Chris Joye today continues his crusade to highlight the growing risks around investors in Australia’s property market. From the AFR:
The $530 billion or so squirrelled away by mums and dads who have elected to take control of their savings destinies, rather than outsourcing decisions to super fund trustees, has never had much exposure to bricks and mortar.
Legislative changes allowing SMSFs to borrow from banks to buy property on a “limited recourse” basis with loan-to-value ratios of up to 80 per cent, and to shift property that houses small business into SMSFs and get capital gains tax exemptions, have materially boosted the appeal of residential real estate. The regular daily “brain damage” wrought by equities’ volatility has not hurt either.
Perhaps unsurprisingly, some bank economists allege that the SMSF sector is nothing to lose sleep over because it is not presently a big housing participant.
…But when the RBA dissects asset allocations across SMSF portfolios, it finds that equities and cash currently sit on a level-pegging with 30 per cent individual weights, or about $330 billion of the $530 billion in SMSF money. Of course, the odd man out is housing, which currently only attracts about 3.5 per cent, or $18.5 billion, in total SMSF investment.
Taking the survey results at face value, savers want to put about 30 per cent (or $160 billion) to work in residential property. So SMSFs are short $140 billion of exposure. This is why the RBA is highlighting that SMSFs could become a significant new source of speculative – and highly leveraged – investment demand.
Sure, yep. Plug it. But let’s not forget we already have an investor problem sending Sydney barmy. With the RBA identifying the Sydeny bubble, SMSF or not, property investors are dining out on Australian productive capacity by preventing a lower cash rate and dollar. Do something about that.
