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BREAKING: Government Bans SMSF Property Lending (Live Reaction) · The Follio Property Podcast

• 0:00
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• 0:30
  Lachlan, live episode today, a breaking news episode actually. So big news coming out today from the government, banning self-managed super fund lending. So I want to unpack today, what does that mean for investors, the market, home buyers? Dive into the Australian property markets. Big news out of Sydney and Melbourne at the moment as well, especially around auction clearance rates and what that means for the wider market. And we love talking about sentiment. Really want to focus in on the sentiment at the moment and see what are investors saying in the market versus the normal Australians in the market too.
• 0:59
  I really want to unpack what this means, Rhys, for the listeners, right? There's headline media and there's what's actually happening on the ground and it's a vast difference. So don't get caught up in the headlines. And the markets within markets, we're still seeing positive growth in subtle markets across Australia while the headlines saying it's all doom and gloom. So we're going to unpack that, what it means to you as a listener in terms of your portfolio and your exposure. But, yeah, biggest news today...
• 1:27
  the removal of lending in self-managed super fund. So Labor's done a deal with the Greens. SMSFs are banned from borrowing to buy a residential property to get a broader tax bill, so what was being spoken about over the last month, through Senate. So what's your opinion on this move? Is this what they're trying to label it as far as helping that first home buyer? Or is this just another stab in the back for a mum and dad investor in Australia?
• 1:51
  Comment from the Greens was this will definitely take the heat out of the market. OK, that's interesting. He's clearly been living under a rock for the last six weeks. What do you think the budget has done? Particularly in Sydney, we've just recorded off a week of...
• 2:06
  47% clearance rates, the worst we've seen since COVID, right? So talk about the heat out of the market. This is just another jab at the market. And it's more around sentiment. Self-managed super fund lending for context makes up about 1% of lending total, right? So we're talking about a very minor impact on the market, but it's the sentiment. Again, sentiment drives markets. This is just another blow. And this is a government now that's really...
• 2:36
  are responsible for what's happening on the headline of Sydney and Melbourne property markets at the moment.
• 2:42
  And the interesting thing about SMSFs as well is it can still be done in commercial, can still be done through company structures as well. So back to my earlier comment, it does feel like they're really just targeting the mum and dad investors who are trying to get a leg up that you mentioned there's less than 1% of lending, right? But it is 1.2 million people, 1.2 million people are accessing this currently. So is this just another handbrake on mum and dad investors to get ahead?
• 3:08
  That's exactly the sophisticated money, still gets the benefit, but the average mum and dad that want to take control of their wealth and self-managed super fund as a vehicle to create wealth through property, something that we're pretty conservative on recently. We have spoken about it on the podcast. It's not something we do a lot of through our business because it's got to be fit for purpose, got to be those that qualify for that and it's something that you don't take a lot of risk or exposure. Yeah.
• 3:33
  But to take that away from mum and dads, even the opportunity to be able to do that, to be able to get ahead for their retirement. And there was a lot of talk, the numbers were coming out only what, three or four episodes ago, where a lot of the money in the super funds were going into a self-managed setting, right? So some of the big corporates were getting concerned because they weren't getting the gains that they were in previous years because more mum and dad investors were actually taking control of their self-managed super. And this is to really stop that completely.
• 4:03
  period of time, Rhys, where the government want to take more control over what Australians are doing with their wealth.
• 4:10
  Looking at some of the notes that we've had here, and it might, you know, over the next 24, 48 hours, we might get more information at hand, but it looks like they're going to grandfather previous SMSF holders, which, you know, makes complete sense. In terms of the ban, it'll be applying 45 days after it becomes law. So I think that's in a couple of weeks. So you're looking at roughly maybe 60 days to get your SMSFs across the line of that.
• 4:36
  And trying to, you know, that was in your pipeline for the next 12 months, 18 months, two years. Very difficult to get a self-managed super fund set up and then get dead into that. And we wouldn't encourage that because you'd be forcing something to happen, right, and being very active. And that's the key. Our listeners and our clients, we don't want to be reactive to policy. We don't want to be reactive to headline media.
• 4:59
  But this is significant, and I was listening to another podcast in our space just this morning, Rhys, when I was at the gym.
• 5:09
  They made an interesting comment. They said, the budget means nothing. What happened with the budget? I don't listen to it. It doesn't affect our clients. We move on. We make money and property. And then today they put a social media post about this doesn't affect our clients. We don't leverage. It doesn't impact it. I'm like, I had to scratch my head for a minute, Rhys, because everything.
