Question of the week – Melbourne CBD property

Print This Post A A A

Question: I have a question relating to a one-bedroom apartment that I bought off the plan in the Melbourne CBD. Is property in the Melbourne CBD (Flinders St) a good investment proposition for an SMSF?

Answer (By Paul Rickard): I understand that the short-term outlook for near Melbourne CBD residential property (in particular, Docklands) is still weak with some supply overhang. In the long term, the overhang should clear and provided the economy (and the city) grows, CBD residential property will probably do ok.

In terms of whether a property in Flinders Street is going to be a good investment for your SMSF, the questions you should consider are:

  1. What is your intended holding period – will you hold it long enough to see the market improve?
  2. Will you hold the property long enough to get it into a “capital gains tax free state” (ie: the asset will be supporting the payment of a pension)?
  3. What is the expected net rental return on the property?
  4. How much of your fund does it represent (how much ‘single asset’ exposure is there)?
  5. What is the “opportunity cost” in investing in this property? What other investment opportunities will you miss out on if you invest in this?

Important: This content has been prepared without taking account of the objectives, financial situation or needs of any particular individual. It does not constitute formal advice. Consider the appropriateness of the information in regards to your circumstances.

Also in the Switzer Super Report:

Also from this edition