SPAA stated the growth in SMSF borrowings been steady over the five years to 30 June 2012, with 90 per cent taking place in the accumulation phase when cash flows are positive.
“What has to be understood is that although SMSF borrowings increased from 1.1 per cent a year in 2008 to 3.7 per cent in 2012, this percentage still only amounts to 3.7 per cent of the total SMSF asset pool of more than $500 billion,” said SPAA’s Graeme Colley.
“SPAA’s understanding of the current situation is that borrowing has not increased significantly since 2012 and remains a very small proportion of the total value of loans made by banks and other financial institutions.”
Mr Colley also said borrowings have “strict limitations” placed on them and can be used for any asset class permitted under the superannuation legislation, not just property.
“The lending criteria placed on superannuation funds that borrow for limited recourse borrowing arrangements is more stringent than loans taken out by individuals for residential property and commercial property – a fact often overlooked,” Mr Colley said.
Well the statement “borrowings have increased from 1.1% to 3.7% – nearly a 400% increase – is there a major problem” makes for better reading than “borrowings currently in SMSF’s are $18.5Bill out of a total asset base of $500Bill – is there a major problem”
David, like the comment ‘hot air’. I cannot get over the media beat up over SMSF Property…..remember the RBA referenced it in the minutes in November from memory. There are restrictions yes, and I feel SMSF members are sometimes played as ‘dummies’, my firm does a number of SMSF Property transactions and we find investors extremely educated prior to coming to us. The key as I have said is education…..and quality advice of course.
Finally, after every week being inundated with “SMSF borrowing risks” and literally every financial journalist saturating media outlets with the same thing over, and over, and over again. Not to mention advisers, retail and industry funds…finally the evidence proves it’s all hot air.