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Could this lending change cost 40,000 homes?

Housing industry groups are sounding the alarm over a provision within the federal government's newly passed housing tax reforms.

Under the changes, self-managed super funds (SMSFs) will lose access to limited recourse borrowing arrangements when purchasing residential property.

The Urban Development Institute of Australia, Housing Industry Association and Property Council of Australia warn this could wipe out around 40,000 privately built rental homes, a number that roughly matches the affordable housing target under the government's own Housing Australia Future Fund.

And that's on top of a separate estimate that the broader tax reforms could already shave 35,000 dwellings off supply over the next decade.

That's a big impact for a relatively small pool of lending.

Annual SMSF property borrowing currently sits at just $8.2 billion (see Ray White graph below), yet industry groups say these investors play an outsized role in helping apartment developments reach the pre-sale thresholds lenders demand before releasing construction finance. Take those buyers away, and some projects may never get off the ground.

They're now pushing for an amendment that lets SMSF investment in new housing continue, while restrictions on established properties stay in place.

Help to Buy expands with 10,000 new places from July

Saving a deposit remains one of the biggest hurdles to owning a home. The Australian Government Help to Buy Scheme is chipping away at that barrier.

Under the shared equity scheme, eligible buyers can purchase with a deposit of as little as 2%, with the government taking an equity stake of up to 40% for new homes and up to 30% for existing homes.

Housing Australia reports the median deposit among participants is just $30,000, and 86% of buyers supported so far are first home buyers.

From 1 July 2026, the scheme will add 10,000 new places and lift income limits to $103,000 for singles and $165,000 for joint and single-parent applicants. Following its expansion to Tasmania, Help to Buy is now available in every state and territory.

Demand has been strongest in Victoria, followed by New South Wales and Queensland.

Australia's ninth housing downturn isn't uncharted territory

Falling prices tend to grab headlines, but new research from Domain has put the current slowdown into perspective.

Since the mid 1990s, Australia's combined capital city market has been through eight distinct downturns. Every single one was followed by a recovery that pushed prices to a new high.

The scale of those changes is also important. On average, downturns have lasted eight months and shaved 2.9% off values. Upswings, by comparison, have run for 2.8 years and delivered average growth of 32.3%.

Domain expects combined capital prices to fall as much as 2.5% over the 2027 financial year, with Sydney and Melbourne leading the decline while Perth, Brisbane and Adelaide keep growing, albeit at a slower pace than the recent boom.

History suggests this is a normal part of the cycle rather than something new, and past downturns have always given way to fresh growth once conditions turned.