RBA warning on SMSFs gearing into property


The Reserve Bank’s Financial Stability Review for September 2013 has received much attention for its comments on SMSFs. Here’s the link to the Review, where the exact wording is:

“In this issue of the Review, a particular focus has been placed on the self-managed superannuation fund (SMSF) sector. Although this sector does not currently pose material risks to financial stability, it is important for the financial position of the household sector and has a number of aspects that warrant careful observation in the period ahead. Changes to legislation in recent years have permitted superannuation funds, including SMSFs, to borrow for investment, for example to purchase property. Since then, property holdings by SMSFs have increased and this type of investment strategy is being heavily promoted. The sector therefore represents a vehicle for potentially speculative demand for property that did not exist in the past.”

Plus there’s also an unreported warning about SMSFs buying hybrids.

“SMSFs and other retail investors have also been the dominant class of purchasers of hybrid securities recently. These investors seem to have been attracted by the higher yields offered on hybrids compared with conventional debt securities; it is important that they fully appreciate and price in the risks embedded in these more complex products.”

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