• 5:31
  It does impact our clients and it does impact investors trying to get in the market because the strategy has changed. And this is another strategy shift. And some of the comments are coming out while the Greens have pushed this is because there's been a lot of talk from property influencers saying there's going to be a flight to self-managed super fund because of the tax break. And I said this on the podcast, you don't invest in real estate to save tax. We never have done that. We do it for wealth accumulation, typically over the medium to long term.
• 6:00
  But to say that you don't care about this stuff, this stuff's really important. And a lot of these groups out there, and this is where I'm getting frustrated, have got one strategy. And they are very definitive and they will make a client situation revolve around...
• 6:15
  their product, whether that's regional, whether that's units, whether that's house and land packages, whether that's commercial product. They've got one product which they'll push on every particular client as a way to solve their life dream goals of retiring early or lifestyle play. But the reality is that can't be true because every client situation now post-budget and from the result today is extremely different.
• 6:42
  There's no two client portfolios that are the same. And that's why we've introduced PropStack so people can take more control over their wealth and their portfolio than relying on misinformation out there. So this does matter and this is important. And for those listening, this just is another, I guess, blow towards the investing landscape for residential property.
• 7:03
  Looking at what they've come out in terms of why, you've mentioned that there was a few powerful quotes out there talking about this is the one I wrote in one of the articles. Since the budget, there's been a surge of ads telling people to turn super into property portfolio and that SMS are now king.
• 7:20
  Now, to be honest, like my algorithm is filled with property-related ads or... Spruikers. Spruikers, I would say. I haven't seen too much myself, to be honest. So there's... Personally, I haven't seen a lot of this out there, but this feels very similar to what was happening... Trust lending. Correct. Yeah. And this is the problem that...
• 7:39
  There's too many people that exploit and try to look for loopholes and put their clients at masses and they get shut down. And like anything, there's always a place for this stuff. Self-managed super purchases, there was a place for the right client, typically in moderation and at lower gearing, maybe at 50%. Same with trust lending. There was a space for the right client, the right situation, and there's a place for the
• 8:04
  where it made sense. But when you go and exploit that at masses and publicly talk about it, as these people have done online on social media, they compromise it for everyday Australians, the mum and dad, who aren't looking to exploit loopholes or try to cheat the system. They're just trying to get small steps ahead in life. And Self-Managed Superfund was a vehicle to do that,
• 8:31
  in a responsible manner. Now it's been taken away in terms of ability to be able to do it with leverage. And we know the power of property is the power of leverage. So now buying in your super without leverage is certainly something that I probably wouldn't recommend. Is there any positives to kind of come out of this from an investor standpoint, or even a first home buyer? Do you believe in the spin that there's out there at the moment that this is to help first home buyers?
• 8:58
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• 9:56
  I don't believe this will benefit first-home buyers at all. Do I think it's a good thing for the industry? Yes, I do. There's so many spruikers that use retirees or uneducated people super and exploit it in the wrong asset classes. And there's been evidence of that over the last decade, right? What's overshadowed that is...
• 10:19
  probably the best property market conditions we've seen for the last 20 years have occurred in the last five years. So it's overshadowed any compromised assets or the wrong markets. So I think it is a responsible measure, albeit that wasn't the intention. And we're in property, so we should be arguably saying this is, you know, let's get the pitchforks out. This is a huge problem in the industry. I just don't like it because of the sentiment it's going to create. And there's times to introduce things to...
• 10:46
  Now is not the time where the market is right now to introduce just another negative news story against Australian residential property. But the spruikers that rely on self-managed super funds, and we know that they're out there, that take advantage of that and buy questionable product with people's retirement funds,
• 11:09
  I think this is a good thing. It will protect some of those people. It's unfortunate for those that were doing it in the right way because that's now no longer available. But in terms of helping first-home buyers get into the market, how does this reasonably help someone get into the market? By making it cheaper was the comment that Elbow came out last week. He said one of his friends he was speaking to went to auction at Sydney and was successful. Well done, mate. Thank you.
• 11:38
  Good on you, mate. You've wiped off a trillion dollars in the real estate market. Think about all the truck drivers, removalists, settlement agents, media photographers, all the industry you've essentially trying to bankrupt in Sydney and parts of Melbourne. So your mate can buy a property. Have you, Felbo?
• 11:58
  Do you think there'll be any, just wrapping up there, so we've kind of touched on all the big things that have come out of the headlines, do you think this will have any movement on property prices across the country or are we already in a, in some instances, the two-speed economy, already in a declining sentiment in certain markets?
