The borrowing stopped. The interest in property did not.

The ban on SMSFs taking out new limited recourse borrowing arrangements to buy residential property has now become law in practice, not just on paper. A recent survey tells you something useful: trustees have not gone cold on property, they have just lost the easiest way to get into it

Money.com.au surveyed 1,000 Australians, including 400 who either run an SMSF or are planning to set one up. The results, reported by selfmanagedsuper magazine, are worth sitting with for a minute, because they cut against the doom that has surrounded this change for months.

What trustees actually said they will do

Twelve per cent of SMSF investors plan to buy residential property outright in their fund, paying cash rather than borrowing. Twenty-six per cent intend to use an LRBA to buy commercial property instead, since that avenue is untouched by the ban. Another 27 per cent said they would rather buy residential property outside super altogether than give up on the asset class inside it.

Money.com.au property expert Nick Burgess put it simply: the ban changes how trustees get exposure to residential property, not whether they want it. He also expects commercial property to pick up a good part of the slack, precisely because it sits outside the new rule.

There is a sharper number buried in the same survey. Eighty-two per cent of Australians who do not yet have an SMSF said they no longer see the point of setting one up if they cannot borrow to buy residential property through it. That is a real signal about how central borrowing was to the pitch for a lot of people. It is also, in our view, a sign of how much education the sector still needs to do about what an SMSF can still achieve without it.

Shares and exchange-traded funds remain the most popular destination for SMSF money, with 46 per cent of members planning to increase their allocation there. Term deposits picked up too, with 23 per cent planning to add to them.

The gap the numbers are pointing at

Read those figures together and a pattern appears. Trustees who want to buy residential property outright with cash are a small minority, because most SMSFs simply do not hold the balance to do it without borrowing. Those with less cash are being pushed toward commercial property, shares, term deposits, or property outside super entirely. What is missing from that list is a way to keep meaningful residential property exposure inside the fund without needing either a loan or a lazy six or seven figure cash balance sitting in one building.

That is not a criticism of the survey. It is the opening it describes.

Where CrowdProperty fits

This is the door that property-backed lending opens. Rather than a fund buying one residential property outright, or not buying one at all, the fund invests in loans to residential development projects, with each loan secured by a first mortgage over real property. The capital is not borrowed. The return comes as income during the loan term rather than a hoped-for gain on sale. And because the same money can be spread across a number of loans rather than sunk into a single asset, no single project, suburb or tenant decides the whole outcome.

CrowdProperty funds small-scale residential development, at scale, lending to experienced SME builders and developers who are getting on with building the homes this country needs. Wholesale investors, including a growing number of self-managed funds, back those loans and earn income secured against the underlying property. We funded our first Australian project in 2021 and have returned capital and interest to investors since.

None of that is a reason to skip the diligence. Ask how the capital is secured, how loans are assessed, who is building the project and how independent they are from the lender, and what happens if a project runs late.

If you’re interested in investing with CrowdProperty and helping SME developers build more homes, register on the platform as a wholesale investor.