SMSFs hold off on direct property

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Enquiries about direct property are on the rise, but the subdued residential property market appears to be preventing self-managed superannuation fund (SMSF) clients from pulling the trigger.

Dixon Advisory's SMSF clients have maintained a steady 6-7 per cent exposure to direct property over the past 12 months, according to Dixon Advisory associate director Tim Coates.

"We're getting a large number of enquiries from people about buying real property in their super funds, but the conversion rate hasn't been as high as we've anticipated," said Coates.

He put the "fairly flat" take-up over the past 12 months down to the lacklustre property market and the 50 per cent auction clearance rate.

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"When the wider economy gains its confidence, [direct property] will certainly be a growing sector," he added.

Yellow Brick Road chief executive Matt Lawler has also seen a spike in enquiries about direct property investment, but he agreed the take-up had been reasonably flat over the last year.

One reason enquiries are up is that people have accumulated sizable assets in their superannuation over the past 15-to-20 years and are wondering what to do with them, said Lawler.

There is a love affair with property in Australia, said Lawler, and "people come to us with very strong ideas about what they should be doing".

Coates played down fears of a housing bubble in Australia, saying Dixon Advisory is "very comfortable with current prices".

"We think the underlying supply and demand dynamics support the prices at their current levels - particularly in the capital cities," Coates said.

But not everyone is keen about the idea of SMSF clients investing their retirement savings in the residential property market.

BBN Asset Management managing director Tony Jovevski reckons the property market is "fully priced" by most measures.

"Multiples of household rents to prices and household incomes to prices are trading at unprecedented levels, and I would expect those levels to correct," Jovevski said.

"Investors should be very wary of putting money into property. The returns are not that good, and there won't be capital gains for a long, long time," he added.

Jovevski recently went to market with a product aimed at retail investors who are concerned about a potential housing bubble, which takes a short position on the Commonwealth Bank and Westpac.

"If house prices fall, that is likely to impact on bank share prices," he said.

However, he said his talks with SMSF managers around the country were very disappointing. 

Financial advisers told him that it "goes against the grain" to invest in something that makes money if the market falls.

"I was dismayed by the attitude of people sitting at the top of thousands of SMSFs. Most of those were beholden to an Approved Product List of the same old, same old; products that usually make in a rising market but always lose in a falling market.

"Those people talk about diversification, but all they're doing is diversifying the losses," Jovevski said.