How the SMSF changes will reshape Australian property

The number of investors affected could also be much higher than the government first estimated, with Australian Finance Industry Association figures showing more than 16,000 SMSF loans were written, compared with the government’s estimate of 4,000.

The change came after an agreement between the Labor government and the Greens in June, which gave investors 45 days to act before limited recourse borrowing arrangements (LRBAs) for residential property were removed.

That deadline passed on 10 August 2026, ending SMSF borrowing for residential property, although investors can still buy property outright through their fund.

While the government said the broader tax changes were designed to help everyday Australians enter the property market, many in the industry argued they could make it harder for investors to get a foot in the door.

Not the desired outcome

While the ban on SMSFs on residential property was intended to reduce competition in the market, industry professionals have warned it would likely reduce supply and new-build development.

According to PRD chief economist Diaswati Mardiasmo, while owner-occupiers would continue to transact in the residential property market in general, those in areas heavily reliant on SMSF activity would face different buyer demographics.

She said that as the market shifts, particularly in SMSF-reliant areas such as off-the-plan assets, agents will need to be prepared for a noticeable drop in buyer interest.

“There is a notable impact on real estate agents, particularly those dealing with residential property investors, off-the-plan developments, and boutique builders, Mardiasmo told REB.

“They have lost a portion of the market as agents can no longer market residential listings to buyers seeking to use credit leverage via superannuation.”

“Because borrowing via LRBAs remains fully permitted for commercial, industrial, and retail spaces, some agents and brokers are aggressively pivoting their client base toward the commercial market.”

She said removing lending would weaken housing supply and continue to push property prices upward as the population grows.

“SMSF borrowing directly financed the construction of new detached dwellings and a large volume of apartment construction, providing a path to homeownership and supporting the current rental market.”

For investors, she said the dip in supply would create an opportunity to broaden their portfolios by staying in residential property as others pivoted to commercial.

“However, matching typical residential budgets into appropriate commercial assets introduces a steeper learning curve for everyday mum-and-dad investors.”

Purchasing mistakes

According to Nelis Group director James Nelis, the SMSF announcement triggered a rush of buyers looking to transact before 10 August.

Ahead of the deadline, Nelis said he had seen an increase in interest in purchasing via the method, with more investors contacting buyer’s agencies to push a deal through.

In the rush to beat the clock, Nelis said some buyers may have neglected some of the consideration that usually comes with a property purchase.

“Due to the tight timeline, we turned away some people who weren’t fully set up and finance-ready prior to the announcement, as we received a number of enquiries with unrealistic expectations and the timing was inappropriate,” Nelis told SPI.

“My concern is that too many people rushed into deals before the deadline without thorough due diligence on the location or asset, appropriate pricing, and may have made compromises that they won’t see until later down the line.”

Supply to reduce further

While the ban is now in effect, industry bodies have called for SMSF lending to continue for new builds to maintain supply to the market.

A joint statement by the Australian Finance Industry Association (AFIA), Housing Industry Australia (HIA), Property Council of Australia, Real Estate Institute of Australia (REIA), SMSF Association, and Urban Development Institute of Australia (UDIA) called for the changes to be reconsidered.

According to the peak bodies, a ban on SMSFs for residential lending would negatively affect the property market, potentially stifling new home construction.

“Restricting financing for a home that has not been built means the policy reaches directly into the new-home market and contradicts the government’s own tax reforms designed to encourage new housing.”

“At a time when Australia is already struggling to build enough homes, there should be a clear and public justification for any policy expected to reduce the building of new homes.”

The industry bodies said that, with the nation already facing a housing supply crisis, any changes that affect the inflow of new dwellings should be fully researched to determine their extent.

“If the evidence demonstrates a clear net public benefit from extending the prohibition to newly constructed homes, the Government can make that case publicly.”

“Australia should not sacrifice additional housing supply before the government has demonstrated a clear public benefit from doing so.”

Bad news for buyer’s agents

Buyer’s agent and founder of House Finder Simon Loo said the changes would completely reshape the buyer’s agent industry over the coming months.

Loo said that buyer’s agents would have to return to the fundamentals, deliver genuine investment advice, and identify quality investment opportunities, if they hoped to attract clients.

“The ones that have typically targeted SMSF, of course they’re going to completely be decimated, at least for the time being,” Loo said.

“Unless they change their ways or unless they have a slightly different approach, then they’re going to suffer.”

He said that rather than expecting an exodus of investors, BAs should prepare for clients to change the way they purchase property.

“I think the money or the people that were thinking of doing SMSF will find ways to maybe buy in their own names again or buy in their own companies.”