Key takeaways
From 10 August 2026, SMSFs can no longer enter new LRBAs to buy residential property, subject to transitional rules.
Around 8,700 new residential SMSF limited recourse borrowing arrangements were recorded in 2023–24.
SMSF borrowing accounts for less than 0.5% of new residential property borrowing each year on average.
Less competition from one buyer group does not necessarily mean lower prices or an easier path into the property market.
A change to Australia's superannuation rules has removed one avenue for new leveraged SMSF buyers to acquire residential property.
From 10 August 2026, self-managed superannuation funds (SMSFs) can generally no longer enter into new limited recourse borrowing arrangements (LRBAs) to acquire residential property.
Under the new law, real property acquired through a new LRBA generally needs to be a business real property. Existing arrangements and certain purchases already underway before the commencement date are protected under transitional rules.
For people who had planned to borrow through their SMSF to invest in residential property, that's a significant change.
But there's another side to the story.
What happens to the home buyers who may previously have competed against those investors?
For a first home buyer turning up at an auction or making an offer on an apartment, house or other property that appeals to investors, one potential source of leveraged competition has become smaller.
The question is whether that's enough to make a noticeable difference.
What has changed with SMSF property borrowing?
SMSFs have generally been prohibited from borrowing, but limited exceptions have allowed funds to borrow through an LRBA.
An LRBA enables an SMSF to borrow to acquire an asset while generally limiting the lender's recourse to that asset if the loan defaults.
The Treasury Laws Amendment (Tax Reform No. 1) Act 2026 received Royal Assent on 26 June 2026.
Schedule 5 of the Act commenced 45 days later, on 10 August 2026. It amended the LRBA rules so that where real property is involved, the property must be "business real property", subject to transitional arrangements.
In practical terms, this prevents SMSFs from using a new LRBA to acquire real property that does not qualify as business real property.
However, it's important to be clear about what the change doesn't do.
It doesn't ban SMSFs from owning residential property altogether. An SMSF may still be able to acquire residential property without borrowing, provided it complies with applicable superannuation rules.
The legislation also provides protection for some arrangements already in place or underway before 10 August.
This includes borrowing arrangements entered into before commencement, certain refinancing arrangements and situations where the related asset is acquired under an arrangement entered into before commencement, even if settlement occurs later.
Before 10 August 2026 | From 10 August 2026 |
|---|---|
SMSFs could use an LRBA to acquire eligible residential investment property, subject to superannuation and lending rules. | New LRBAs involving real property generally need to involve business real property. |
Existing SMSF rules and lending criteria applied. | Borrowing arrangements entered into before 10 August 2026 have transitional protection, subject to the transitional provisions. |
Residential property could be acquired with borrowed SMSF funds through an eligible LRBA. | SMSFs may still acquire residential property without borrowing, subject to applicable SMSF rules. |
SMSF investors using LRBAs formed part of residential buyer demand. | New leveraged SMSF residential buyers are generally removed from that pool subject to transitional arrangements. |
If you're interested in the rules from an SMSF investor's perspective, read our guide to buying property with super through an SMSF.
How big was SMSF residential borrowing?
This is where the potential impact on home buyers needs some perspective.
That represents thousands of new residential borrowing arrangements involving SMSFs.
Aussie Broker Veenu Bharara said she had also been handling SMSF property deals in the lead-up to the changes.
“I was doing deals, I think, from last year also... So, I'm literally waiting on one formal approval of one of my last SMSF deals to come in.”
Nathan Rigney, director of NGR Accounting, had also seen growing interest among his clients.
“I've had more inquiries than ever before about people wanting to buy properties in their self-managed super fund and actually going through the process,” Rigney said.
But measured against Australia's wider home lending market, SMSF borrowing remains relatively small.
The government has said LRBAs accounted for less than 1% of total residential property borrowing and less than 0.5% of new residential borrowing each year on average.
