Superannuation fund returns are being driven down by consumers embracing online shopping, analysts say.
More people have opted to shop online during COVID-19 and once they move online, they often don’t return to bricks-and-mortar stores, said Scott Keck, executive chairman of property valuers Charter Keck Kramer.
Listed property makes up seven to 10 per cent of superannuation investment portfolios and usually behaves independently of share-market fluctuations. However, listed property fell by as much as 70 per cent during the global financial crisis of 2008–09.
Mr Keck told The New Daily there would be less return from rent with more people working from home, reducing demand for office space.
“Property yields and internal rates of return are likely to be unchanged, but income will be lower as tenants will be given more incentives,” he said.
Mr Keck said shopping centres would also have to adapt by broadening into professional services, healthcare, hospitality, accommodation and even aged care.
Super funds with exposure to retail property will also be affected by landlords receiving less income after the national cabinet demanded landlords negotiate rent reductions with affected business tenants with annual revenues below $50 million.
The downturn in property returns is partly due to a dramatic shift in Australian spending habits during the coronavirus crisis.
“We haven’t seen these sorts of swings in spending before, ever,” Zip co-founder Peter Gray told the Business Insider.
ATM withdrawals halved in April, as online shopping doubled.
Australians staying at home spent more on bikes and scooters, homewares, computers, and skincare
They shopped more locally, at bakeries and fruit and vegetable and speciality stores.
Products to suffer drops in sales included cosmetics, books, event planning and visits to medical centres.
Mr Gray said increased spending on web design and hosting indicated many Australians were seeking to start their own businesses.
The ‘enormous’ shift to home offices saw big falls in revenue from parking lots, public transport, road tolls, petrol, and car insurance.
“From what we are seeing we would predict this is a sign of things to come, people returning to shopping local and moving away from the cash society we have been so accustomed to,” Mr Gray said.
With superannuation funds tipped to experience their first financial year of negative returns in 10 years, ABC analyst Andrew Robertson puts things in perspective.
“It’s not Armageddon, and we still have the benefits of the previous nine consecutive years of positive returns,” he writes.
“The reality is, most superannuation funds are heavily leveraged to the stock market, and markets go up, and they go down.
“Australia’s biggest super fund, AustralianSuper, tells its members to expect to lose money five years out of 20.
“The hope is that the gains in the other 15 years will more than make up for the five years of losses.”
AustralianSuper’s average annual return on its balanced fund since 1985 has been 9.68 per cent, despite the bad years.
Mr Robertson points out that Australian Super’s last negative return was during the global financial crisis in 2009, when it lost 13.4 per cent.
“While superannuation is not set and forget, it is a long-term investment that will go up and down, and we shouldn’t overreact to the downs.”
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