The implications of the property downturn in Sydney and Melbourne have left their mark on self-managed super funds (SMSF), which are beginning to shy away from  the property sector in their asset allocations.

SuperConcepts’ latest SMSF investment patterns survey revealed that asset allocation to property sank from 19.5% to 18.9% for the June 2018 quarter. The survey covered a total of 962 residential or commercial properties, which were owned by the 2600 SMSF funds.

“We’re seeing the start of a trend that will be sustained particularly as the residential market softens and property is becoming less available to SMSFs as an investment option,” said Phil LaGreca, SuperConcepts Executive Manager of SMSF Technical and Strategic Services. 

“It’s not just residential though, we expect property allocations in SMSFs overall to continue falling as access to finance tightens and lenders start to increase their interest rates.”

LaGreca also noted that 40% properties owned used borrowings to purchase property – a significant finding given that lending conditions are currently being tightened.

Based on the A-REIT performance, the allocation should have grown to 19.9% but, according to LaGreca, the number has dropped as direct residential and commercial property allocation makes up about 83% of the total property investments.

The split was 30% commercial to 70% residential, compared to 42% commercial versus 58% residential based on value. 

The average value per property was $681,000 and $410,000 for commercial property and residential property, respectively.