Growing activity by SMSFs boosting property market

Sydney was the strongest performing capital city with a growth rate of 11.4% followed by Perth (8.6%) and Melbourne (6.8%).

There were also signs of improvement in the Brisbane market with house prices rising by 4.1% over the last year.     

Source ABS

A major reason for rising house prices in Australia is the fact that property investors have become more active in the property market over the past year due to very low interest rates and high rental yields.

In particular, DEPPRO has recorded a 50% jump in activity by investors using Self-Managed Super Funds to purchase properties during 2013.

Recent changes to superannuation rules which have allowed SMSFs to borrow money in order to purchase property are encouraging this trend.

With interest rates at very low levels, the owners of SMSFs are now buying property in greater numbers so they can take advantage of rising property prices and sound rental yields.

The growing importance of SMSFs is highlighted by the fact that ten years ago, SMSFs represented just 10%of all superannuation money.
Now indiv¬iduals running SMSFs control the biggest proportion of the $1.58 trillion invested in the Australian super. It is estimated that the nation’s more than 500,000 SMSF's account for almost $500 billion, or just under one-third of the total.

According to the Australian Taxation Office, the average SMSF has a balance just short of $1 million: the average member balance stood at $500,000, almost six times the size of the average account balance of other super funds.

DEPPRO is finding that the owners of SMSF’s are very well informed about the tax depreciation benefits associated with owning investment properties which can be equivalent to around 60% of the annual rental income of an investment property.

During 2013, DEPPRO has found that the vast majority of SMSFs are buying new properties such as apartments which offer property investors the maximum tax depreciation benefits.

The tax depreciation benefits achieved from buying a new property can total thousand of dollars each year in additional cash flow for investors for an initial outlay cost of around $600 by obtaining a tax depreciation report.