The latest sector research has shown SMSF trustees still have a strong appetite for investing in property despite the ban on the use of limited recourse borrowing arrangements (LRBA) to acquire residential property, which comes into effect next week.
A survey of 1000 Australians by Money.com.au, including 400 people who have an SMSF or are planning to establish one, found 26 per cent intend to invest in commercial property through their SMSF using an LRBA.
Further, the study revealed 12 per cent of SMSF investors plan to buy residential property outright in their fund without employing gearing.
Indicating a strong attraction to the asset class, 27 per cent of SMSF members also indicated they plan to buy residential property outside of the superannuation environment.
“The borrowing ban changes how investors can access residential property through an SMSF, but it doesn’t change the underlying appeal of the asset class,” Money.com.au property expert Nick Burgess noted.
In addition, Burgess expected commercial property to become a much bigger focus because it is not affected by the LRBA rule amendment.
“SMSF investors are more than twice as likely to buy residential property outside their super or invest in commercial property than purchase residential property outright within their SMSF using existing funds. That reflects the reality that relatively few investors have enough cash in their SMSF to buy property without borrowing,” he said.
However, the analysis also found 82 per cent of Australians who do not already have an SMSF admitted they no longer see the point in setting up one if they cannot borrow to buy residential property through the fund.
Shares and exchange-traded funds were the most common investment destination for SMSFs, with 46 per cent of members planning to increase their allocation to them.
Another 23 per cent also said they plan to increase their allocation to term deposits.
