In an industry first, Macquarie Bank has launched a product allowing self-managed superannuation funds (SMSF) to incorporate gearing in residential property investments.
Through the Macquarie Property Lever, SMSF members can invest in any residential property of their choice and can facilitate the investment by borrowing up to 55 per cent of the property's value.
The launch comes as the Federal Government has declared it will conduct a review of the marketing of products toward SMSFs.
The Association of Superannuation Funds of Australia said it would review the use of gearing by SMSFs after a legislative change overturned a previous ban.
However, Macquarie believes the product will be attractive for SMSFs due to its simplicity rather than any clever marketing surrounding it.
"If you were to buy property as an investor you would go out, find it, get finance and buy it, and the process that we've put in place here replicates that process," Macquarie Relationship Banking executive director Dean Firth said.
A further benefit of Macquarie Property Lever was that the provider of the product was also the provider of the funding, Firth said.
The gearing level built into the product was judged by the bank as being sufficiently conservative for its purpose.
"We didn't think aggressive gearing was something that should exist inside of a self-managed super fund, hence the fact our gearing is at 55 per cent," Firth said.
Under the conditions of the product, Macquarie is the security trustee and in turn appoints a property manager to take care of the property.
The SMSF then receives all of the net rental income from the property and the benefit of any capital gain made on the property as well as any tax advantages that arise from the investment.
Insurance is organised by Macquarie and underwritten by QBE. The minimum loan amount is $165,000. Macquarie is currently having the product rated to allow its inclusion on major investment platforms.
