Trustees who keep the bulk of their self-managed super fund (SMSF) assets in property could be making a dangerous investment move, according to HLB Mann Judd.
Property has been a popular asset choice for SMSF holders due to volatile market conditions as investor confidence remains low in the domestic market.
“There seem to be a lot more people investing in property and people who traditionally would have shied away from shares are now looking at their SMSF to hold property,” HLB Mann Judd SMSF specialist Andrew Yee said.
“Before, people didn’t have enough capital to buy a property in their fund, but now that a super fund can borrow, it makes it easier for them.”
However Mr Yee warns that the perceived benefits of holding property in unstable market conditions could be detrimental to retirement savings.
“It can be dangerous having just property in your SMSF as it is an illiquid asset and not easy to sell,” Mr Yee said.
“If you’re drawing a pension, you need to be able to draw the minimum amount from your pension every year, so you have to make sure the income from the property is able to provide for that.”
HLB Mann Judd have said that diversified portfolios within SMSF trusts is one strategy to weather unstable market conditions while still accumulating wealth for retirement.
With investors looking to the equity markets on the back of anticipated lower interest rates in the year ahead, Mr Yee has said it is likely this shift might occur in the SMSF sector.
“A lot of people in SMSFs are holding cash at the moment, but with the cash rate so low, many might start looking at diversifying out of cash,” Mr Yee said.
“If the share market has a run this year it may provide an impetus for super fund investors to move out of cash and into other markets, such as shares.”