Puzzle Finance Blog


Concerns over property in self-managed super funds


HORROR means different things to different people.


For some, it means giant spiders. For me, it's the copy of the Wolf Creek DVD that lurks on my living room shelf, unopened because I'm scared to watch it.

Horror for a real estate investor usually involves losing money, and lots of it.

Luckily Australia escaped the worst of the GFC where house prices in parts of many countries halved in value.

However, fears are growing about a new horror at home. Not a massive crash, but experts are worried that many people may come financially unstuck after chasing elusive investment returns through property in their self-managed super funds without doing their homework.

More than 900,000 Aussies have money in SMSFs, and there has been a big push by property promoters in the past year to get people to borrow money within their SMSF to buy houses.

This threatens to spark a fresh housing bubble that will push houses further beyond the reach of younger Aussies, but also risks trapping older pre-retirees in a nasty financial situation.

I was previously a big fan of holding property in a SMSF long-term to enjoy enormous tax benefits, but that changed when the Federal Government moved the goalposts earlier this year, and now an unpleasant tax bill may eventually bite those who buy property in super.

These days, I'm scared that many Australians - still spooked by the share market collapse five years ago - will use super to pump their life savings, plus borrowings, into bricks and mortar and be burnt badly if house prices fall, interest rates rise, or they get bad advice from a so-called expert and buy in an area with poor growth prospects.

Self-managed super is an extremely complex area, where one mistake could result in you losing almost half your nest egg in penalty taxes. It's not something that people should see as a vehicle to pile into property.

Retirees cannot sell part of a house to free up some retirement cash. And if Australia does get hit by a housing downturn, they may still have loans to pay on properties that have tumbled in value.

With good planning and a sound strategy, property in super can work well for some people. But just make sure it doesn't become your personal house of horrors.

Posted by Anthony Keane - The Advertiser on 22nd August, 2013 | Comments | Trackbacks
Tags:

Bookmark and Share

The trackback URL for this page is http://www.puzzlefinance.com.au/trackback?post=27150906


Trackbacks

There are no trackbacks for this post


Comments

There are no comments for this post


Post a Comment

HTML is not allowed in comments, http://... will be automatically linked.


Name (required):


Email Address (not displayed):


Comment (required):


To help prevent spam, please enter the word ache here:

Puzzle Finance Blog

About Puzzle Finance


Archives

September 2017
August 2017
July 2017
June 2017
May 2017
March 2017
February 2017
January 2017
December 2016
November 2016
October 2016
July 2016
June 2016
May 2016
April 2016
March 2016
February 2016
January 2016
December 2015
November 2015
October 2015
September 2015
August 2015
July 2015
June 2015
May 2015
April 2015
March 2015
February 2015
January 2015
December 2014
November 2014
October 2014
September 2014
August 2014
July 2014
June 2014
May 2014
April 2014
March 2014
February 2014
January 2014
December 2013
November 2013
October 2013
September 2013
August 2013
July 2013
June 2013
May 2013
April 2013
March 2013
February 2013
January 2013
December 2012
November 2012
October 2012
September 2012
August 2012
July 2012
June 2012
May 2012
April 2012
March 2012
February 2012
January 2012
December 2011
November 2011
October 2011
September 2011
August 2011
July 2011
June 2011
May 2011
April 2011
March 2011
February 2011
January 2011
December 2010
November 2010
October 2010
September 2010

Tags

Purchase or Rent (1)
The Age (1)