SMSF Association Submission
The Self Managed Super Fund Association (SMSFA) welcomes the opportunity to make a submission on the Government’s measures increasing the supply of affordable housing. Specifically, the SMSFA would like to comment on the amendment that clarifies that Managed Investment Trusts (MITs) cannot acquire investments in residential property except where it is affordable housing.
Australian residential property makes a strong contribution to the strategic asset allocation of investment portfolios in Australia, including for self managed super funds (SMSFs). Specifically, Australian residential property delivers strong long-run risk-adjusted returns and portfolio diversification benefits as there is little correlation between the Australian residential property market and other common investments, such as Australian equities. This indicates the strategic role and potential added-value of residential property in many portfolios.
Unlisted wholesale residential property funds are an appropriate model for attracting large-scale investment in residential property in Australia, and particularly for affordable housing investment. Unlisted wholesale residential property funds require a significant minimum investment, with low debt levels, and tend to be much less volatile and far more stable in their investment returns. These features are very consistent with the appetite of institutional investors such as superannuation funds and retail investors looking for stable returns, such as SMSFs with members in retirement phase.
From an SMSF perspective, it is arguable that stopping MITs from investing in residential property limits the opportunity for SMSFs to invest in residential property in an indirect, fractional method which offers the benefits of liquidity and smaller asset size, encouraging diversification. Allowing SMSFs exposure to residential property through MITs as opposed to direct investments is a positive for diversification and asset allocation, reducing risks of SMSFs being over concentrated in a single asset class.