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Self-managed super funds now represent up to half of real estate sales in some markets, according to Raine & Horne offices in Sydney and the Hunter region.
Data from the Australian Taxation Office shows a significant increase in residential property assets held by self-managed super funds, with $10.825 billion in June 2009 and $14.868 billion in March 2012.
“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.
“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”, he said.
“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 per cent 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 per cent of investment homes in this price bracket sold to DIY funds.”