Residential property delivers returns up to 100% higher than balanced super funds

Media release - 17 April, 2012

Bricks & mortar trumps super funds

  • Over the last 10 years balanced funds have delivered average annual returns of 5.1%.[1]
  • Over the same period, residential property Australia-wide has recorded capital gains of up to 11.04%[2] annually – more than twice the total growth achieved by balanced funds.

Angus Raine, CEO of leading property group Raine & Horne, says many Australians could be a lot better off in retirement by investing in bricks and mortar, rather than pinning all their hopes on a balanced super fund.

Mr Raine says, “While industry statistics regularly suggest that between 70% and 80% of workers have their super invested in a balanced fund option, what many workers don’t realise is that the term ‘balanced’ fund is a misnomer.”

A balanced fund invests in a mix of local and international asset classes such as shares, bonds, listed (commercial) property and cash. Yet despite the term ‘balanced’ these funds often have 60% to 70% of their members’ money invested in high risk, growth style markets such as Australian and international shares.

“What concerns me is that over the last ten years Australian shares have recorded average annual gains of just 6.8%, while international shares have returned a woeful average annual loss of 2.8%[3]. Not surprisingly over the last decade, investors in balanced super funds have experienced a modest annual return averaging just 5.1%[4],” said Mr Raine.

“It begs the question why superannuation funds have such a significant investment in these highly volatile asset classes, which is putting the retirement lifestyle of many Australians in jeopardy.”

By contrast, Australia’s residential property market has delivered far more stable – and healthier, long term returns.

“It takes time to sell a property, so people can’t simply bail out if the market experiences a soft patch. This takes a large degree of volatility out of the property market,” said Mr Raine.

Average annual property returns up to 11.04%

Across Australia, the 10-year returns for all property markets, except Sydney, eclipse those of balanced super funds.

“These are just the capital appreciation figures, they do not include rental income returns,” said Mr Raine.

In Darwin for instance, 10-year average annual capital growth ranges from 11.04% for apartments to 9.1% for houses. Hobart has delivered 10-year average annual price appreciation of up to 10.3% for houses[5].

Residential property – 10-year average annual capital growth

Market

Houses

Units

ACT

8.27%

8.42%

Adelaide

7.86%

8.70%

Brisbane

8.21%

8.41%

Darwin

9.81%

11.04%

Hobart

10.3%

9.37%

Melbourne

7.51%

6.54%

Perth

9.47%

8.67%

Sydney

4.73%

4.53%

Source: Residex as at end February 2012

Investing now for retirement

Mr Raine says one sensible strategy is for workers to invest today in the property they would like to live in during retirement.

“Whether it is an inner city apartment or a sea change house, rent the property out today, let the tenant help pay off the mortgage, and use negative gearing benefits to reduce your current tax bill,” explains Mr Raine.

“Then when you are ready to retire, sell off the family home and receive a tax free lump sum from the proceeds to live on in retirement, and move into your dream dwelling – paying today’s prices, not the higher price tag you could expect to pay as a consequence of capital growth several decades down the track.”

“This approach puts workers in control of their retirement lifestyle rather than relying on a super fund manager who has no idea of your personal aspirations – yet who is holding the reins of your nest egg,” adds Mr Raine.

-ENDS-

 

For further media information contact:

Angus Raine, CEO Raine & Horne on (02) 9258 5422 or 0409 920 697

Andrew Harrington, National Marketing & Communications Co-ordinator on 02 9258 5400

 


[1] SuperRatings Latest returns to 29 February 2012  -  http://www.superratings.com.au/latestreturns

[2] Residex Capital city market analysis for February 2012  -  http://blog.residex.com.au/2012/03/15/austratlia-as-a-whole/

[3] SuperRatings Latest returns to 29 February 2012  -  http://www.superratings.com.au/latestreturns

[4] SuperRatings Latest returns to 29 February 2012  -  http://www.superratings.com.au/latestreturns

[5] Residex Capital city market analysis for February 2012  -  http://blog.residex.com.au/2012/03/15/austratlia-as-a-whole/

 

Media release

Tuesday, 17th April 2012

Residential property delivers returns up to 100% higher than balanced super funds

·        Over the last 10 years balanced funds have delivered average annual returns of 5.1%.[1]

·        Over the same period, residential property Australia-wide has recorded capital gains of up to 11.04%[2] annually – more than twice the total growth achieved by balanced funds. 

