Brokers tip SMSF lending slowdown

In exclusive comments provided to The Adviser, Smartline franchisee Ian Simpson said demand for SMSF property loans will shrink, with some lenders pulling back their involvement in SMSF lending coupled with the debate between regulators.

“I personally think this is ridiculous because the whole superannuation sector is so heavily overweight in equities and bonds that having minimal exposure to residential property is actually not prudent,” he said.

Michael Clarke, broker and owner of Compass Lending & Finance, said he expects, over time, less access to SMSF lending for residential property as lenders pull back from this space and regulation tightens.

“Regulators are very concerned about bulk movement of monies out of ‘diversified’ managed funds and industry funds into singular residential property assets. In summary, higher risk results from lower diversification,” he said.

Tanya Sale, chief executive of independent aggregator Outsource Financial, said the industry will see a decline in SMSF property loans, as the requirements for purchasing property via an SMSF will be amended.

“My thoughts and views would be there will be policy changes within the lenders, a minimal amount that has to be in the SMSF and also the quality and geographical landscape of the property being bought,” she said.

Deanne Firth, director of Tactical Super, which specialises in SMSF auditing, said it is clear that banks are cutting SMSF borrowing to comply with APRA’s warning.

“APRA has single-handedly wiped out the market for residential purchases in SMSFs. Business real property will be purchased instead,” she said.

However, some industry figures, such as Mortgage Choice franchisee Craig Guthrie, do not believe that less people will purchase property via their SMSF as a result of APRA’s crackdown.

“I don’t see these policies having any significant effect on that part of the market, since the rates for those loan products are already heavily loaded, and LVRs are strictly limited to 80 per cent anyway,” he said.

“In fact, if the average mum-and-dad property investor is pushed out of the market, it will just be more appealing for the wealthy SMSF investors to get into the market.”

Michelle Coleman, principal of brokerage W Financial, said that while taking out an SMSF loan is not a quick decision for borrowers, they will still purchase property with their SMSF while it is still a viable option.

“In fact, some people may push forward sooner and faster with this if they think they may possibly close the door to this type of lending,” she said.

[Related: Brokers favour non-banks for investor loans]