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Australia is a property-loving nation – on average, 1 in 9 of us owns an investment property. One significant benefit of property investment is the potential for capital growth over time, and owners of Self-Managed Superfunds (SMSFs) can use their balance to fund investments in property, providing their sole purpose is to build wealth for retirement.
Owners of self-managed superfunds are able to use all or part of their fund to invest in property, and obtain finance to fund any gaps. These properties can generate income through leasing to tenants, and yield from these activities attracts generous tax discounts.
Finding investment properties
The key to property investment through an SMSF, is finding a property that has the potential to attract rental yield and/or capital growth. Buying property with an SMSF is entirely different to owning a home. The fund is the owner of the property, not the individual or ‘member’, so the characteristics you’re looking for are purely from an investor’s perspective. The fund member can’t live in the property, or lease it to any family members, and there are restrictions in place on making improvements to the property.
A number of areas across Australia are emerging as investment hotspots, so choosing the right one could be your route to SMSF wealth. These 3 booming areas could be ones to watch:
Western Suburbs, Melbourne
Undergoing a similar level of gentrification as the trendy northern locales of Fitzroy, Melbourne’s western suburbs have continued to interest investors in recent months and years. In the last quarter of 2016, Footscray reported a median unit price growth rate of 26.7%. As more and more young professionals flock to the area, the hipster-approved cafés and hotspot dining experiences are quick to follow, offering investors a potentially lucrative slice of both capital growth and rental income. The suburb’s proximity to the CBD and growth in popularity remains misaligned with its comparably cheaper market, offering the potential for a higher level of confidence to investors looking for guaranteed growth.
Sephamore, South Australia
Character-rich properties and a beachside location, Sephamore in Greater Adelaide has enjoyed consistently impressive rental yields of late, as well as strong capital growth. The annual capital growth of median house prices was recorded at 21.47%, with rental yields also holding strong at between 4 and 6%. The DSR (Demand to Supply Ratio) score sits consistently above average, offering generous potential to would-be investors, and a lower risk solution to those using borrowings with their SMSF balance.
Blacktown and , New South Wales
While purchasing affordable property within the blue ribbon region of Sydney CBD is becoming increasingly difficult, there are certain suburbs experiencing high growth patterns. In 2016, the urban hub of Blacktown – which sits just 35 minutes drive from the CBD – began to boom, enjoying a median house price growth rate of 57.3% over 3 years. A redevelopment of the hospital and an energy project grant for the area has it tipped for more success in 2017. For investors looking for a longer-term bet, rising hotspot, Fairfield, has seen comparably slower growth than its neighbours. However, in the pipeline are a number of approved infrastructure and transport improvements, and a CBD facelift that could well transform rental yield and capital growth potential.
These examples illustrate the benefits of growing your SMSF’s value through strategic property investment. ESUPERFUND encourages all SMSF property investors to obtain the correct advice and undertake substantial research before choosing an investment. All information provided is based on past performance, and there is no certainty on the future of the property market.
For more information about SMSFs, download our free SMSF Guide to investing in Property eBook or Information Package today. If you're interested in investing in property through an SMSF, ESUPERFUND helps make it easy, with a fast, streamlined process. And if you act now, ESUPERFUND is offering a Special Free Offer! Click here for details.