12.2 | 11.8 | 11.0 | 12.3 | 14.1 |
Australian Shares | 40.5 | 41.4 | 41.0 | 38.9 | 36.0 |
International Shares | 7.3 | 7.1 | 8.8 | 8.7 | 7.9 |
Property | 16.3 | 15.7 | 16.1 | 16.0 | 16.8 |
Other (Hedge funds, agricultural funds, and private geared and ungeared trusts) | 1.9 | 2.1 | 1.3 | 1.2 | 0.5 |
Total | 100.0 | 100.00 | 100.0 | 100.0 | 100.0 |
Source: Multiport Pty Ltd
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