Two in Three New Australian Houses Backed by Super Face the Axe

The nation's largest detached builders have reported 3,613 signed contracts that rely on the outlawed SMSF borrowing arrangements, with 2,415 expected to be cancelled, detached starts tipped to fall by up to 5 per cent, and state governments to lose more than $450 million.

Wall frames and roof members stand on the second storey of a detached house, with more houses rising across the estate behind it, in the market where builders expect 2,415 signed contracts to be cancelled once the SMSF borrowing ban starts on 10 August. (Photo Credit: Supplied by Wood Central / Central PR Group)

Builders responsible for more than 40 per cent of Australia’s detached housing hold 3,613 signed contracts that rely on superannuation borrowing arrangements outlawed from 10 August, and they expect 2,415 of those houses, or 66.9 per cent, to be cancelled once the ban takes effect. That is according to Tim Reardon, Chief Economist at the Housing Industry Association, whose survey of the country’s largest detached home builders provides the first direct evidence of how the new restrictions will affect housing supply.

A cancellation of that scale would hit the timber industry’s largest single market, with the frame and truss sector supplying 75 per cent of Australia’s detached houses, and the average new detached house using 14.58 cubic metres of structural timber, according to the HIA’s own estimates. On those figures, the 2,415 contracts expected to be cancelled account for more than 35,000 cubic metres of structural framing timber, 68 per cent of it softwood.

“SMSFs do not live in homes. They do not create demand for housing,” Reardon said, arguing the funds supply the capital that finances new construction rather than competing with owner-occupiers for it. These are signed agreements rather than hypothetical future investments, he said, houses builders had expected to construct within the next year.

More than 70 per cent of the surveyed builders report that investor enquiries have fallen since the Federal Budget, and nearly 9 in 10 expect detached housing commencements to decline through 2026 and 2027.

It comes as the industry prepares for the ban’s 10 August commencement, 45 days after the Treasury Laws Amendment (Tax Reform No. 1) Act received Royal Assent with a Greens amendment, tabled by Senator Nick McKim, that prohibits self-managed super funds from entering new limited recourse borrowing arrangements over residential property. The Senate passed the package 35 votes to 25 on 25 June, with existing arrangements grandfathered, commercial property borrowing untouched, and the ban itself the price of Greens support for the Government’s negative gearing and capital gains tax reforms.

Pine roof trusses span a new detached house, the product line at the centre of a frame and truss sector that supplies three in every four detached houses built in Australia. (Photo Credit: Dreamstime)

When weaker future sales are added to the cancellations, the HIA expects detached housing commencements to fall by between 3.5 and 5 per cent, with state governments losing more than A$450 million in GST and stamp duty revenue. Those estimates cover detached housing alone, Reardon said, and exclude apartment construction, where investor participation is typically higher and pre-sales are often required before projects can secure construction finance, meaning the full impact on supply may be greater.

“New housing supply does not begin at settlement,” Ray White Chief Economist Nerida Conisbee said, but at the point where a developer must prove to a lender that enough buyers have committed for a project to proceed. SMSF investors typically account for at least 30 per cent of apartment project pre-sales, on the peak bodies’ own figures, commitments that often determine whether construction finance is approved at all.

The survey adds hard numbers to a warning three peak bodies issued a fortnight ago, when the HIA, the Urban Development Institute of Australia, and the Property Council of Australia called on the Government to preserve SMSF investment in new housing while restricting it in established dwellings. “SMSF investors play a critical role in getting these projects out of the ground,” Simon Croft, HIA Chief Executive Industry and Policy, said at the time, with Property Council Chief Executive Mike Zorbas branding the changes the latest “handbrake on investment nobody asked for”.

Canberra’s defence rests on scale, with Treasurer Jim Chalmers describing SMSF borrowing as less than 1 per cent of total residential property lending and valuing the ban at $50 million over the forward estimates. Treasury figures put to Parliament count 4,300 new SMSF borrowing arrangements established in 2024, a number Reardon argues reveals nothing about how many houses depended on those investors before construction could proceed.

A precedent for the assessment already exists, with Treasury modelling the housing impact of the Budget changes to negative gearing and capital gains tax, reforms the Government has acknowledged will reduce supply by 35,000 homes over the next decade. The HIA wants the same framework applied to the SMSF restrictions, through a published housing supply impact assessment and cost-benefit analysis covering detached housing, apartment construction, affordability, and government revenue.

Nine months ago, Reardon forecast that detached starts would “lift steadily to a 2027 peak” on the strength of easing interest rates, an outlook his own members have now reversed. Every house that falls out of the pipeline counts toward the Government’s target of 1.2 million new dwellings over five years, a volume the residential sector is already struggling to deliver with the trades it has.

Source: https://woodcentral.com.au/smsf-borrowing-ban-home-contracts/