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Property subdued after the reforms

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  • Property subdued after the reforms

    Property subdued after the reforms
    Maurice Dunlevy
    June 16, 2007

    INVESTMENT property sales generated by superannuation reforms have so far created a gentle wave rather than the widely tipped tsunami.
    Despite some estimates that proceeds of property sales could account for up to 50 per cent of the expected $100 billion of extra flows into super over the next three years, there's so far little evidence of a property sell-down.

    Owners had been tipped to cut and run, reinvesting their money in super, where they are able to contribute $1 million tax-free by June 30, or a combined total of $450,000 over the next three years.

    Property analyst Louis Christopher said yesterday that he had a sense of a wave of super-generated sales, but it was not a tidal wave.

    Mr Christopher, from consultancy Adviser Edge, said a lag in data made it difficult to know what was actually happening in the market.

    The only indication of increased sales was the number of properties currently on the market - up 12 per cent on June last year.

    More properties for sale may, however, only reflect the recovery in eastern seaboard residential markets, he said.

    Real Estate Institute of Australia national president Graham Joyce said real estate agents were reporting the withdrawal of rental properties as owners prepared to sell.

    The information was anecdotal and it could be some time before a clearer picture emerged because the new super rules allowed tax-free contributions up to $450,000 to be made over the next three years, he said.

    With the average property settlement taking 42 days, the REIA is not expecting last-minute sales to meet the June 30 $1 million tax-free deadline to cause a spike in June quarter figures.

    March quarter numbers revealed anything but a boom in residential property.

    Sales volumes in NSW fell 27.3 per cent for the quarter (and 25.9 per cent in the year to March), Victoria was unchanged and Queensland had a 5 per cent increase.

    WA sales fell up to 15 per cent.

    Australia has an estimated 8.6 million dwellings, 500,000 of which are sold each year.

    With fringe benefits tax payable on investment property sales, the federal government stands to make a financial windfall from any investment property sell-down.

    The real winners, though, will be state and territory governments, which collected $5.3 billion in stamp duty in 2005-06.

    No one knows for certain how much property money will flow into Australia's $1 trillion super industry, but a recent survey of 14,500 non-bank financial advisers may be a good guide.

    The AMP Capital Investors Investment Trends survey shows that, on average, financial planners expect to process an additional $6.4 million each in client superannuation accounts, totalling nearly $100 billion over the next three years.

    Of financial planners who anticipate processing less than $5 million in extra contributions, 49 per cent expect some clients to sell property.

    Of financial planners anticipating they will process more than $5 million, 34 per cent of clients were expected to sell property investments.

    Individual super funds report a torrent of additional contributions since April, but the Association of Superannuation Funds of Australia said it would be at least six months before it knew how much had come from property sales.

    "There's one way to find out if a man is honest-ask him. If he says 'yes,' you know he is a crook." Groucho Marx