Self-managed super fund (SMSF) trustees are moving away from cash and are instead looking to house their money in direct property, a recent survey indicates.
The quarterly Multiport SMSF Investment Patterns Survey revealed that the overall asset allocation of property in SMSFs jumped 1.2 per cent to 18.6 per cent over the year to March 2013.
“Lower interest rates during the quarter and the possibility of further cuts have meant cash has become a less attractive investment, so trustees are ‘cashing out’ of cash and looking for other homes for their money,” AMP SMSF administration head of technical services Philip LaGreca said.
The survey covers around 1,950 funds, a sample of the SMSFs Multiport administers, and the investments held at 31 March 2013. The assets of the funds surveyed represent approximately $1.8 billion.
The March quarter also saw a significant increase in the use of limited recourse borrowing arrangements for direct property, where 34 per cent of direct property holders had a gearing arrangement in place, up five percentage points on the December quarter.
However, the average loan amount held by SMSFs fell in the March quarter to $248,000 compared to $268,000 for the previous quarter.
“Even though the number of loans is increasing, the loan value appears to be decreasing. This probably reflects on more conservative loan to value ratios, particularly with commercial property,” Mr LaGreca continued.
Average SMSF contributions for the March quarter increased slightly to $6,805 compared to $6,585 for the previous quarter.