Lawyer slams SMSF links to property bubble

The suggestion that limited recourse borrowing by SMSFs is overheating the property market “cannot be taken seriously”, according to Townsends Business & Corporate Lawyers.

The role of SMSFs in creating a residential property market bubble is insignificant compared to factors that directly influence property prices such as interest rates and the demand for residential land, said Michael Hallinan, special counsel superannuation at Townsends.

Other factors, such as the federal government’s subsidies and incentives, can also translate into increased property sales, he added.

“It’s been suggested by the Reserve Bank of Australia that super gearing by SMSFs may be overheating the residential property market,” Mr Hallinan said.

“Whether this suggestion is pre-justifying any future restriction or the closure of limited recourse borrowing for SMSFs, which may arise from the previously proposed review of limited recourse borrowing, is not known.

“Those SMSF investors who are thinking about limited recourse borrowing may have two or so years to determine whether a gearing strategy is appropriate for them before this investment class is [potentially] closed off or restricted,” he added.

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