31 August 2022

Five reasons SMSF investors will weather the storm

Australian property values are softening as rising interest rates and inflation take their toll. However, the cyclical nature of the property market means there will be plenty of opportunities for SMSF investors. 

The last time we saw significant falls in house prices was way back in the early stages of the pandemic in 2020.  Fuelled by ‘peak panic’ in markets – with economists predicting substantial and extended economic pain for our national economy – home values dropped by nearly 10 per cent across a seven month period.  Once the economic outlook became clearer, and against the backdrop of the ‘whatever it takes’ attitude of our governments and regulators, housing prices quickly returned to pre-pandemic levels, with annual dwelling values up 4.3% over the past five years.

The cyclical nature of the Australian property market means there will be plenty of opportunities for SMSF investors, who are largely insulated from any broader property price falls for the following five reasons:

  1. The biggest dips in value are coming from the top end of the market, whereas SMSFs tend to prefer lower-value properties.
  2. Rental returns are sky-rocketing due to record low vacancy rates. That’s good news for SMSF investors, who have little tax incentive to negatively gear.
  3. Inflation is less of an issue for SMSF investors because they don’t make mortgage repayments with their take-home pay, which is affected by cost of living.
  4. SMSFs are, by definition, a long-term investment to support retirement. Australian property is cyclical but, over a longer period, the returns have been consistently strong.
  5. SMSFs are not limited to residential investments. Many focus on commercial property, which has the added benefit of being excluded from owner-occupancy rules.

With borders reopening amid record-low unemployment and calls by business for skilled migration, demand is likely to be supported. And when it comes to interest rates, we agree with the consensus view that the terminal cash rate will peak between 2.5% and 3.25%.

Discover more from the 2022 SMSF Awards’ ‘Best SMSF Lender’. Get in touch with your BDM.

La Trobe Financial Services Pty Limited ACN 006 479 527 Australian Credit Licence 392385. 
^To view our Awards and Ratings, please visit the Awards and Ratings page on our website.
This publication does not constitute financial advice and should not be relied upon as such. It is intended only to provide a summary and a general overview on matters of interest and it is not intended to be comprehensive. You should seek your own financial or other professional advice before acting or relying on any of the content.
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