The Real SMSF Exposure

Posted by Daniel Joseph

In the past few weeks as property prices have gained momentum, there have been numerous commentators talking about the risk of a housing ‘bubble’. Some feel this is the result of low rates, while others are pointing the finger at SMSFs. These commentators have twisted the data and blown out of proportion the RBA’s comments in their recent Financial Stability Review.

For the record, the RBA has dismissed any talk of a housing bubble as ‘alarmist’ and for anyone who knows the true statistics about SMSFs, this risk is the last thing on their mind.

ATO figures show that SMSFs have only 3.4 per cent of assets invested in residential property. Property investments in SMSFs are much more heavily weighted to non-residential property, such as commercial, which makes up $58 billion, compared to residential’s $17 billion. Out of a total of $495 billion for SMSF assets, clearly, this ‘risk’ needs to be kept in perspective. What is even more interesting is that geared property in SMSFs make up less than one half of one per cent (0.4848 per cent) of total investments.

As the market continues to improve, we will no doubt see more headlines warning of a bust or bubble. A recent article tried to state that a bubble was certain as house prices are at record levels, and yet so is GDP every quarter, employment almost every month, and even the price of bread. Somehow we don’t think many people will claim we are in a ‘bread bubble’. To us it seems that the old saying applies – an asset bubble is simply a bull market that you don’t have a position in.

Ultimately the shift by Australians to take control of their future can be seen as nothing but a positive, especially when previous super performances are examined. As our ageing population, that is living longer than ever, approaches retirement it may well become a necessity.

Posted by Daniel Joseph, on 21st Feb 2014