The convergence of record investor lending, broad-based participation growth, and strong rental market fundamentals has created a “rare” strategic window of opportunity for SMSFs to invest in property, investment experts have said.
Angus Moore, executive manager of economics at PropTrack, and Matt Kerr, head of client advisory and analytics at PropTrack, said analysis of the latest Class Benchmark data revealed that SMSFs held over $74 billion in direct property investments at the end of the 2025 financial year, making it the second most prominent asset class across all funds.
Direct property investment represented 21.1 per cent of total asset allocation, with property ownership present in almost 30 per cent of funds at the end of FY2024–25.
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“Non-residential property remained the dominant asset class. This isn’t surprising given the compelling advantages it offers SMSF members: attractive taxation incentives, portfolio diversification beyond traditional shares and managed funds, and the ability to lease business premises to related parties,” Moore and Kerr said.
“This unique structure allows business owners to simultaneously build retirement wealth through property ownership while supporting their ongoing business operations – effectively turning necessary business expenses into retirement savings.”
The data also showed residential property remained an attractive investment class for SMSFs, with strong growth in returns and increased use of limited recourse borrowing arrangements (LRBAs) for property purchases.
It found that almost half (45.2 per cent) of residential assets in FY24–25 were acquired through LRBAs, demonstrating the importance of leverage in SMSF property strategies. This aligns with broader market trends.
Kerr and Moore said PropTrack data shows property investors are a large and important part of Australia’s property market, with around one in seven Australians owning a rental property.
“Investor activity has been particularly strong in the past year, with investors making up their highest share of new lending since 2017,” they said.
“Given this momentum, residential property investment within a well-diversified strategy remains compelling for SMSF trustees.”
Moore and Kerr continued that there are a number of reasons as to why direct property investment remains a “compelling” asset class for SMSFs.
“Australia’s residential property investor market is showing remarkable momentum, with lending data revealing the strongest investor participation in nearly a decade,” they said.
“Investors now represent their highest share of new lending nationally since 2017, while in Queensland, South Australia and Western Australia, investor lending shares are sitting around their highest investor lending shares ever recorded.”
They added that this surge is particularly significant as investor lending growth substantially outpaces owner-occupier lending, indicating that investors are driving a disproportionate share of current activity.
“This investor momentum creates an optimal environment for SMSF property investment. Strong market participation validates residential property as a robust asset class, while SMSFs enjoy unique advantages such as LRBA financing access plus concessional tax treatment – 15 per cent in accumulation phase, 10 per cent on discounted capital gains, and tax-free in pension phase,” they said.
“These favourable conditions, combined with strong lending data, position residential property as a compelling long-term investment strategy for SMSF trustees.”