The supply problem is structural, not cyclical
Australia set itself an ambitious target: 1.2 million new homes under the National Housing Accord by June 2029. The headline numbers sound encouraging. Building approvals have risen by 26% and commencements by 15% compared to the quarter just before the Accord began. But the gap between what is being built and what is needed remains wide.
Based on data to early 2026 and before recent global disruptions to commodity prices and supply chains, the National Housing Supply and Affordability Council (NHSAC) estimated around 980,000 new homes could have been expected in the Accord period. That is still 220,000 short of the target, and conditions have since worsened. Higher fuel and petrochemical prices from conflict in the Middle East have had flow-on impacts on construction costs, which rose 2% in the June quarter 2026 and are now 51% higher than before the COVID-19 pandemic.
Labour supply consistently falls short of what is required, and the training and migration systems have been unable to supply sufficient workers with the right skills. The consequence is straightforward: increasing construction costs may reduce the financial feasibility of some housing projects, presenting risks to housing supply in the near term.
Policy responses that complicate the picture
Government has responded on two fronts: pushing states to approve more homes, and restricting certain investment structures inside superannuation. Both carry consequences worth understanding.
On supply, the NHSAC Chair has noted the importance of remaining cautious about introducing demand-side policies, which generally only serve to push prices up. On the super side, the change is more direct.
The Treasury Laws Amendment (Tax Reform No. 1) Act 2026, which received Royal Assent on 26 June 2026, means that from 10 August 2026, SMSF trustees can no longer use Limited Recourse Borrowing Arrangements (LRBAs) to acquire residential property within an SMSF. The change is strictly prospective and does not affect existing loans.
Commercial property LRBAs are completely unaffected. SMSFs can still borrow to purchase business real property, which can be leased to related parties such as the fund members' own business at market rates.
For residential property inside super, three pathways remain:
- Grandfathered LRBA: if your fund entered a residential LRBA before 10 August 2026, that existing arrangement is unaffected and can continue as normal.
- SMSF unit trust structure: the fund invests in a unit trust that holds the property and carries the borrowing. Unlike an LRBA, this structure is not held directly in the fund via a bare trust, and it can fund construction as well as established property purchases.
- Cash purchase inside the fund: if your fund has sufficient cash reserves to purchase without borrowing, the ban does not apply.
Remember: SMSF trustees and their relatives cannot live in residential SMSF property or rent it from the fund, regardless of which structure is used.
The trade-offs serious investors should weigh
The tax treatment inside super remains unchanged and is worth understanding clearly. Rental income is taxed at 15% during the accumulation phase, well below most members' personal marginal rates, and capital gains are taxed at an effective rate of 10% for assets held more than 12 months. In pension phase, both fall to zero up to the Transfer Balance Cap.
On the demand side, Victoria's slower price growth partly reflects recent policy reform, such as land tax changes and rental reforms, which have curtailed investor demand. That is a reminder that state-level rules can shift the investment calculus materially, and they vary across jurisdictions.
For those looking outside super, borrowing in a personal name allows full tax deductions on interest and expenses and the benefit of negative gearing. For new builds in particular, full negative gearing continues to apply. That distinction between new builds and established property matters and is worth discussing with a licensed tax adviser.
The supply shortfall itself carries a dual implication. Australia's supply shortage is not going away in 2026. Building approvals for new homes declined 3.6% in July 2026, led by a 4.5% fall in houses. Fewer completions tend to support rental demand, but they also raise construction cost risk for those building rather than buying established.
A worked scenario: SMSF accumulation phase, unit trust structure
Consider a fund in accumulation phase with two members and $600,000 in combined balances. The fund contributes around $150,000 to $180,000 as equity into a unit trust, which then borrows to acquire a residential investment property valued at approximately $650,000. The borrowing sits inside the unit trust, not the fund itself.
Rental income flows back to the fund via the unit trust distribution and is taxed at 15%. If the property is held for more than 12 months and later sold in accumulation phase, the effective CGT rate is 10%. In pension phase (subject to the Transfer Balance Cap), both the rental income and the CGT fall to zero.
These numbers are illustrative. Actual outcomes depend on rental income received, vacancy periods, property management costs, borrowing costs at the time, and each fund's specific circumstances. No rental income is guaranteed, and an independent rental appraisal is an important step before any purchase decision.
What to consider next
If you are weighing residential property inside super, or investment property outside it, three conversations are worth having before anything else:
- An SMSF specialist accountant: to assess whether your fund's balance and liquidity position suit either a unit trust structure or a cash purchase, and to clarify the tax implications for your specific situation.
- A licensed mortgage broker or SMSF-specialist lender: to understand current LVR requirements, borrowing costs, and what serviceability looks like for the structure you are considering.
- A licensed financial adviser: to assess whether property is appropriate for your overall retirement and investment position, and how it fits alongside your other assets.
For general information on how EWC coordinates property sourcing and finance referrals for investors and SMSF trustees, visit /services. To talk through your situation with our team, you can book a call at elitewealthcreators.com/booking/ or reach us via /contact.
General information only, not personal financial advice. Speak with a licensed adviser before acting.