Investment properties are the second largest sector for investments outside superannuation and Australians face a myriad of structural risks when holding these assets, according to Rice Warner.
The research house’s latest analysis found of the $2.3 trillion total personal investments as at 30 June 2016, 40.6 per cent were invested in investment property, 44.3 per cent in cash and term deposits, 12.09 per cent in equities, and 2.1 per cent in fixed interest and loans.
Rice Warner said as Australian investors were predominantly tied to variable rate loans, any increase in rates would feed into the cost of servicing mortgages, especially for investors who were using negative gearing and hence dependent on income other than their rent to service the mortgages.
It said other structural risks for property assets included:
Rice Warner noted that allowing super to be accessed to fund housing purchase would further escalate risks.
“The combination of dilution of retirement savings and further upward pressure on property prices means such a measure would at best be counter-productive for those whom it is intended to help, and at worst would further increase the risk of the property booms in Sydney and Melbourne ending in tears,” the analysis said.
The chief investment officers of UniSuper, HESTA, and TelstraSuper have elaborated on opportunities and risks that are top of mind when it comes to illiquid assets like private credit within their portfolios.
In an address to the National Press Club last week, the incoming chair of Australia’s sovereign wealth fund said institutional investors could play a role in the winding road towards net zero.
The FSC chief executive will join a long line-up of renowned speakers at the inaugural summit.
Australia’s second-largest super fund has explained its approach to the Asian giant and how it is balancing underlying risk, adding that avoiding China altogether may not be a “doable strategy”.
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