SMSF Mortgage & Property Investment Trends

Self managed super funds property investment trends

Property has long been one of the most popular investment choices for self-managed super funds (SMSFs). With the right structure, SMSFs can borrow to purchase property, giving trustees access to an asset class that’s both tangible and familiar.

But the property and lending market changes quickly. From shifts in mortgage availability to evolving investment trends, trustees need to stay informed to make confident decisions. Here’s a closer look at why property continues to appeal inside SMSFs, the rules around borrowing, the current lending environment, and the key risks and opportunities to keep in mind.

Why property in SMSFs remains popular

Australians have always had a strong appetite for property, and SMSFs are no exception. According to the ATO’s March 2025 quarterly report, total SMSF assets are estimated at $1.01 trillion. Among the top holdings, residential real property and commercial property show notable investment activity.

For many trustees, property offers:

• Tangible value – an asset they can see and understand.

• Potential capital growth – especially in a rising market.

• Rental income – providing steady cash flow inside the fund.

• Diversification – balancing shares or cash holdings with bricks and mortar.

Limited Resource Borrowing rules and restrictions

SMSFs can borrow to purchase property under what’s known as a Limited Recourse Borrowing Arrangement (LRBA). These arrangements are subject to strict rules set out by the ATO:

• The property must be a single acquirable asset – for example, a residential house or a commercial building.

• The loan must be limited recourse – meaning if the fund defaults, the lender’s rights are limited to the property itself, not other SMSF assets.

• The property must meet the sole purpose test – it must be held for the purpose of providing retirement benefits to members.

• No related-party use – residential property owned by the SMSF cannot be lived in by members or related parties.

• All transactions must be at arm’s length – purchases, rents and expenses must reflect market values.

Because of these rules, SMSF borrowing requires careful structuring and professional support. 

The current super real estate lending market

In recent years, lenders have become more cautious about self managed super funds property investment loans. APRA data shows that while SMSF lending continues to grow, the pace has slowed compared to the mid-2010s when LRBAs surged in popularity.

Key points about today’s lending environment:

• Fewer lenders – Not all banks offer SMSF loans, and those that do often have stricter criteria.

• Higher interest rates – SMSF mortgage rates are typically higher than standard residential loans.

• Lower loan-to-value ratios (LVRs) – Many lenders require deposits of 30% or more for residential property, and sometimes higher for commercial.

• Stricter documentation – Trustees need to provide detailed financial records, investment strategies, and evidence the fund can meet repayment obligations.

These factors make borrowing more complex than a typical home loan, but still possible for well-prepared funds.

Key trends in SMSF property investment

Despite tighter lending conditions, self managed super funds property investment remains a cornerstone for many SMSFs. Some of the notable trends in 2025 include:

• Strong interest in commercial property – particularly office warehouses, industrial units and medical suites, as trustees seek stable long-term tenants.

• Continued demand for residential property – housing affordability challenges and population growth are keeping demand high, which in turn supports property values. Many SMSFs are looking to areas with strong rental yields or long-term growth potential.

• Diversification into fractional property investments – newer platforms allow SMSFs to buy part ownership of properties, though trustees must carefully check compliance.

• Younger trustees entering property via SMSFs – driven by a desire to take control and invest outside traditional super fund offerings.

Together, these trends show SMSFs are adapting to the changing property and economic market rather than stepping away altogether.

Risks and opportunities for self managed super funds property investment

Like any investment, property inside a self managed super fund comes with both advantages and risks.

Opportunities include:

• Long-term capital growth potential.

• Stable income through rent.

• Ability to hold business premises within your SMSF.

Risks to watch for:

• Liquidity issues – property is illiquid, which may create challenges in paying member benefits or tax obligations.

• Borrowing limits – strict limited resource borrowing rules mean SMSFs can’t easily refinance or redraw like individuals can.

• Market risk – downturns in property values could impact the fund’s overall balance.

• Concentration risk – putting too much of the fund into one asset class may reduce diversification.

For trustees, the key is balancing enthusiasm for property with a clear-eyed view of the risks.

What trustees should consider next

If you’re exploring property investment within your self managed super fund, from a compliance perspective, it’s worth asking:

• Does this fit with our investment strategy?

• Do we have enough liquidity to cover tax, expenses and member benefits?

• Are we confident the loan and structure comply with limited resource borrowing rules?

Getting professional advice and working with an SMSF administrator helps ensure your investment is structured correctly and compliant from the outset.

How Andromedae can help

At Andromedae, we help trustees manage the complexity of SMSF property investment compliance and administration. From understanding limited resource borrowing rules to keeping your compliance and reporting up to date, we make the process clear and manageable.

If you’d like expert support navigating SMSF property compliance, get in touch with us today.

Disclaimer: Andromedae and its staff do not provide financial advice on whether an SMSF is right for you. We also do not provide advice on what investments your SMSF should undertake. Our role is to manage the administration and compliance of your SMSF. Please seek advice from your own financial professionals to determine what is best for your personal circumstances. All content in this blog is provided as general information only.