Angus Raine, CEO of leading property group Raine & Horne, says many Australians could be a lot better off in retirement by investing in bricks and mortar, rather than pinning all their hopes on a balanced super fund.

Mr Raine says, “While industry statistics regularly suggest that between 70% and 80% of workers have their super invested in a balanced fund option, what many workers don’t realise is that the term ‘balanced’ fund is a misnomer.”

A balanced fund invests in a mix of local and international asset classes such as shares, bonds, listed (commercial) property and cash. Yet despite the term ‘balanced’ these funds often have 60% to 70% of their members’ money invested in high risk, growth style markets such as Australian and international shares.

“What concerns me is that over the last ten years Australian shares have recorded average annual gains of just 6.8%, while international shares have returned a woeful average annual loss of 2.8%[3]. Not surprisingly over the last decade, investors in balanced super funds have experienced a modest annual return averaging just 5.1%[4],” said Mr Raine.

“It begs the question why superannuation funds have such a significant investment in these highly volatile asset classes, which is putting the retirement lifestyle of many Australians in jeopardy.”

By contrast, Australia’s residential property market has delivered far more stable – and healthier, long term returns.

“It takes time to sell a property, so people can’t simply bail out if the market experiences a soft patch. This takes a large degree of volatility out of the property market,” said Mr Raine.

Average annual property returns up to 11.04%

Across Australia, the 10-year returns for all property markets, except Sydney, eclipse those of balanced super funds.

“These are just the capital appreciation figures, they do not include rental income returns,” said Mr Raine.

In Darwin for instance, 10-year average annual capital growth ranges from 11.04% for apartments to 9.1% for houses. Hobart has delivered 10-year average annual price appreciation of up to 10.3% for houses[5].

Residential property – 10-year average annual capital growth

Market

Houses

Units

ACT

8.27%

8.42%

Adelaide

7.86%

8.70%

Brisbane

8.21%

8.41%

Darwin

9.81%

11.04%

Hobart

10.3%

9.37%

Melbourne

7.51%

6.54%

Perth

9.47%

8.67%

Sydney

4.73%

4.53%

Source: Residex as at end February 2012

Investing now for retirement

Mr Raine says one sensible strategy is for workers to invest today in the property they would like to live in during retirement.

“Whether it is an inner city apartment or a sea change house, rent the property out today, let the tenant help pay off the mortgage, and use negative gearing benefits to reduce

Media release

Tuesday, 17th April 2012

Residential property delivers returns up to 100% higher than balanced super funds

  • Over the last 10 years balanced funds have delivered average annual returns of 5.1%.[1]
  • Over the same period, residential property Australia-wide has recorded capital gains of up to 11.04%[2] annually – more than twice the total growth achieved by balanced funds.

Angus Raine, CEO of leading property group Raine & Horne, says many Australians could be a lot better off in retirement by investing in bricks and mortar, rather than pinning all their hopes on a balanced super fund.

Mr Raine says, “While industry statistics regularly suggest that between 70% and 80% of workers have their super invested in a balanced fund option, what many workers don’t realise is that the term ‘balanced’ fund is a misnomer.”

A balanced fund invests in a mix of local and international asset classes such as shares, bonds, listed (commercial) property and cash. Yet despite the term ‘balanced’ these funds often have 60% to 70% of their members’ money invested in high risk, growth style markets such as Australian and international shares.

“What concerns me is that over the last ten years Australian shares have recorded average annual gains of just 6.8%, while international shares have returned a woeful average annual loss of 2.8%[3]. Not surprisingly over the last decade, investors in balanced super funds have experienced a modest annual return averaging just 5.1%[4],” said Mr Raine.

