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.
“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.”
Resi is not a good asset for SMSF’s. With net yields assuming no gearing not even close to 4% they can’t make even the smallest pension payments. Secondly they can be prone to sudden requirements of capital for repairs, special levies etc and ability to have sufficient liquidity for these expenses can be difficult or impossible.
I would even question sole purpose for industrial/commercial although the capital risks are lower and the yields are higher than resi.
If you must do it the most flexible option is a unit trust. This allows partial sales from the fund to meet capital needs which can be met by borrowings outside the fund…if you want that much complexity.
Just diversify inside super and do your property outside is a safer option in my view.
I totally agree with David. As a semi retired accountant with 39 years experience (the last 17 as a SMSF accounting specialist), it never made sense to me clients investing large sums towards residential investment properties where Rents were crunched by so many expenses (and in an ever increasing number and type). This is even more truer for SMSFs in pension phase!