2019 looks murky for the residential sector as it continues to weaken, pushing older investors to place their money elsewhere.
According to a report by The Investor of JLL, the so-called ‘Mum and Dad’ investors under the self-managed super funds (SMSF) in Australia are choosing to invest their money into commercial properties instead. The reason behind this is that the weakening residential market and commercial properties offer attractive propositions for investors, such as longer leases, higher certainty when it comes to income, and small liability on outgoings.
Aside from commercial properties, these investors are also opting for another option to boost their investment prospects, which is through banks’ lending restrictions through peer-to-peer lending.
So far, Australia houses 597,000 SMSFs, and when combined is totalled to around a whopping A$700 billion. In fact, that A$700 billion is only a part of the total superannuation sector of Australia, which is one-third to be exact, according to the Australian Tax Office. Not only that, the said sector is growing as data shows growth over five years to June 2017. Each year within the five years, the sector grew five per cent each year.
“Mums and Dads have always aspired to invest beyond the family home and residential historically has always been seen as the safe harbour, given it was what they knew. But they are getting more educated now and growing the confidence to invest in higher value property asset classes,” said Marty Janes, Head of Metropolitan Sales in Australia for JLL.
On the other hand, Dylan McEvoy, a Director in JLL’s Metropolitan Markets Sales & Investments team said more and more ‘Mum and Dad’ investors’ are tapping into the service station market.
“We are seeing more and more Mums and Dads coming out of residential and equity stock markets and looking at service stations. They get long leases of typically 15 years with top-tier tenants, plus 5 to 6 percent returns for assets in Sydney. It’s a strong proposition,” the director said.
There is an increase in the service station market as more Mums and Dads are coming out to purchase assets. These investors are actually trading their assets with each other, which according to the report by the Investor is valued between A$2.5 million and A$6 million.
“The number of private buyers bidding for service stations outnumber larger investment funds,” says Janes, further explaining that it is “not unusual to see family members pool their funds so they can bid for higher value assets where there is less competition among buyers.”
As for other investors who’re also wanting to place their money elsewhere, there are commercial property listings available from real estate websites, such as the National Brokers Network. These kind of websites can help you in locating the best assets for the buy-and-sell scheme. Real estate agents can also assist in the negotiating process, and as well as the marketing and lead generation in order to free up your time on a number of occasions.