Media release - 20th August, 2012

SMSFs represent up to 50% of real estate sales in some markets

Raine & Horne offices in Sydney and the Hunter region are reporting self-managed super funds (SMSFs) represent up to 50% of real estate sales in some markets.  

“It’s fair to say that since the laws changed back in 2007, allowing self-managed super funds to borrow funds to acquire residential property, we’ve seen more DIY funds looking to secure housing assets in some markets across Australia,” said Angus Raine.

According to the Australian Taxation Office (ATO), SMSFs held $10.825 billion worth of assets in residential property in June 2008 – and $14.868 billion by March 2012.

“This is a significant increase, however, according to the ATO, Australia’s 468,000 SMSFs hold around $416 billion worth of total investments, which means only 3.5% is invested in residential real estate,” says Mr Raine.

“I’d be urging more SMSFs to consider borrowing to buy a quality, well-located residential rental property because it can deliver long term capital growth and income, and using a DIY super structure, it’s possible to buy a house or apartment with pre-tax dollars.

“Furthermore, if the fund decides to sell the property in the pension phase it is capital gains tax free.”

Mr Raine also warned that buying a residential property through a SMSF is not for everyone

“I’d urge investors to talk to an accountant and/or financial planner before making a decision to secure a property through a DIY super fund.”

Ray Noonan, Principal, Raine & Horne Nelson Bay, who took advantage of the 2007 rule changes to switch from a retail super fund to a SMSF three years ago, confirmed more DIY funds are snapping up local investments.

“In the last three to six months, there’s been an increase in investors returning to the Nelson Bay market after several years,” says Mr Noonan, who notes that investors, including SMSFs, represented only about 10% of real estate sales for the three years to May 2012.

“Since the double interest rate cuts in May and June, SMSFs have become more significant players in the market under $300,000, with around 50% of investment homes in this price bracket sold to DIY funds.”

For example, Raine & Horne Nelson Bay recently sold a two-bedroom apartment at 8/6 Thurlow Avenue, Nelson Bay, for $236,000 to a Sydney couple who’d established a SMSF.

“The apartment will rent for $270 to $280 a week and is in a good street, enjoying partial water views, with close proximity to the town centre, shops, restaurants and the marina,” says Mr Noonan.

Jason Maxwell, Principal of Raine & Horne Newcastle, says many SMSF investors have their eyes on residential and commercial property sectors.

“We’ve seen investors with a high level of financial maturity purchase in the commercial and residential property sectors of Newcastle.”

Mr Maxwell recently sold a one bedroom, fully furnished apartment in the Chifley Apartments complex at 507/14 Wharf Road, Newcastle, to a SMSF for $355,000.

“The property is returning a 6% yield, as well as a first-year depreciation value of around $14,500.”

David Hill, Principal of Raine & Horne Crows Nest, says investment properties close to the CBD are also attracting the attention of DIY funds.

“In the last 12 months we’ve seen vacancy rates plummet to around 2%,” says Mr Hill.

“Investors, including SMSFs, are clearly taking note of this trend because over the last 18 months, the percentage of homes sold as rental properties has jumped from 15% to around 50% in Crows Nest and Wollstonecraft.”

“We are seeing plenty of interest in lower North Shore real estate from SMSFs with assets between $200,000 and $400,000,” says Mr Hill.

“They are taking advantage of the ability to borrow funds, and are making their presence felt in the $600,000 to $800,000 apartment market, where they can earn a gross rental yield around 5%.

-ENDS-

For further media information contact:

Angus Raine, CEO Raine & Horne on 0409 920 697

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