Restricting SMSF investment in property would potentially lead to adverse price implications in other asset classes, according to the head of a structured products funds management house.
“Most people know the market needs property to be an asset class for SMSFs,” Instreet managing director George Lucas told selfmanagedsuper.
“If you just do the simple maths, there’s maybe $1.5 trillion in superannuation at the moment with an additional $2 trillion of investable money outside of superannuation. The Australian equity market is probably a $2 trillion market, so there are just not enough assets to go around.
“So if you start limiting the areas in which people can invest and make it so SMSFs can’t invest in property, for example, the pool of assets SMSFs can invest in will shrink and this will just make another section of the market overheat.
“So in some ways the fact that SMSFs do invest in property does take a little bit of the pressure off the equity market.”
Lending more weight to the argument not to restrict SMSF property investment was the fact property was a good fit for the time horizon of retirement savings investing, Lucas said.
“In some ways property is the perfect retirement asset because retirement goals are long dated and property is a long-dated asset,” he said.
“Equities have only a very short duration and 10-year government bonds only have a duration of seven years, whereas property is a 50-year investment.”
He pointed out it was becoming increasingly difficult to determine where the constant concern over the SMSF sector was actually coming from.
“Right at the moment there are a lot of messages saying ‘danger, danger self-managed super funds’. But you can’t really determine whether or not these comments are coming from the regulators or if they are being driven by industry professionals who don’t see SMSFs as being in their best interests,” he said.