SMSF overlooking commercial property

MANY self-managed superannuation fund investors gravitate towards residential investments and are overlooking the benefits in commercial property, according to Australian Unity Investments.

Australian Unity Real Estate Investment head of portfolio management Ryan Banting said many investors automatically think ‘residential’ when considering property as an asset class but, with residential property markets at risk of overheating, now may not be the right time to invest in this area.

Banting said now could be a good time to consider commercial property as an investment option.

“Investors may believe that commercial property isn’t suitable for a SMSF because of the size of investment required, the possible lack of liquidity and the difficulties in managing a commercial property, as opposed to a residential property,” he added.

Banting said these concerns can be overcome with pooled investment vehicles such as listed and unlisted property trusts.

“These trusts may be an option for smaller investors looking to diversify their SMSF portfolio into the commercial property space. Both are managed by professional fund managers who invest and manage a portfolio of properties using the pooled capital.

“Other benefits of investing in commercial property through a managed fund include diversity, regular valuations, smaller capital requirement for buy-in, potentially greater liquidity through regular withdrawal facilities, and a stable income from a diversified tenancy base,” he continued.

Banting said unlisted non-residential properties have also consistently achieved investment yields of around 7% over the past two years, according to IPD, providing stable returns at a time when other asset classes have faced headwinds such as falling interest rates and weakness in the sharemarket.

AUI head of healthcare and retirement property Chris Smith said the healthcare property sector is a great example of stable returns.

“The healthcare property sector has been less volatile than other commercial property sectors over the past few years, and has outperformed all property on a one, three and five year basis, driven primarily by strong income returns.

“Healthcare properties are different because they are relatively scarce, operate in a regulated industry and are typically leased to large, stable and well-resourced operators,”

“The ageing Australian population and increasing need for healthcare services ensures high occupancy levels and contributes to higher income yields,” Smith said.

Property Review

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