SMSFs not to blame for higher property prices
27 September 2013
The main cause is rather increased investor participation driven by Australia’s favourable tax rules (e.g. negative gearing) combined with a search for yield caused by low interest rates.Meanwhile, the AFR's Stephen Koukoulas is arguing that house prices are simply recovering after the GFC:"Even though house price growth is reasonably solid at the moment, with prices up around 5.6 per cent over the past year, at least according to the RPData series, all that is happening is a catch-up from the house price falls that were evident between 2010 to early 2012. It is no more than this."In other words, the level of house prices now is roughly the same as three years ago. The quarterly ABS house price series shows a similar trend to that shown by RPData, with the weighted average of eight capital city house prices up just 0.5 per cent between the June quarter 2010 and the June quarter 2013. That is an average annual increase of 0.1 per cent!"Bubble? Trouble? Hardly."According to the ABS data, house prices have risen 15.9 per cent over the past five years, which means the annual average increase for half a decade has been just 3 per cent, which is hardly the stuff that would be causing most sober analysts, policy makers or investors much concern."Unfortunately, the headline grabbers, those jumping at shadows and creating make believe market monsters can get high profile coverage with outlandish claims of bubbles. They often link the price changes to household debt and the experience in countries like Ireland, the US, Spain and the UK, where house prices fell by up to 50 per cent during the financial crisis."
Self Managed Super Funds (SMSFs) have hit back at at claims they are behind the recent increase in Australian house prices.
It is claimed that only around $80 billion has been invested into real estate (both residential and commercial) since rule changes in 2007. This is not enough to have a material impact on prices in a market worth more than $2 trillion. The percentage of funds allocated to real estate has barely shifted over the past four years.