Independent economist Saul Eslake said: “The value of housing, or at least residential real estate, owned by SMSFs is a tiny fraction of the total value of housing. And similarly, the value of non-recourse loans is very small as a percentage of the total value of housing debt outstanding.”
For some wider context, ABS data shows there were 139,794 new loan commitments for dwellings in the March quarter of 2026 alone, including 82,453 owner-occupier commitments and 57,342 investor commitments. Of the owner-occupier total, 30,241 were first home buyer commitments.
These figures are not directly like-for-like measures: the ABS figures are dwelling loan commitments, while the SMSF figure relates specifically to new LRBAs for residential housing.
So, while SMSF borrowers have been active in residential property, the available national lending data doesn't support assuming their removal from new leveraged purchases will dramatically change competition across Australia's housing market.
The impact, if there is one, may be more nuanced.
Could first home buyers now face less competition?
Potentially, but the available evidence doesn't tell us that every first home buyer will suddenly have fewer people bidding against them.
Removing new SMSF residential LRBAs means one avenue for leveraged residential investment has closed. In an individual sale where an SMSF borrower might otherwise have been competing, that could change the mix of potential buyers.
But SMSF borrowing makes up a relatively small proportion of the broader residential property lending market. And SMSF investors aren't the only people competing for residential property.
Depending on the property and location, buyers may still be competing against:
other first home buyers
existing owner-occupiers
downsizers and upsizers
investors buying outside super
SMSFs buying without borrowing.
Investor activity more broadly also remains an important part of Australia's housing finance market.
In the March quarter of 2026, the ABS recorded 57,342 new investor loan commitments for dwellings. While this was 5.3% lower than the previous quarter, it was 18.8% higher than a year earlier.
That's why it would be a stretch to say the SMSF change has removed investor competition for first home buyers.
A more accurate way to look at it is that one type of leveraged investor can generally no longer enter the residential market in the same way they could before 10 August.
Eslake pointed to the relatively small size of SMSF property holdings in the broader housing market as one reason the change may not materially alter competition for first home buyers.
Whether buyers notice that difference is likely to depend on what they're buying and what is happening in their local market.
Bharara said she wouldn't necessarily describe SMSF investors as direct competitors to first home buyers across the board.
“I will not say they were competing with first-home buyers.”
Where could the change matter most?
The available data doesn't yet provide a clear picture of where the changes could have the greatest impact.
National figures tell us how many residential LRBAs have been established and give us an indication of SMSF borrowing share of the broader market.
But they don't provide enough evidence to conclude that the impact will be concentrated on a particular first home buyer price bracket, suburb or property type.
That's an important distinction.
Rigney said that while he'd seen increasing interest in SMSF property purchases among his clients, he wasn't expecting the borrowing change alone to substantially shift the wider property market.
“I don't know if it's going to be that much of an impact that you're going to see a difference in the price of the market. I mean, it's just taking another player out.”
For example, it may seem logical that a first home buyer looking at an investment-friendly apartment could have been more likely to encounter an SMSF investor than someone bidding on a higher-priced owner-occupier home. But without sufficient granular data, we shouldn't assume that's the case.
What we do know is that property is a meaningful asset class within SMSFs.
Bharara also shared she had seen SMSF investors buying outside their home states.
“If I'm based in New South Wales, I'm not buying in New South Wales. I'm buying somewhere in Queensland, or one of my clients has just bought in Launceston, Tasmania. So it may be competition for a first-home buyer there in that area.”
Moneysmart reports that, based on ATO figures, Australia had more than 653,000 SMSFs with more than $1 trillion in assets as of 31 December 2025, and around 17.5% of SMSF assets were held in residential and commercial property combined.
However, property already owned by SMSFs isn't the same thing as new residential property purchased using an LRBA.
For a buyer, the more useful question may therefore be less about what the reform does to Australia's entire housing market and more about who is currently competing for the same properties in your local market.
You might also be interested in: First-home buyer reality check - What's changed in 12 months?
Does this mean property prices could fall?
