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New type of property investor set to emerge in 2012

A new breed of property investor is likely to charge into the market in the second quarter of next year and drive the activity of the traditional buy-and-hold investor, according to Australian Property Monitors senior economist Andrew Wilson.

Despite some signals across many of the nation's capitals that buyer enquiry is picking up, a good majority of investors are still waiting for an even clearer signal that housing prices have moved upwards and that capital growth will begin to outweigh the cost of holding properties again, says Mr Wilson.

A surge of new investors – the SMSF (self-managed superannuation fund) investor types – are expected to hit the ground running in the second quarter of next year and likely to even beat the traditional investors back into the market, he says.

Wilson says his forecast is based on anecdotal feedback across the industry – from accountants, lawyers and SMSF advisers already putting 'the wheels in motion' for many new and existing property investors.

He says the 'perceived groundswell' of SMSF investor activity is reflective of the big hit many superannuation funds experienced around the time of the GFC and even more recently.

'Many individuals don't want their super funds exposed to stockmarket activity anymore and instead want to take back control of how their funds are invested,' says Mr Wilson.

David Thomas of Trilogy Investment Property Funding agrees with Wilson's forecast because currently his company is being swamped with enquiry on borrowing through a SMSF to buy a residential investment property.

The demographic tends to be individuals in their 40s with enough superannuation accumulated already, he says.

Thomas says that of every 10 enquiries he currently receives regarding financing a property through a SMSF, only one enquiry might proceed through to a transaction because the process can at first be a little daunting and many individuals need time to digest the idea and then time to set up the SMSF.

'There's still not a lot of rubber hitting the road yet because these investors first need to do their homework,' says Mr Thomas.

'They need to find out what's involved – it's not an instantaneous purchase because they need to speak to the mortgage broker to find out what's involved and how much they can borrow, then see a solicitor to set up their SMSF trust deed, then approach an accountant who establishes the corporate trustee for the SMSF, then weigh up the figures – all before they get an approval on the SMSF loan.

'If the process has started now then it's highly likely we'll see these SMSF investors ready to buy second quarter of next year.'

Reproduced in full with permission: Australian Property Investor, 'New type of property investor set to emerge in 2012', 24 November 2011.