Borrowing to acquire property within an SMSF has increased in the past 12 months and further growth is expected as the majority of advisers continue to recommend gearing to their clients.
Investment Trends’ “April 2013 SMSF Investor Report” estimated there were 34,000 SMSFs that were borrowing within their super, which was up from a figure of 30,000 in the 2012 report.
“Borrowing within SMSFs remained a niche with further room for growth,” Investment Trends analyst King Loong Choi told selfmanagedsuper.
“Furthermore, borrowing to invest within SMSFs has been predominantly an adviser-led market, with seven out of 10 saying that an adviser recommended them their loan product.”
A second report, the “2013 SMSF Planner Report”, found half the planners who advised on SMSFs had also recommended the use of borrowing within SMSFs.
A further 23 per cent said they intended to do so at some point in the future, the report said.
“On top of this, planners expect an increase in the proportion of their SMSF client base to be using gearing within the next 12 months,” Choi said.
“For example, as of 2013, planners who advised on SMSFs estimated that 12 per cent of their SMSF client base was already borrowing within super and they expected this to be 17 per cent within 12 months.
“Increasing awareness of the rules around borrowing within super and a rise in proportion of new SMSFs citing borrowing as the reason for establishment, together should support further growth in this part of the market.”
The planner report also found planners who advised on SMSFs estimated a quarter of their SMSF client base would be suitable for a borrowing product within their SMSF.
The report surveyed more than 400 advisers who were divided into two groups – SMSF specialists who serviced 20 or more SMSF clients and SMSF generalists who serviced fewer than 20 SMSF clients.
