iscover 
The Housing Industry Association (HIA) survey of Australia’s largest detached home builders, representing more than 40 per cent of national detached housing construction, found that 3,613 signed contracts backed by SMSF limited recourse borrowing arrangements (LRBAs) were yet to commence construction.
Builders also expected around two-thirds of those projects to be shelved once the legislation takes effect on 10 August, following the federal government’s last-minute budget concession to the Greens.
While the 45-day transition period has prompted a surge in SMSF borrowing in the short term, HIA chief economist Tim Reardon warned that the changes could “undermine the government’s objective of building 1.2 million homes and improving housing affordability”.
The survey also found more than 70 per cent of respondents had seen investor inquiries decline since the federal budget, while almost 90 per cent expected detached housing commencements to fall over 2026 and 2027.
Reardon said the findings provided the first direct evidence from builders of how the legislation was expected to affect housing supply.
“These are not hypothetical future investments,” he said.
“They are signed contracts to build homes that builders had expected to construct in the next year.”
Capital v demand
Reardon said the findings highlighted what he described as a misunderstanding of the role SMSFs play in housing supply.
“SMSFs do not live in homes. They do not create demand for housing. They do provide capital that finances the construction of new housing,” he said.
“Restricting one source of investment does not reduce the number of Australians needing somewhere to live.”
The HIA estimated the combined impact of contract cancellations and weaker future sales could reduce detached housing commencements by between 3.5 and 5 per cent, while reducing GST and stamp duty revenue to state governments by more than $450 million.
It said those estimates relate only to detached housing and do not include apartment construction, where investor participation is typically higher, and presales are often required before projects can obtain construction finance.
Industry adjusts
Reardon called on Treasury to publish a housing supply impact assessment and cost-benefit analysis of the reforms, consistent with the modelling undertaken for the government’s changes to negative gearing and capital gains tax.
“That assessment should quantify the expected impacts on detached housing, apartment construction, housing affordability and government revenue,” he said.
“The issue extends well beyond superannuation policy. This is ultimately about how housing policy is evaluated.
“If increasing housing supply remains the Government’s objective, then every major housing policy should be assessed against one simple question.
“Will it increase or reduce the future supply of homes?”
Indeed, the new CEO of the Finance Brokers Association of Australia (FBAA) has said that brokers and borrowers will need to adjust to a new lending environment, urging them to look for new avenues of opportunity.
“Brokers must accept that a new world has arrived in regard to SMSF residential lending,” he said.
“Along with borrowers we must adjust, as this legislation, along with changes to negative gearing and CGT, have now been rushed through Parliament with no industry consultation.
“There is a strong likelihood that both home owners and renters will incur losses and higher prices as a result of legislation that won’t help solve the housing crisis in any meaningful way.
“Specialist lenders in this field are doing what they can to support brokers and borrowers through these changes.
“While all new residential lending and limited recourse borrowing arrangements are effectively dead from 10 August, opportunities for SMSF commercial lending remain as well as residential refinancing opportunities where appropriate through the grandfathering provisions enacted.”
Across the broader housing market, Australian Finance Group’s latest broker data also pointed to softer investor activity, with investor lodgements easing during the June quarter and falling further in June.
[Related: SMSF lending tipped for commercial property shift]
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