The last week of an era?

SMSF borrowing rules are changing. Explore what the deadline means for property investors, housing supply and the long-term Australian property market.

Posted by Gavin Chau

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By this time next week, borrowing through an SMSF to purchase residential property will effectively become history. Over the past few weeks that has created a wave of urgency. Advisers have been rushing to establish funds, brokers have been scrambling to obtain approvals and investors have been trying to exchange contracts before the deadline arrives.

Most of the discussion has understandably focused on the practical questions. Can I still make it? What paperwork is left? Has my finance been approved?

They’re important questions, but they aren’t the ones I’ve been thinking about.

What I’ve found more interesting is how this period will look when we eventually have the benefit of hindsight. Twenty years from now, will we simply remember this as another policy adjustment, or will we look back on it as a unique period in Australian property investing that existed for a short window before quietly disappearing?

Borrowing through an SMSF only became possible in 2007. That feels like a long time ago because an entire generation of investors has grown up with it, but in the context of Australian property it’s actually a just a brief chapter. For most of our history the strategy didn’t exist, then for roughly two decades it did, and now the rules are changing again.

Could a future government bring it back? Of course it could. Governments regularly reverse the policies of those that came before them. The difficulty is that investment decisions can’t be based on what a future government may or may not decide. They have to be made using the rules that exist today.

The Market Has Already Made Its Decision

The interesting thing is that the market hasn’t waited for the deadline to arrive. Behaviour started changing as soon as investors realised the window was closing.

Historically, around one in every four properties our clients purchased was through an SMSF. Since the announcement, that proportion has increased to around three out of every four. This week alone we expect another 53 property exchanges before the deadline.

Those numbers tell us something about human behaviour.

When people believe an opportunity is temporary, they stop treating it as something they can always do later.

Some of those purchases were probably going to happen anyway. They’ve simply been pulled forward. Others may never have occurred without the deadline creating a sense that the decision had to be made now rather than sometime in the future.

Markets don’t wait for legislation to take effect. They begin adapting as soon as expectations change.

Housing Is Rarely That Simple

Interestingly, Roy mentioned something the other day that I hadn’t really considered. The increased demand for established property appears to have provided some support for prices. That probably isn’t enough to change the broader direction of the market, but it does improve development feasibility at the margin because stronger end values make projects stack up a little more easily.

Although this alone doesn’t suddenly solve Australia’s housing shortage, it reinforces that housing doesn’t have one problem, so it is unlikely to have one solution either.

Construction costs remain high. Finance remains expensive. Planning approvals still take too long. Labour shortages haven’t disappeared. Infrastructure remains constrained. Now we’ve also changed one of the funding pathways that has historically been important for off-the-plan projects.

Each of those factors pushes feasibility in one direction or the other. None of them, on their own, determine the outcome.

The Market Behaves More Like an Ecosystem

One reason housing is so difficult to analyse is that people often imagine it as a static system. We assume that if one variable changes, the outcome is proportional and predictable. In reality, markets behave much more like ecosystems.

Change one part of the system and everything else begins adjusting around it. Capital reroutes through different structures. Investors change strategy. Developers delay projects. Lenders reassess risk. Some projects quietly disappear while others suddenly become viable.

Interestingly those adjustments don’t happen all at once. Some appear immediately. Others take months or even years before they become visible.

In most cases it’s those second and third-order effects that end up being more significant than the original policy itself.

That’s one reason I’ve become increasingly interested in asking what happens next.

Investing Without Hindsight

History has a habit of making opportunities look obvious once they’ve passed.

People look back at Sydney twenty years ago and wonder why everyone didn’t buy property. They look at the Global Financial Crisis or the COVID recovery and imagine the decisions must have been easy.

Every major investment opportunity feels uncertain while you’re living through it. That’s precisely why it exists.

Borrowing through an SMSF may eventually be remembered as one of those temporary policy windows. Or perhaps another government reintroduces it in five or ten years’ time. Nobody knows. What we do know is that the current rules are ending.

That doesn’t mean investors should buy the wrong property simply to beat a deadline. A poor investment purchased before Friday doesn’t magically become a good investment on Monday. Quality assets, sensible cash flow and long-term fundamentals still matter far more than the structure used to purchase them.

If borrowing through an SMSF has genuinely been part of your long-term strategy though, I wouldn’t make today’s decision on the assumption that the opportunity will simply come around again.

Sometimes it does.

Sometimes it doesn’t.

The difficult thing about investing is that you never get to make decisions with the benefit of hindsight. By the time history tells us which opportunities mattered, they’ve usually stopped being opportunities.

Posted by Gavin Chau, on 4th Aug 2026