Fresh figures have revealed that the federal government’s changes to residential borrowing through SMSFs could significantly impact supply as the LRBA ban comes into effect.
The Housing Industry Association (HIA), the national peak body for Australia’s residential building industry, has warned the new ban on self-managed super fund (SMSF) borrowing for residential property could substantially cut new-home supply.
From Monday (10 August), SMSFs can no longer use new limited recourse borrowing arrangements (LRBAs) to acquire residential property.
The ban stems from a legislative agreement between the federal government and the Greens to secure the minor party’s backing of the budget’s housing tax overhaul.
While SMSFs can still purchase homes with fund cash reserves, and LRBAs are still available for qualifying business real property, the change closes a major leveraged pathway used by investors buying new builds and off-the-plan stock.
Under the new laws, the property must maintain its commercial business status for the entire duration of the LRBA, and if a commercial property financed via an LRBA ceases to be used for business purposes, the arrangement will instantly breach the new borrowing exemptions.
Existing residential LRBAs are not affected, nor are refinances of those arrangements.
SMSFs that exchanged a binding contract to acquire property before 10 August are also protected under the transitional provisions, even if settlement or loan execution occurs after the cut-off.
Contracts exposed to deadline
The HIA said survey responses from Australia’s largest home builders indicated that the SMSF changes alone could reduce detached-home commencements by between 3.5 per cent and 5 per cent annually.
The association further warned that about 2,500 new-home contracts already signed were expected to be cancelled due to buyers and developers failing to complete the necessary administrative arrangements before the deadline.
HIA chief economist Tim Reardon said the implications for apartments could be more pronounced, given the importance of presales to project funding.
“The adverse shock of prohibiting borrowing to build a new apartment by an SMSF is likely to be more significant,” Reardon said.
The concern is that reduced demand from SMSF purchasers could weaken the presale levels developers need to obtain construction finance.
Reardon said the ban undermined the federal, state, and territory governments’ target of delivering 1.2 million homes by 2029.
“Governments have committed to delivering 1.2 million new homes. Yet from today, Australia is removing one of the investment pathways that has helped finance the construction of new housing,” he said.
“You cannot make it harder to invest in new homes and expect more homes to be built. Not a single SMSF lives in a home in Australia and therefore aren’t adding to demand and when an SMSF builds a new home, they do not add to demand, but they only add to supply.”
The HIA has called on the government to disclose the analysis it relied on in proceeding with the measure, including its expected impact on national construction activity.
“The Government should release the modelling that informed this decision, including its estimate of how many fewer homes will be built as a consequence of banning SMSF borrowing for residential property,” Reardon said.
Lending data challenges assumptions
The Australian Finance Industry Association (AFIA) has separately said that the affected market is significantly larger than the government’s working assumption of around 4,000 new LRBAs a year.
Preliminary figures collected from 13 AFIA non-bank lender members that actively write SMSF residential loans showed more than 16,000 new loans in the 2026 financial year, backed by $10.3 billion in security.
AFIA added that the number was likely to understate the broader market, given its members represent only a small portion of SMSF residential lenders.
Firstmac has also offered a further indication of the sector’s exposure to construction-linked finance, with the Brisbane-based non-bank lender telling The Adviser that a major share of its SMSF book supported new developments.
“Approximately 20 per cent of our SMSF lending is to new developments/off the plan. This translates into about 1,500 SMSF loans per year,” Firstmac CEO Marie Mortimer said.
[Related: ATO releases extensive LRBA guidance ahead of ban]
Want to see more stories from trusted news sources?
Make The Adviser a preferred news source on Google.
Click here to add The Adviser as a preferred news source.
