Banning SMSF borrowing won’t help housing affordability

The Labor Party has announced that it’s going to ban all borrowings to self-managed superannuation funds (SMSFs) because seemingly that’s going to help with housing affordability.

Please!

It’s concerning that Labor clearly has a limited understanding about residential real estate as well as the role of property investing within SMSFs.

So, let’s look at the reality of SMSF borrowing in Australia, shall we?

The market for SMSF (or LRBA’s which are Limited Resource Borrowing Arrangements) represents about $12 billion in borrowings in the overall Australian Residential market..

Sure, that sounds like a big market, but the housing market in Australia is valued at $6.43 trillion.

So, using those numbers, residential borrowings to SMSFs actually represent just 0.18 per cent of our total market!

ad_v2Also, the idea that SMSFs have plunged into property investment in recent times is not borne out by the statistics, with SMSF residential property holdings (both geared and ungeared) being consistent between four to six per cent of total SMSF assets.

The Coalition government has previously rejected recommendations to ban SMSF borrowing.

And according to the SMSF Association, the most recent Australian Tax Office statistics show that SMSFs hold $24.3 billion in total borrowings, with these financial instruments being predominantly used to invest in residential and non-residential property in an almost 50-50 split.

Does Labor really think that taking 0.2 per cent of the market out is going to help with housing affordability?

Come on Labor – you have to be a bit better than that!

The information provided in this article is general in nature and does not constitute personal financial advice. The information has been prepared without taking into account your personal objectives, financial situation or needs. Before acting on any information you should consider the appropriateness of the information with regard to your objectives, financial situation and needs.