SMSFs are not distorting housing market

Myths and misconceptions have surrounded the degree to which self-managed superannuation funds (SMSFs) have invested in residential property and impacted housing pricing, according to the SMSF Association.

In a strong submission to a Parliamentary committee reviewing the regulatory framework and home ownership, the SMSF Association said that the myths and misconceptions persisted despite the reality.

“These persist despite empirical data clearly illustrating that the concentration of SMSF investment in residential property, in relative terms, is very low,” the association’s submission said.

Further it said that SMSFs had also been substantially misrepresented on the issue of borrowing.

“…the level of gearing in SMSFs under the limited recourse borrowing arrangements (LRBA) is another area surrounded by misinformation. The use of LRBAs is subject to stringent rules and regulatory oversight,” it said.

The SMSF Association said greater understanding of the position of SMSFs on residential property investment and LRBAs would demonstrate why the y are not factors of significant influence on the accessibility and affordability of residential housing.

The submission said that SMSFs have an important role to play in the long-term retirement plans of many small business owners and families and that, as long-term investment vehicles, those SMSFs that invest in residential property contriburte to essential rental housing supply.

“SMSF trustees invested in residential property will do so directly themselves or they may seek out programs such as those offered through Defence Housing Australia (DHA). DHA is a Government Business Enterprise, the purpose of ‘providing housing, and housing related services, to Australian Defence Force (ADF) members and their families to support Defence capability.’  Those services include to ‘provide adequate and suitable housing for members…, officers…, and contractors of the Department of Defence’ ii and their families,” it said.

“The DHA has included SMSFs in its target market as a source of investment capital to fulfill their purpose.”

The SMSF Association said inquiries and feedback from its members showed that there is interest in the SMSF market to invest in NDIS housing.

“This interest is driven by a desire to provide for this segment as part of their social and ethical investment philosophies. It also provides stability for the fund, given the long-term tenancy requirements and the reliable, consistent income paid.”