Regulators are at risk of overstating the problems surrounding SMSF property advice and ‘spruiking’, according to the head of Westpac’s SMSF trustee division, Sinclair Taylor.
Speaking at the SMSF Professionals’ Association of Australia (SPAA) national conference earlier this week, Taylor noted that the SMSF loan market is worth $6-7 billion, with around 30,000 funds borrowing to buy property – and that the vast majority of transactions are legitimate.
As reported by WP's sister publication Australian Broker, ASIC chairman, Greg Medcraft, dubbed SMSFs a ‘fragile’ zone last week and says the sector’s growth will be the ‘greatest challenge in the next decade’.
“Frankly, making sure those investors can be confident and, more importantly, that they are informed, is absolutely critical,” he told reporters.
However, despite ASIC’s on-going concerns, Taylor says he expects demand to increase.
"As cash rates come off and equities remain volatile, a lot of trustees are looking for the security of property. That is what they tell us when they come in to talk about a loan.”
Furthermore, he says Westpac insists on working with brokers and trustees to ensure they understand the complexities of the process before going ahead and that most lenders provide only ‘vanilla’ loans.
"We lend on residential and general commercial property. The assets must be a going concern. We do not lend on anything like agricultural property."
Westpac and St George have a combined SMSF loan book of around $2 billion, giving them a significant market share. The group's average loan size sits at around $300,000 and the maximum loan-to-valuation ratio is 80%.
"We are also seeing more brokers selling the product,” says Taylor. “There is very strong growth in applications from mortgage brokers."