Property remains firm favourite, despite the hype
In spite of the hype and spite about borrowing in SMSFs, one thing remains clear – the demand for purchasing property in SMSFs is real.
The latest Smart Property Investment/ Property Investment Professionals of Australia (PIPA) Property Investor Sentiment Survey, released at the end of 2014, indicates that despite talk of property bubbles, confidence in the Australian property market remains high.
Moreover, it indicates that property investment within SMSFs continues to grow.
Of the 627 respondents to the survey, 14.3 per cent stated that they had invested in property via a SMSF before, a significant increase from the survey result of 4.4 per cent in February 2014.
Furthermore, 21.4 per cent of surveyed investors said they planned to purchase a property via an SMSF within the next 12 months, an increase of 4 per cent from the last survey.
PIPA members sent the survey directly to their existing client databases. The survey was also completed by Smart Property Investment’s database of investors.
Those serious about achieving self-funded retirement know that one property will not do the job in providing them with the amount of passive income required to enjoy a retirement of spoils. If you combine the total percentage of those who own property in this survey you get over 84 per cent who own at least one property.
Positive sentiment continues
You’d have to be living under a rock if you don’t know that the property market is performing well from an investment return perspective, given solid gains in values in our two major cities of Sydney and Melbourne – and good rental yields throughout most parts of Australia, providing a nice overall return to investors.
Almost 80 per cent surveyed believe now is a good time to invest in property.
This is a slight fall of five per cent from our survey early in 2014, but this percentage is still very strong. Budding and experienced investors continue to see opportunity in the property sector.
In addition, over 74 per cent of respondents said that if interest rates remain lower for longer they will consider further purchases.
This is somewhat of a logical response, as low interest rates combined with a good rental market makes the investor’s out-of-pocket contribution to hold the property less.
The other contributing factors are more reliable long-term reasons and one could take a calculated guess that when interest rates move higher in the coming years then low interest rates would be less of a key driver.
The positive sentiment story flows into further planned activity by those surveyed, with 68 per cent saying they plan to either buy their first investment property or add to their portfolio within the next 6 – 12 months.
Property preferences
The survey also looked at insights and planned activity over the next 6 – 12 months.
It showed existing property is still the main game for most investors.
When we studied the responses to price point we learnt a lot more about our budding buyers’ intentions.
One in every two buyers are looking to buy below the median range of value on property across Australia.
Sensible really, given this is the range where most Australians can afford property, and it also means those surveyed haven’t lost sight of yield returns as well, because buying property in this range is where most tenants can afford to pay the rental price range on offer.
Where to buy?
Achieving a great investment return in the property game is all about getting the location and the suburb and then property right within that location.
The survey provided a good insight into where most of the experienced investors are considering their options. Most investors see the best investment opportunities in the larger city locations.
And the question on most minds is what location is the best bet for returns.
Brisbane has been well supported in this survey at 56 per cent.
This is likely the result of seeing Sydney and Melbourne having a great time for the past 18 months.
Many think Brisbane, when you consider its values and affordability measures, has room for some reasonable value growth.
But those who think it’s as easy as picking a city and not worrying about the suburb need to think again and do more research on the right locations to increase the likelihood of better results.
Why property?
Property has long been a popular investment selection among Australians and a growing selection among SMSF trustees.
Our survey highlights the key reasons for its appeal, with better long-term returns the highest rating factor at 22 per cent, followed by less volatility at 18 per cent. Like most SMSF trustees, many property investors also like the idea of control at 17 per cent.
Ben Kingsley, chair, Property Investment Professionals of Australia