Australians are increasingly turning to self-managed superannuation funds (SMSFs) to diversify their retirement savings into property, reflecting a rising preference for control and transparency in their investments.
According to Shore Financial CEO Theo Chambers, the latest data from the Australian Taxation Office (ATO) shows that SMSF residential property allocations have grown by 26.4% since 2021, reaching $55.2 billion, with non-residential property allocations up 25.0%, now totalling $102 billion.
Mr Chambers attributes this growth to “a combination of more accessible SMSF lending and dissatisfaction with traditional super returns.”
He explains that one of the main reasons for this rise is that lending has become far more accessible to SMSF investors.
“Previously, obtaining SMSF property loans was challenging,” he says. “Now, lenders are offering more competitive rates and terms, including higher loan-to-value ratios (LVRs) of up to 90%.”
He adds that some lenders are now considering future super contributions when assessing borrowing capacity, which has been particularly beneficial for self-employed borrowers.
“Your mortgage serviceability isn’t limited by past contributions alone,” Mr Chambers points out, describing the shift as a “game changer” for SMSF property investment.
Greater access to SMSF loans
Jack Henderson, Director of Henderson Advocacy, also observes the shift in Australian attitudes toward retirement investments, noting a significant increase in property purchases through SMSFs. “
Australians want more oversight over their retirement funds,” he says.
“Most people have no idea where their money is invested inside a standard industry fund.”
Mr Henderson highlights that property, particularly established residential assets, feels more tangible and understandable to many investors compared to equities.
“They feel much more comfortable with property; it’s something they believe they understand more,” he adds.
He believes this desire for control over SMSF investments is not just a passing trend: “People want more control, for sure,” he says.
“They want to know where their money’s going, and that isn’t always clear in a typical super fund.”
Disillusionment with traditional Super
Another factor driving the move to SMSFs is the underperformance of many traditional super funds.
Mr Chambers notes that even with the All Ordinaries finally above 8,000 points, it only rose from just under 7,000 points before the Global Financial Crisis over 15 years ago.
“That’s not great growth,” he says, and he believes this lacklustre performance has prompted Australians to explore property as a way to grow their assets.
Adding to this disillusionment is the high management fees and underperformance of some super funds.
He says that many super funds have failed to meet the ASX index as a benchmark, which has led investors to look elsewhere.
“Investors are seeing the poor performance of their super and chasing bigger returns,” he explains.
For many Australians, he adds, “the decision to turn to property within their SMSF is about both confidence in property’s growth potential and a lack of satisfaction with their super returns.”
Navigating common pitfalls
Although interest in SMSF property investing has grown, both Mr Chambers and Mr Henderson advise caution when steering clients towards a property.
“If the property doesn’t grow, you’re in a worse position,” warns Mr Henderson.
He frequently sees clients who, due to poor advice, end up purchasing off-the-plan or new build properties, which often deliver lacklustre returns.
“People who don’t get the right advice generally get sucked into buying subpar properties,” Mr Henderson explains, adding that “what happens is they go to their accountant, who refers them to a property marketer, and they end up with an off-the-plan property that isn’t a good investment.”
To maximise SMSF investments, Mr Henderson recommends focusing on established blue-chip properties in desirable locations.
“Our strategy is about buying established blue-chip assets in high-quality areas that have a solid track record,” he says.
By targeting these reliable properties, investors are more likely to enjoy consistent growth, particularly over long-term holding periods.
What are benefits?
Another advantage of SMSFs is the ability to leverage super funds to purchase property, thereby amplifying returns compared to traditional super or shares.
Mr Chambers explains, “While shares will outperform property in some years, SMSF investors using $200,000 in super to purchase a $1 million property are achieving capital growth on the $1 million, not just the $200,000.”
This ability to leverage capital within SMSFs has made property a highly attractive option for investors looking to grow their retirement assets.
Mr Henderson echoes this, explaining that while your clients may worry about capital gains taxes on their SMSF properties, they often find relief in the tax advantages of superannuation.
“When you go into pension phase, capital gains are tax-free,” he says, “and even if you sell earlier, you’re looking at a significantly reduced tax rate compared to personal investments.”
This makes SMSF property appealing not just for growth but also for long-term tax efficiency.
Changing attitudes and lower barriers
Mr Chambers highlights how SMSFs, once considered viable only for those with substantial wealth, are now becoming accessible for a broader range of investors.
“People previously felt they needed $500,000 or more to justify an SMSF,” he says.
“Now, with lower setup costs, people can consider SMSFs from a balance of $150,000 to $200,000, even combined with a spousal partner.”
This shift has opened the doors for Australians across various income levels to explore SMSFs as a path to property investment.
For Australians now prioritising control over their retirement assets, SMSF property investing offers a unique combination of growth potential, tax advantages, and leverage for your clients.
“At the end of the day, everyone is investing so they can get cash flow to retire comfortably,” says Mr Henderson.
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