“It begs the question why superannuation funds have such a significant investment in these highly volatile asset classes, which is putting the retirement lifestyle of many Australians in jeopardy.”

By contrast, Australia’s residential property market has delivered far more stable – and healthier, long term returns.

“It takes time to sell a property, so people can’t simply bail out if the market experiences a soft patch. This takes a large degree of volatility out of the property market,” said Mr Raine.

Average annual property returns up to 11.04%

Across Australia, the 10-year returns for all property markets, except Sydney, eclipse those of balanced super funds.

“These are just the capital appreciation figures, they do not include rental income returns,” said Mr Raine.

In Darwin for instance, 10-year average annual capital growth ranges from 11.04% for apartments to 9.1% for houses. Hobart has delivered 10-year average annual price appreciation of up to 10.3% for houses[5].

Residential property – 10-year average annual capital growth

Market

Houses

Units

ACT

8.27%

8.42%

Adelaide

7.86%

8.70%

Brisbane

8.21%

8.41%

Darwin

9.81%

11.04%

Hobart

10.3%

9.37%

Melbourne

7.51%

6.54%

Perth

9.47%

8.67%

Sydney

4.73%

4.53%

Source: Residex as at end February 2012

Investing now for retirement

Mr Raine says one sensible strategy is for workers to invest today in the property they would like to live in during retirement.

“Whether it is an inner city apartment or a sea change house, rent the property out today, let the tenant help pay off the mortgage, and use negative gearing benefits to reduce your current tax bill,” explains Mr Raine.

“Then when you are ready to retire, sell off the family home and receive a tax free lump sum from the proceeds to live on in retirement, and move into your dream dwelling – paying today’s prices, not the higher price tag you could expect to pay as a consequence of capital growth several decades down the track.”

“This approach puts workers in control of their retirement lifestyle rather than relying on a super fund manager who has no idea of your personal aspirations – yet who is holding the reins of your nest egg,” adds Mr Raine.

-ENDS-

 

For further media information contact:

Angus Raine, CEO Raine & Horne on (02) 9258 5422 or 0409 920 697

Andrew Harrington, National Marketing & Communications Co-ordinator on 02 9258 5400



[1] SuperRatings Latest returns to 29 February 2012  -  http://www.superratings.com.au/latestreturns

[2] Residex Capital city market analysis for February 2012  -  http://blog.residex.com.au/2012/03/15/austratlia-as-a-whole/

[3] SuperRatings Latest returns to 29 February 2012  -  http://www.superratings.com.au/latestreturns

[4] SuperRatings Latest returns to 29 February 2012  -  http://www.superratings.com.au/latestreturns

[5] Residex Capital city market analysis for February 2012  -  http://blog.residex.com.au/2012/03/15/austratlia-as-a-whole/

 

your current tax bill,” explains Mr Raine.

“Then when you are ready to retire, sell off the family home and receive a tax free lump sum from the proceeds to live on in retirement, and move into your dream dwelling – paying today’s prices, not the higher price tag you could expect to pay as a consequence of capital growth several decades down the track.”

“This approach puts workers in control of their retirement lifestyle rather than relying on a super fund manager who has no idea of your personal aspirations – yet who is holding the reins of your nest egg,” adds Mr Raine.

-ENDS-

 

For further media information contact:

Angus Raine, CEO Raine & Horne on (02) 9258 5422 or 0409 920 697

Andrew Harrington, National Marketing & Communications Co-ordinator on 02 9258 5400



[1] SuperRatings Latest returns to 29 February 2012  -  http://www.superratings.com.au/latestreturns

[2] Residex Capital city market analysis for February 2012  -  http://blog.residex.com.au/2012/03/15/austratlia-as-a-whole/

[3] SuperRatings Latest returns to 29 February 2012  -  http://www.superratings.com.au/latestreturns