Investments, Property

Property allocations to continue to drop

SMSFs are reducing exposure to property in their portfolio asset allocations, reflecting wider trends in the property downturn in the Sydney and Melbourne markets, new analysis has found.

The latest SuperConcepts Investment Patterns Survey revealed the asset allocation to the property sector decreased from 19.5 per cent to 18.9 per cent for the June quarter 2018.

Explaining this further, SuperConcepts SMSF technical and strategic services executive manager Phil La Greca said: “We’re seeing the start of a trend that will be sustained particularly as the residential market softens and property is becoming less available to SMSFs as an investment option.

“It’s not just residential though; we expect property allocations in SMSFs overall to continue falling as access to finance tightens and lenders start to increase their interest rates.

“Forty per cent of the properties owned in the survey used borrowings to buy property and the conditions around that are being tightened.”

La Greca said based on performance of Australian real estate investment trusts, the allocation should have increased to 19.9 per cent.

“However, as direct residential and commercial property allocation represents about 83 per cent of the total property investments, the figure has fallen,” he noted.

A total of 962 residential or commercial properties were owned by the 2600 SMSF funds covered in the survey.

The split was 30 per cent commercial versus 70 per cent residential, compared to 42 per cent commercial versus 58 per cent residential based on value.

The average value per property was $681,000 for commercial property and $410,000 for residential property.

The survey covered 2600 funds, a sample of the funds administered by SuperConcepts, and the investments held at 30 June 2018.

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