4 min read
Quick Summary
- MARKET SIGNAL: Charter Hall expects more private money to move from residential into commercial property.
- TAX CHANGES: Negative gearing and CGT changes have weakened the residential investment case.
- SMSF OPPORTUNITY: SMSFs can still borrow for eligible commercial property.
- PERTH CONTEXT: Perth’s tight industrial market continues to support demand for quality assets.
- INVESTOR TEST: Yield alone is not enough. Debt costs, lease quality, liquidity and compliance matter.
When Residential Changes, Commercial Gets A Look-In
When the CEO of Australia’s biggest listed property fund manager says a seismic shift is coming, it is worth paying attention.
David Harrison, CEO of Charter Hall, says more SMSFs and private investors are looking beyond residential property after federal tax changes. As Harrison put it, “The recent federal government changes have turned negative gearing into a dirty word, and we’re seeing capital wanting to invest in positively geared, long-lease commercial assets… from all ends of the spectrum.”
What Charter Hall Is Seeing
The federal budget wound back negative gearing on established housing and abolished the 50% capital gains tax discount.
The government has also banned SMSFs from borrowing to invest in residential property.
Harrison expects “a seismic shift of private investor money” as investors reconsider commercial assets, and Charter Hall’s direct property business equity inflows rose almost 60% to $223 million in the year to 30 June.
Why Commercial Property Is Getting Attention
The appeal starts with income. Positive gearing simply means an investment’s net income is higher than its ongoing interest and ownership costs.
But a headline yield is not the same as your net return after interest, management, insurance, repairs, land tax, vacancy and other costs. That is where plenty of glossy deals start to look less glossy.
Tenant strength also matters. A long lease to a solid business can offer more certainty, but the lease is only as good as the tenant behind it.
The Perth And WA Context
Perth remains relevant here. Recent market data places Perth’s industrial and warehouse vacancy rate at around 2%, making it one of the tightest industrial markets in Australia.
That can support rental demand for well-located assets, particularly in established precincts such as Welshpool and Wangara. Even so, not all industrial property is equal, and asset selection still matters.
What This Means For SMSF Investors
The residential borrowing ban does not remove access to eligible commercial property. SMSF commercial property loans remain available, subject to lender policy, valuation, serviceability and super rules.
The familiar structure still works: an SMSF can buy through a limited recourse borrowing arrangement, with the property held in a separate bare trust while the loan is in place.
A lease-back to your own business can also remain valid where the property is eligible and the lease is on market terms. To understand the lending side, see our SMSF loans service and our guidance on commercial property loans.
The Practical Checklist Before You Move
A disciplined process is more valuable than a dramatic prediction. Before moving from residential into commercial property, work through these steps.
- STEP 1: Define the objective. Know whether you want retirement income, business premises, diversification or a long-term SMSF asset.
- STEP 2: Compare yield with the cost of debt. Run the net figures after outgoings, vacancy and ownership costs, not just the headline number.
- STEP 3: Examine the lease and tenant strength. Check lease term, rent reviews, outgoings and the financial quality of the tenant behind the agreement.
- STEP 4: Stress-test vacancy and your cash buffer. Ask how the loan gets covered if the tenant leaves or rates move against you.
- STEP 5: Confirm structure, compliance and lender readiness. Get advice early, and front-load the file with the right documents, recent entity statements, signed lease schedules and valuer access when requested.
Risks And Transparency
Commercial property is not risk-free.
- VACANCY RISK: If a tenant leaves, the rent can stop while repayments and holding costs continue.
- LIQUIDITY RISK: Commercial property is usually slower and more expensive to sell than listed assets.
- INTEREST RATE RISK: A deal that looks positively geared today can tighten quickly if debt costs rise.
- HERD RISK: When too much money chases the same sector, prices can rise and yields can compress.
The right property is not the one making the loudest headline. It is the one that fits your goals, cash flow and risk appetite.
Terms To Know
- POSITIVE GEARING: When an investment’s net income is higher than its ongoing interest and ownership costs.
- NEGATIVE GEARING: When an investment’s deductible expenses and interest costs exceed its income.
- SMSF: A self-managed superannuation fund operated by its members to invest for retirement under superannuation law.
- BARE TRUST: A separate trust structure commonly used to hold an asset acquired under an SMSF limited recourse borrowing arrangement.
The Baseline Difference
At Baseline Finance, we do not treat a commercial property loan as a product-picking exercise.
We start with your goals, test the property fundamentals, assess the cash flow and compare lender options.
Our approach is jargon-free and transparent, so you understand both the opportunity and the trade-offs before you commit.
Information in this article is general in nature and is not financial, tax, legal or SMSF advice. Loan approval is subject to lender criteria, valuation, applicable laws and approved applicants. Fees, charges and other costs may apply.
Contact Baseline Finance
Phone: 08 6108 3925
