SMSFs overlooking commercial property
Self-managed super fund (SMSF) trustees should look to commercial properties via pooled investment vehicles to avoid the overheated residential property investment market.
Australian Unity Real Estate Investment head of portfolio management Ryan Banting said SMSF trustees have avoided directly purchased commercial property in their portfolios as it was typically too large, illiquid and difficult to manage compared with residential property.
However pooled investment vehicles, such as listed and unlisted property trusts, had performed well in recent years. Unlisted property trusts had achieved yields of around 7 per cent over the past two years and been immune from declining interest rates and share market volatility.
Banting said while the residential property market was at risk of overheating, many SMSF trustees overlooked the benefits of commercial property as it was an option for smaller investors who wished to diversify their SMSF portfolio into property.
He said that SMSF trustees could benefit from the professional funds management applied by the pooled vehicles, as well as from the smaller capital requirement for buy-in and liquidity offered through regular withdrawal facilities.
“Unlike listed property funds, unlisted funds are not subject to the share market volatility that listed funds have experienced in recent years; exhibiting performance in line with the underlining investment properties,” Banting said.
Australian Unity Investments head of healthcare and retirement property Chris Smith said healthcare-related property fell into this sector of commercial property and had outperformed all property on a one, three and five-year basis.
“Healthcare properties are different because they are relatively scarce, operate in a regulated industry and are typically leased to large, stable and well-resourced operators,” he said.
“The ageing Australian population and increasing need for healthcare services ensures high occupancy levels and contributes to higher income yields.”
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