• 12:15
  It just adds to the sentiment story, Reece. So that 1% of lending. So it was interesting. We're going to go see some figures. The March data, 46% of lending across Australia was happening in the investment space, which is the highest it's ever been, which was, you know, we spoke about on the podcast. There were some red flags there. Only 1% of that self-managed super fund. So do I think it'll have a material impact on property prices? No.
• 12:38
  Does the sentiment have a material impact on property prices? Absolutely it does. We know and we speak about it all the time. Sentiment drives markets more than the event itself. And while we were getting some green shoots around interest rates and policy,
• 12:54
  This is, again, just really poor timing. And it's, again, another introduction of policy that the Labor government, as little as 12 months ago, said they'll never do. So, again, a disappointing day for Australians that put faith in their politicians.
• 13:14
  I was actually looking through, to do a bit of prep for this podcast, looking through what's probably happened in the last 12 months. It was actually shocking to see. We actually had rate decreases up until September last year. So in the last 12 months, we've had rate decreases, rate increases. You've had...
• 13:30
  the trust lending, the debt to income caps, you've had the budget announcement with negative gearing and the capital gains reduction of the exemption that you have there. So there's been a lot going on to really say... But what a 12-month period. It's like it's never faced more headwinds. And what a government, just to throw this all at once. Not only that, how about we give out money late last year, bring it forward to October, first-time buyers, first-time buyers,
• 13:57
  First I buy a scheme to give 5% deposits.
• 14:02
  and let the market charge. They forecasted 0.1% growth per year off the back of that. And we know markets went up by 10% to 15% purely on that scheme. And then let's do whatever we can as a country to essentially de-stimulate it. So now every day, first home buyers are now in negative equity. I just, the timing of this is so horrible that
• 14:27
  they've got to be held to some account. Like there's generally mortgage stress out there in these markets like Sydney where first home buyers
• 14:36
  have a case against the people running our country. Like how dirty would you be? How upset would you be when you've been told, here's some money to help you get into the market. We're going to do everything we can to get you in the market in October 2025. You go out there, you take 95% debt out into the market, buy a property, and then the government ambush you with now four or five significant changes to policy
• 15:04
  plus some rate rises and go, okay, sorry, guys, you're in the whole 200 grand. And we don't foresee any way out of this, but we're trying to help more people get into the market at the cost of what, who you tried to help last year. Just doesn't make sense to me, Rhys.
• 15:19
  Let's go on to some of the two-speed economy comments we've been saying for the last couple of months. Coatality came out with some recent data today off the back of a webinar, actually, so I thought it'd be good to touch on it. Now, Lachlan, you don't have this data set in front of you, but you have studied these all day, so I'll read them out for those. So if you're listening, I'll explain as best as I can, but this will be a visual podcast.
• 15:39
  But it basically shows, and we talk about this through the podcast, where you've got the lower quartile, the middle, and the upper quartile. So what that's saying is the lower price bracket versus the median price bracket versus the
• 15:50
  higher price bracket across the market. Now, it's actually highlighted areas of Sydney, Melbourne. I just want to touch on those two first because that's probably where we've seen sort of markets within markets play out. And you're seeing the headlines on, say, Sydney and Melbourne, historic low declines. And looking at this graph, you can see in the upper quartile some really sharp decreases in value. So signalling out Sydney here, looking at the last sort of three months trend...
• 16:15
  They're on a serious decline on the upper quartile. The middle and the lower quartile are still on a decline but not at the same rapid pace as what Sydney is. Melbourne's a fascinating one as well. Melbourne upper quartile are following the same trajectory as what Sydney is. The medium...
• 16:31
  Not as bad. And actually, the lower quartile in Melbourne is starting to stabilise and actually start to go more neutral. Looking at those two markets, which have probably seen the biggest price decrease over the last six months, what do you make of that?
• 16:49
  as recorded this year, negative 2.5% price decline across the board. But obviously, and this is what listeners need to understand, there's always markets within markets.
• 17:03
  The upper quartile has seen close to 5% decline over that period this year, which means that the lower quartile, the entry points, which for Sydney is up to 1.5 million, has been quite stagnant. And arguably, there's markets, as we've seen from some of the data maps, the heat areas, there's markets that actually have produced a positive impact.
• 17:25
  price growth for the year 2026. That's only even more compounded in Melbourne, right? So when you go into that information there, again, the entry point or the lower quartile for Melbourne is lower. We're looking sort of sub a million. It is extremely competitive. And we know that on the ground because we're in those markets competing trying to buy property.
