Property investors exposed to structural risks

finance/housing/property/

20 April 2017
| By Jassmyn |
image
image
expand image

Investment properties are the second largest sector for investments outside superannuation and Australians face a myriad of structural risks when holding these assets, according to Rice Warner.

The research house’s latest analysis found of the $2.3 trillion total personal investments as at 30 June 2016, 40.6 per cent were invested in investment property, 44.3 per cent in cash and term deposits, 12.09 per cent in equities, and 2.1 per cent in fixed interest and loans.

Rice Warner said as Australian investors were predominantly tied to variable rate loans, any increase in rates would feed into the cost of servicing mortgages, especially for investors who were using negative gearing and hence dependent on income other than their rent to service the mortgages.

It said other structural risks for property assets included:

  • Changes in tax treatment as housing affordability moves up the political agenda;
  • Restrictions on movement of capital by international investors, especially those based in China;
  • Property-specific risks such as repair bills and loss of rent; and
  • Difficulties with property investments at the same time as difficulties with other investments that have similar economic drivers.

Rice Warner noted that allowing super to be accessed to fund housing purchase would further escalate risks.

“The combination of dilution of retirement savings and further upward pressure on property prices means such a measure would at best be counter-productive for those whom it is intended to help, and at worst would further increase the risk of the property booms in Sydney and Melbourne ending in tears,” the analysis said.

Read more about:

AUTHOR

Recommended for you

sub-bgsidebar subscription

Never miss the latest news and developments in wealth management industry

MARKET INSIGHTS

So we are now underwriting criminal scams?...

2 months 3 weeks ago

Glad to see the back of you Steve. You made financial more expensive, not more affordable as you claim, and presided ...

2 months 3 weeks ago

Completely agree Peter. The definition of 'significant change is circumstances relevant to the scope of the advice' is s...

4 months 4 weeks ago

ASIC has suspended the Australian Financial Services Licence of a Melbourne-based financial advice firm....

1 week 4 days ago

The corporate regulator has issued infringement notices to three AFSLs whose financial advisers provided personal advice to a retail client while unregistered....

2 weeks 2 days ago

ASIC has released the results of its first adviser exam to be held in 2025, with 241 candidates attempting the test....

3 weeks ago

TOP PERFORMING FUNDS

ACS FIXED INT - AUSTRALIA/GLOBAL BOND