Will Self Managed Super Funds Underpin Australian Residential Property Values?

So you’re worried about the value of properties being flat or worse for some time, and this is impacting on your ability to make a decision as to whether now is the time to plunge your hard earned money into purchasing an investment property?

One fact that should provide some comfort about residential property values holding ground or better over the longer term is the level of superannuation funds and borrowings that are currently being poured into the Australian residential property market. Since legislation changed a few years back the average mum and dad can now borrow money within a Self-Managed Super Fund SMSF to assist them with purchasing a residential investment property in Australia.

Given this information and knowledge do we predict that the amount of super money flowing into Australian residential property will increase or decrease over the coming decade? Simply put we predict that it will increase.

Our view is that as long as legislation doesn’t change further, more Australians will seek to diversify their superannuation investments moving their SMSF towards the perceived safety of residential property. At some stage in the future we may see as many as 1 in 5 Australians owning some form of direct real estate as part of their superannuation. This is not outside the realms of possibility.

What does this mean for the Australian residential property market? It means a new avenue of money and purchasers for the Australian property market via this relatively new ownership vehicle. This has the potential to create a spike in the level of demand over the next decade and a higher level of demand obviously put’s upward pressure on property prices.

Are we still in the early stages of this phenomenon? Yes.

Does purchasing residential property now with the awareness more SMSF money will end up in the Australian residential property market guarantee you will make money? No.

There are obviously many other factors that will affect the performance of any property that you purchase; such as the overall broader economy, interest rates, the property selected and your personal circumstances. However we at Property Planning Australia have confidence in the resilience of the Australia residential property market as a whole and more so specifically when purchasing well selected individual properties in certain streets & pockets. This is just one example of why we have this confidence.

If you would like to discuss owning residential property within a SMSF or your broader property and financial plan please click here to schedule a complimentary property plan meeting.

** Source: Adapted from ATO tables and previous ATO statistics (www.ato.gov.au)

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