The Association of Superannuation Funds of Australia is warning advisers that the rumours around superannuation taxes could unsettle their clients and cause them to invest in other asset classes that might not be in their best interests. ASFA CEO Pauline Vamos said that if clients lose their tax concessions on their super, then they will look for them elsewhere, namely, in property. Like any other investment, property needs a lot of advice, she said, and advisers should warn clients not to automatically dive in.
“The last thing you want is being too overweight in one asset class – by the time you have your own home and a couple of investment properties, all your money is one asset class,” she said. “The issue with property, particularly in self-managed funds, is that it’s often hard to sell when you retire.”
There are also other costs to consider; entry cost, mortgage cost, loan application fees and the high cost of property management, said certified financial planner Paul Levy. He said he is more worried that if the government keeps making changes to super, then clients will dump it as a whole concept, rather than just change asset classes. “If they get turned off that; that defeats the whole purpose of what super was intended for in the first place.”
Charter Hall Direct Property is already expecting a reallocation of cash to direct property in 2013, as direct property provides both stable income yields and the potential for capital growth. Unlisted direct property is expected to be a popular alternative for investors searching for higher yielding investments.
“Direct property has a compelling investment case and the asset class is well placed given the historically large positive spread between property yields and debt costs, long leases and sensible debt and liquidity structures,” said head of Charter Hall’s retail investor division Richard Stacker.
“Those looking to unlisted property for security and sustainable income need to make sure they have quality long term leased assets in their portfolio, rather than lower grade, shorter lease term investments which offer slightly higher yields however come with a higher risk profile.”