Market conditions ripe for SMEs to use SMSFs to acquire property
The market conditions are attractive for small to medium-size enterprises (SMEs) to acquire their own premises, whether it be commercial or industrial, via their self-managed super funds (SMSFs), says the specialist commercial property lender Thinktank Group.
Thinktank’s Per Amundsen says the financial benefits of SMEs using their SMSFs to acquire their business premises are well known, including tax minimisation, asset protection and building wealth for retirement.
“But what is often less understood is that the secondary market for commercial property can be closely linked to the primary market, and that rising prices in the latter, in many circumstances, will have a flow-on effect on the former,” Amundsen says. “In particular, tighter vacancy rates in Sydney and Melbourne are pushing prices up across both primary and secondary markets.
“As the latest Property Council of Australia (PCA) figures showed, there has been an improvement in all CBD markets’ vacancy rates, with demand the key driver, especially in Melbourne.
“Sydney landlords are predicting vacancy rates of ‘well below four percent’ with the latest PCA figures showing it fell from 4.8 percent to 4.6 percent in the six months to July. And the Melbourne market is even tighter, with the vacancy rate hitting a 10-year low at 3.6 percent.
“Falling CBD vacancy rates help underpin commercial property prices right across the market. There’s a ripple effect flowing out from this CBD activity, so for SMEs it’s an ideal opportunity to either sell their commercial premises to their SMSF or use their fund to acquire premises.”
Amundsen says a similar opportunity exists in SMEs in the manufacturing and constructions sectors of the economy.
“The industrial property market, where Thinktank has 43.6 percent of its loan book at $363 million, is benefiting from a stronger manufacturing sector with the ACCI-Westpac Survey of Industrial Trends for the June quarter rising 4.4 points to 63.8.
“Manufacturing continues to benefit from local apartment and infrastructure projects that are still boosting demand, with 37 percent of businesses expecting the general business environment to strengthen over the next six months.
“This paints a positive picture for industrial property, with the commercial and industrial real estate agent Savills highlighting stable rental levels across the country (except Perth), but with yields continuing to tighten everywhere (including Perth).”