At a time when the country is looking to increase new homes starts, one change could see a substantial number of contracts fall over before construction has begun.
New data gives an indication of how Australia’s home building goals will be hurt by the government’s recent ban on lending for residential properties held within self-managed super funds (SMSFs).
Ever since early last month, when the federal government signalled its intent to prohibit SMSFs from using Limited Recourse Borrowing Arrangements (LRBAs) to acquire residential real estate, the building sector has been warning that the change could impact the number of new homes being built around Australia.
Now, with the legislation to enact the ban having passed parliament, and the change set to come into effect on 10 August, the Housing Industry Association (HIA) has released the clearest data yet to indicate how severe the impact might be.
According to the HIA’s survey of Australia's largest detached home builders, representing more than 40% of national detached housing construction, the nation’s major builders currently have 3613 signed contracts with purchasers using SMSF Limited Recourse Borrowing Arrangements that have not yet commenced construction.
While existing loans have been grandfathered into the legislation, all new borrowing has been disallowed. Because of this, HIA’s data estimates that 2415 of those contracts, or 66.9% are likely to be cancelled once the legislation comes into effect.
Contracts for homes set to be purchased using SMSF Limited Recourse Borrowing Arrangements could soon be cancelled if financing isn't secured before August 10. Image: Getty
And this only accounts for new detached home construction; it doesn’t take into account the apartment sector, where off-the-plan contracts are often signed months or years in advance, and financing is only secured shortly before settlement.
Taking into account off-the-plan apartment contracts that could be cancelled, as well as those held by smaller builders not captured by the HIA’s large detached home builders, the number of current contracts set to be cancelled by the change could run into the many thousands.
According to Urban Development Institute of Australia (UDIA) president Oscar Stanley, evidence gathered by UDIA indicates SMSFs currently support between 25% and 50% of qualifying pre-sales for developments, which developers rely on to secure financing and commence construction.
Off-the-plan apartment contracts are expected to be impacted as well, as financing is not generally secured until the project's construction is near completion. Image: Getty
The HIA, UDIA and other industry peak bodies have called on the government to amend the new rules to include a carve out for lending to support new home building.
Without it, they warn that the government has undermined its own ambition of building 1.2 million new homes over a five-year period to June 2029.
HIA’s data estimates the combined impact of contract cancellations and weaker future sales is likely to reduce detached housing commencements by between 3.5% and 5%, while reducing GST and stamp duty revenue to state governments by more than $450 million
Tim Reardon, HIA’s chief economist, urged the government to undertake modeling to accurately capture the extent to which the SMSF lending changes could impact future supply.
"The Government has made increasing housing supply its central housing policy objective. The question now is whether this SMSF legislation advances that objective or makes it more difficult to achieve. The legislation was passed without a cost/benefit analysis or any publicly available data on how significant the reduction in new home supply would be, as a result of this change,” he said.
"The next step is to transparently measure its outcomes and release that evidence prior to the next election,” Mr Reardon said.
Mr Stanley similarly commented: “Every housing policy should be judged by one question – will it build more homes? If the answer is no, it is the wrong policy”.
Are you interested in learning more about buying and building new? Check out our New Homes section.
This article was originally published on 20 Jul 2026 at 4:00pm but has been regularly updated to keep the information current.
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