There isn't enough evidence to draw that conclusion from the SMSF borrowing change alone.
Property prices are influenced by a much wider range of factors, including the number of properties available for sale, buyer demand, interest rates, access to credit, population changes, employment and income conditions, new housing supply and local market conditions.
The SMSF reform changes one part of the demand equation by restricting future leveraged residential purchases through SMSFs.
Eslake doesn't expect that change alone to materially shift Australia's overall housing market.
“Removing this provision will have no material impact at all on the supply of or demand for housing.”
But given SMSF borrowing accounts for less than 0.5% of new residential borrowing each year on average, according to government figures, it would be difficult to attribute future movements in Australian home prices to this reform alone.
There may also be flow-on effects that take time to become clear.
Some SMSF investors may choose not to buy residential property. Others may invest in residential property using existing fund money rather than borrowing, while some may consider other asset classes.
For SMSF investors who had been considering residential property, Rigney expects some may reconsider their investment strategy.
“I think potentially you're going to have people who look at their strategy and what they're doing. They'll always find something else.”
He said some investors may consider commercial property, while others may decide not to proceed with an alternative investment they don't fully understand.
Business real property can also continue to qualify for new LRBAs where the relevant rules are met. That makes the eventual effect on residential demand difficult to predict.
What could this mean at an auction?
Imagine you're preparing to bid on a property this weekend.
The new rules don't tell you how many bidders will turn up, what they'll be prepared to pay, or whether another investor will take the place of a potential SMSF borrower.
What they do tell you is that someone who had planned to establish a new SMSF LRBA after 10 August to buy that residential property generally can't use that borrowing structure to make the purchase.
Someone with a protected pre-commencement arrangement may still be able to participate.
An SMSF may also be able to acquire residential property without borrowing, subject to the applicable SMSF rules. And investors purchasing outside an SMSF remain part of the market.
So, rather than expecting noticeably quieter auctions because of the reform, buyers may want to treat it as one change to the potential buyer mix.
The number of people you're competing with can vary from one property to the next anyway.
That's why understanding recent comparable sales, the level of interest in the property and your own limit can be more useful than trying to predict how one national policy change will affect an individual auction.
You might also be interested in: Why more sellers may be choosing private treaty over auction?
Should first home buyers change their strategy?
For most buyers, the fundamentals of preparing to buy haven't changed.
Even if competition from leveraged SMSF investors eases in part of the market, that doesn't automatically increase how much you can borrow or make a property affordable for your circumstances.
If you're getting ready to buy, consider focusing on the things you can control:
Know what you may be able to borrow. Your borrowing power will depend on factors including your income, expenses, debts, deposit, and the lender's assessment criteria.
Set a budget before you bid. A quieter auction doesn't necessarily mean a property will sell within your budget.
Research the local market. Look at recent comparable sales and the types of buyers active in the area rather than relying on national headlines.
Consider your property options. If you're flexible about property type or location, understanding where your budget stretches further could give you more choices.
Get your finances organised early. Knowing where you stand before making an offer can help you approach the search with a clearer idea of your price range.
An Aussie Broker can help you understand your borrowing position and compare home loan options from over 25 lenders+**.
What should home buyers take away from the SMSF changes?
The SMSF borrowing change is significant, but its effect on first home buyers shouldn't be overstated.
From 10 August 2026, new SMSF LRBAs involving real property generally need to be for business real property, removing a pathway that had allowed SMSFs to borrow to buy residential investment properties.
That means the pool of potential new leveraged SMSF residential buyers has become smaller. But the government said LRBAs represented less than 0.5% of new residential borrowing each year on average.
So, could a first home buyer face one less competitor at a particular property? Potentially.
Does it mean first home buyers across Australia should expect cheaper homes or substantially less competition? Not necessarily.
If you're planning to buy, understanding your borrowing position, setting up a budget and keeping an eye on what's happening in the market you're actually searching in may be more useful than trying to time your purchase around the reform.