Private fund investors looking for real estate opportunities
Self-managed superannuation fund (SMSF) investors are looking into opportunities in real estate to make use of the advantages of investing in such a fund.
Privately managed funds have grown to US$58.4 billion placed in local real property in June, in comparison to more than US$30 billion two years ago says the Australian Taxation Office.
"We have a lot of clients who want to borrow [within super] and specifically borrow to buy real estate," Bryce Figot, a senior associate at SMSF specialist law firm DBA Lawyers told The Australian. He says that similar cases has grown since 2007 when gearing was allowed to be used in superannuation for purchasing standard assets such as property and shares. "This year, assisting clients borrow for property has become something we do every day as a matter of course," he adds.
Cash holdings in the SMSF industry now account for 28 percent of the fund's US$110 billion worth of total assets and reached 22 percent before the Global Financial Crisis hit in June 2006. Australians usually tend to borrow money to own property and this continues even when its in a SMSFcontext.
Figot says that majority of his firm's clients or about 95 percent are requesting to leverage into property in preference to shares. "Property has produced great returns over the years while the share market has had mixed results, to say the least," Figot adds. Moreover, Australia's improving economy may also convince people to take more calculated investment risks.