It is kind of weird to learn that only 3.6% of the SMSF kitty has been poured into residential real estate (till the latest news came in). I mean I get a feeling that the numbers should be a lot higher. However, data and fact sheets cannot be questioned and they state that about $18 billion out of the $500 billion in Self Managed Super Funds is invested in residential real estate presently.
What fate awaits the First Home Buyers?
If I care to think hard there are plenty of questions in regard to SMSF investments that surface to my mind. The questions keep bouncing from very different trajectories. Sometime, I am deep in thought about what will happen to First Home Buyers? They will surely be at the receiving end of the SMSF avalanche.
At other times, on a fairly different note, my mind thinks about the many real estate agents. How can they recommend on where to park one’s SMSF money? After all, they are not certified to do so. These are just a couple of stray thoughts you know but don’t they deserve being discussed.
The figure 3.6% could move up to 30% shortly
A few reliable surveys suggest that we might have as much as 30% of SMSF money parked into residential real estate in some time from now. This could mean bad news for the First Home Buyers for sure.
If I look at it the other way, I will say that no progress-oriented move can prosper without leaving a few victims here and there. May be, FHBs are among the rare victims of an otherwise smart idea.
SMSF investment in property presents a bipolar perspective
I will tell you the bipolarity of the SMSF idea. If the money people invest in residential properties through SMSF goes on to boost new supplies, we may look forward to solving the chronic housing problem; one that the inner and the middle ring of capital cities may soon face.
If on the other hand, the money flows into existing properties then it will only spike the prices in an unprecedented way, further marginalising First Home Buyers.
Why is money not being poured into commercial/industrial real estate?
No one wants a day when SMSF-driven investor activity drives the prices to a point where only very few have access to it. I fail to understand why so few SMSF investors are willing to show interest in commercial or industrial real estate.
I say this because these areas are traditionally known to give higher rental yields when markets run at low inflation and low interest rates.
This to me is also a great opportunity to serve a caveat. Don’t be rushed into making a decision with your SMSF fund if the guy advising you on it does not have an Australian Financial Services license. You will have endless line of fly-by-nighters, spruikers and ill-equipped real estate agents sermonising you on where to park your money.
However, the ones who are really good enough will show you their license and accreditations before they begin with their recommendations.
Have you made up your mind on how to segregate your SMSF investments?