• 17:48
  double-digit groups through home opens, you're seeing multiple offers. And you're seeing a market there that's 3% to 4% more expensive now than it was at the start of the year.
• 17:58
  But what's dragging that and the media headline that's talking about auction clearance rates and what's dragging the median house price down is that upper quartile. And for Melbourne, that's north of $2 million. And that market is falling like a rock, so it is in Sydney. But what you're seeing is headline media talk about auction clearance rates in Melbourne as low as 50%. In Sydney now, down to 47%. In eastern suburbs of Sydney, Vecluse is an example where it was 35%.
• 18:27
  They will – is what people – that's what's going to hit the headline media. Prices are falling. They're falling like a cliff. But you've got to go within the markets. When we net it out over the different segments, there is some positive growth happening on the ground, which is going to be hard for people to understand when you're not in there every single day and you're only reading the paper saying that it's the worst property market we've seen since essentially COVID hit.
• 18:49
  The Sydney one and those that are listening, I've pulled up some graphs here that Lachlan's referring to in terms of the heat map that Cotality bring out. The Sydney one is...
• 18:59
  paints a picture, but it's very up and down. It's not consistent. There's areas that are going up. In a city, there's areas that are going down, and it's kind of a bit patchy. And we've actually got a podcast coming out on Thursday with Reidem, who gave us a Sydney market update. That was one of the things he mentioned on the podcast, actually. So make sure you tune to that. It's very much a yo-yo environment. However, you're looking at the Melbourne heat map, which I've got up right now, you can clearly see some random patches well out of probably the Melbourne area.
• 19:27
  It's Geelong and we've talked about Geelong on the podcast, doing extremely well, but it's that middle segment, which is typically where we're... Right in the bullseye, like right where the target is. That's where all the activity is going. And you mentioned there as well, obviously the upper quartiles are struggling in those areas. So that's probably telling a story that the lower price points in the heat map we've got here, which is right in the bullseye, which is within a 10K radius, it seems, of the Melbourne CBD, that is seeing some serious growth. It is. And all this policy, when you think about it and step back for a little bit and
• 19:57
  look at the government's intention and what they're doing is driving so much activity to that sub a million dollar price point. That's why we're seeing so much activity in the villa unit market. That's why we're seeing a lot of activity in entry level areas between say 600 and 1.2 is because these changes to capital gains have impacted borrowing capacity.
• 20:21
  So those that could borrow a house or an investment for 1 to 1.2, now maybe I'm able to spend 750. Well, they're competing with the same market, which is first home buyers, and which is now competing with investor dollars. So you've just created a perfect storm for that entry-level asset that's made it more competitive than it was pre-budget. And that's why I think you're seeing the data that we're seeing there.
• 20:41
  Well, you're looking at the Melbourne clearance rates. So we track this on a week-by-week basis. So link in the comments for those who want to download the investment report. We track this on a week-by-week basis. So looking at last week, the mean auction price in Melbourne...
• 20:57
  was between 620 and 700K. So that's showing that out of all the auctions that are going on, which was 599 listed, so the 600 auctions going on there, the average price is down there. So that's just showing you where the market is moving in Melbourne from a competition standpoint. And like you said there, Lachlan, that is competing with your first home buyers as well. So really going against what a lot of these policy changes are there to be in the first place.
• 21:21
  Yeah, you're funneling essentially the Australian property market all to the area that you're trying to support. But what I find interesting, Rhys, is when you dive into this data, our weekly data insights is really compelling. Tracking median house price movement and seeing that in the last seven days, Sydney has fallen by 0.45%.
• 21:47
  net that out over a month, that's price decline of 2% a month. That's the largest fall in the Sydney market, certainly since we started the podcast, but back to COVID times, it's really dire in that market at the moment. And obviously, there's markets within markets, but across the board to see almost negative 0.5% for a week is showing, I guess, the struggle in that market.
• 22:12
  And you mentioned earlier in the episode, but clearance rates are up 47%, which has been a decline over the last four weeks. And just to give those listeners some context, that was 69% the same time last year. So Sydney market is well and truly coming off this year and actually starting to move at a bit of momentum now.
• 22:30
  Yeah, it is. And around the grounds, Reece, just a touch on the weekly price movement, Perth up slightly, so still in the positive. Adelaide, first time, Reece, in the negatives. So this is the first time this year, and I know I've been calling. Our listeners, I've seen the comments, you think I've got something against Adelaide. I certainly don't. One of the great cricket grounds in Australia. Besides the point, it is overheated. It's at an affordability ceiling, and it's just registrarized.