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Property market thrown into chaos ahead of SMSF ban
The recent SMSF lending changes could have negative consequences across the property sector, with buyer’s agencies caught in the crossfire.
The property industry has been left in chaos following the government’s decision to abolish Australians’ ability to purchase residential property through self-managed super funds (SMSFs).
While the proposed changes have been touted as a boost for first-time buyers to enter the market, many across the industry felt the decision would have far-reaching consequences for the sector.
SPI understands that the ban on SMSF investing could have negative ramifications for buyer’s agents and their client bases, with up to 20 per cent of purchasers utilising the wealth-building strategy.
According to Capital Property Advisory managing director Matthew Hughes, the removal of SMSF could see some buyer’s agencies struggle to stay afloat.
“I think moving to cut costs to try and retain good people along the way is a smart move to weather the storm,” Hughes told SPI.
He said the smaller, leaner businesses would likely be fine, due to lower overhead costs.
Hughes said the reforms would trigger a flurry of activity amongst buyers seeking to jump into SMSF before it was removed, with many buyer’s agents having to ensure they get their clients over the line without rushing the process.
“If you weren’t already thinking about pulling the trigger, it is probably too late to start the whole process,” Hughes said.
“Anyone who had it on their radar, there is obviously now a massive time pressure to go and execute.”
With residential property held by SMSFs accounting for more than $55 billion as of the June quarter 2024, PRD chief economist Diaswati Mardiasmo said the ban would likely have a “huge” impact on the market.
“For an investor, it does put a limit on how you can use your SMSF and what type of property you can buy into, especially if you have been using your SMSF exclusively in the residential market,” Mardiasmo said.
She said that unless investors had significant capital sitting in their SMSF, they would need to change tactics in order to build wealth for their future, including a pivot to commercial or mixed-use assets.
“If you do need to use a loan, you may need to consider alternatives to pure residential homes.”
Fouracre Financial founder Jack Fouracre said that removing the tax would make it more difficult for potential buyers to purchase property.
“My heart goes out to the next generation looking to get ahead using one,” Fouracre said.
“It was one of the lowest tax environment structures purpose-built for retirement, allowing many of our clients to plan for a better lifestyle without taking such a large cut.”
He said that the changes had created a sense of impending urgency among potential buyers, who now had a deadline to make their purchase.
“It has only been 24 hours since the announcement, and I have had 15 inquiries from clients wanting to buy an SMSF.”
“The market will see many active SMSF buyers with high intent to close a deal, but unfortunately, some will miss out entirely,” he said.
In addition to impacting buyers and property sales, Fouracre said that the withdrawal of SMSF-held properties would see a drop in rental supply.
“100 per cent of SMSF buyers were supplying the market with available rental properties. In two months, that’s all gone.”
Hughes said he felt the government had made the wrong move if the ultimate goal was to strengthen the nation’s property sector.
“More concerning is the fact that you’re just making it impossible for the people they’re purporting to help to get ahead through property and create wealth by pulling all of these levers, when really the only lever you should be pulling is removing red tape and getting more supply to market.”
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