Reserve banks telling concern

Published in the Geelong Advertiser, October 2013 by Dale Gillham

Generally, I’m not a big reader of the Reserve Bank of Australia’s monthly meeting minutes (in fact I don’t think I’ve ever read them), however, with the release of the September minutes a couple of weeks ago some interesting comments caught my attention. 

In recent years changes have been made to the options available for investments held within a self-managed superannuation fund (SMSF). 

The most significant of these changes is the ability to hold investment property through a SMSF. 

So rather than using your super to simply invest in managed funds or direct shares etc. you now also have the ability to use super to invest directly in good old bricks and mortar and this brings me back to the RBA minutes. 

RBA members commented that “property gearing in self-managed superannuation funds was one area identified where households could be starting to take some risk with their finances; members also noted that this development would be closely monitored by Bank staff in the period ahead.”

This tells me two things. 

Firstly, the RBA is worried that SMSF property purchases could inflate an already overheated Australian property market and secondly, it’s worried that property spruikers could be taking advantage of individuals, putting them at risk of financial ruin by promoting price-inflated properties. 

I have seen a number of these SMSF property spruikers pop up over recent years offering incentives such as holiday’s and cash giveaways for people who purchase a property through a SMSF. 

Normally, these properties are very expensive as large commissions and kick-backs are priced into the sale. 

Whilst I don’t consider investing in property through a SMSF to be a bad idea, my advice is to conduct your own extensive research and always read the fine print of what you are getting into before you sign on the dotted line.

So what do we expect in the market?

Last week we discussed that the All Ordinaries is currently consolidating around the prior high of 5229 points set in May and that this may continue for one to two more weeks before the resumption of the uptrend. 

Well, this week a down bar has formed further confirming my thoughts that for now, investors are waiting for more positive news to come out of the market before diving back in.

This week’s announcement of a partial government services shutdown in the United States is likely to be further encouragement for seasoned investors to sit on their hands. 

My guess is that a resolution to this situation will be formed in the coming days and this may be the positive news investors will be looking for to return to our market and support the return to upward momentum.


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