A major change to Australia's self-managed super fund (SMSF) rules has sparked an unusually unified response from the residential development industry, with developers, financiers and peak bodies warning the policy could significantly reduce new housing supply at a time when Australia is already struggling to meet its housing targets.

In this Apartments.com.au livestream, host Mike Bird is joined by Urban Development Institute of Australia (UDIA) National President Oscar Stanley and Colliers Director of Project Marketing Ashley Bramich to unpack the legislation, why it passed with little industry consultation, and why they believe the government's estimates dramatically understate its impact.

Rather than focusing on politics, the discussion centres on what the change means for the practical delivery of new housing, particularly apartments and townhouses that rely on early pre-sales to secure construction finance.

Why SMSF buyers matter to new housing

While the legislation was introduced as part of broader housing affordability reforms, Stanley and Bramich argue it misunderstands how self-managed super funds participate in the new apartment market.

Unlike buyers competing at established home auctions, SMSF purchasers typically buy off the plan, often years before completion. According to Bramich, these buyers frequently make up between 20 and 50 per cent of a project's initial sales, particularly in larger apartment developments where early pre-sales are essential to obtaining construction funding.

Without those foundation sales, many projects simply struggle to reach financial close.

"One thing I know for sure is that projects rely on getting the initial 20 to 30 per cent, particularly big ones which often have more affordable stock in them... they rely on the channels who work with people using the SMSF to get these projects off the ground," Bird notes during the discussion, highlighting the important role the SMSF buyer cohort plays before owner-occupiers enter the market.

That distinction sits at the centre of the industry's concern. Stanley argues these buyers are not displacing first home buyers from existing housing stock but are instead helping create additional supply by enabling projects to commence.

A larger impact than originally estimated

Treasury has estimated the policy could affect around 4,000 dwellings annually.

Industry modelling presented during the discussion tells a very different story.

Drawing on data from major project marketers, lenders and finance groups active in the SMSF lending sector, Stanley and Bramich believe the true figure exceeds 16,000 homes each year before accounting for the wider flow-on effects of delayed or cancelled developments.

Because pre-sales unlock bank funding, removing a significant portion of early purchasers doesn't simply reduce the number of SMSF buyers. It can prevent entire projects from proceeding, delaying hundreds of additional apartments that would otherwise have been purchased by owner-occupiers and traditional investors.

The concern is particularly relevant as governments continue working toward the National Housing Accord target of delivering 1.2 million new homes by 2029.

Why Melbourne could feel the greatest impact

While the policy affects projects nationally, both guests expect Melbourne to be among the hardest-hit markets.

The city's comparatively affordable apartment market, particularly developments with one and two-bedroom apartments priced below $1 million, has historically attracted significant SMSF participation.

According to Bramich, these projects rely heavily on early investor demand before broader owner-occupier interest builds as construction progresses. Removing one of the largest purchaser groups at that early stage creates a substantial funding gap.

Regional Queensland, South Australia and parts of Western Australia are also expected to experience impacts, particularly where developers have built business models around this established buyer segment.

What it means for renters and first home buyers

A recurring theme throughout the discussion is that fewer investor purchases today can translate into fewer rental properties tomorrow.

SMSF investors are generally long-term holders who purchase properties as retirement investments. Because they cannot occupy the homes themselves, the completed apartments typically enter the rental market once construction finishes.

Stanley argues that removing these buyers reduces future rental supply at a time when vacancy rates remain historically low.

The irony, he says, is that projects which fail to proceed because early investors disappear may also prevent first home buyers from purchasing apartments they had intended to buy later in the sales cycle.

Rather than reducing competition, the industry believes the policy risks reducing the number of homes available altogether.

A rush before the August deadline

With contracts entered before 10 August protected under transitional arrangements, the industry has seen a surge of SMSF buyers attempting to exchange contracts before the deadline.

Bramich says thousands of purchasers are now making significant financial decisions within a compressed timeframe simply to qualify before the legislation takes effect.

While this has temporarily accelerated sales activity, both guests expect a noticeable slowdown once the deadline passes, particularly for projects still seeking the pre-sales required to commence construction.

The broader economic consequences

The discussion extends beyond housing supply to the wider property ecosystem.

Developers have already begun reassessing future projects, while some businesses heavily exposed to SMSF buyers have reportedly reduced staff as they prepare for lower activity levels.

The lending sector, specialist finance providers and financial advisers who work within the SMSF space are also expected to feel significant impacts as demand contracts.

For Stanley, these effects reinforce that housing policy cannot be viewed in isolation.

Development feasibility already faces pressure from elevated construction costs, financing constraints and weaker investor activity. Removing another important source of demand, he argues, risks making marginal projects unviable.

The industry's proposed solution

Rather than reversing the legislation entirely, both Stanley and Bramich advocate for a targeted exemption allowing SMSFs to continue purchasing brand-new housing.

They argue this would preserve the government's objective of limiting SMSF participation in established housing while maintaining investment that directly supports additional supply.

The proposal would also align with existing policy settings that already encourage investment into newly built homes through capital gains tax and negative gearing concessions.

Looking ahead

With the legislation now passed, the industry's attention has shifted from opposing the change to demonstrating its consequences through real-world data and project case studies.

Whether the government ultimately revisits the policy remains uncertain.

What is clear from the discussion is that developers, project marketers and industry bodies believe the issue extends well beyond one category of buyer. In their view, the debate is ultimately about maintaining the financial foundations required to deliver new housing at scale.

As Australia continues searching for solutions to improve affordability and increase supply, the coming months will provide an early indication of whether these concerns begin to materialise across the country's apartment development pipeline.