If you’ve been following property finance commentary online, you’d have heard that buying residential property through a trust is a fast track to low-cost property acquisition. Social media platforms, particularly TikTok, have been flooded with so-called finance experts promoting trust structures as a loophole to growing your property portfolio. The reality is far more grounded.
Across the market, we’re seeing a clear downward shift in lender appetite for residential trust funding. Banks are tightening policies, reassessing risk, and quietly closing the doors that influencers have been talking up.
What is a residential property fund?
A residential property fund involves multiple investors contributing to a pooled trust that purchases and manages residential assets. You can see why this would pique the interest of Australians who may find it hard to enter the investment property market on their own.
Investors in these trusts share in the rental income and capital gains in proportion to their stake, without having to put in usual time and effort that goes into managing an investment property. While the perks seem great, there are also risks involved such as limited choice in properties or tenants, and potentially high management fees.
The TikTok effect: Why the pullback is happening.
The recent surge in trust lending interest hasn’t come from sophisticated investors alone. Much of it has been driven by broad, sometimes misleading online content, like that found on TikTok, suggesting that trust structures automatically unlock higher borrowing capacity or more flexible credit terms. Regulators and lenders have taken notice.
With increased scrutiny from ASIC and heightened risk management across the banking sector, lenders are moving quickly to rein in trust lending, particularly where structures are being used without clear rationale or where borrowers lack strong financial history.
What lenders are doing right now.
Based on current market intelligence, here’s a snapshot of how major lenders are approaching residential trust lending at the moment:
- CBA: Corporate trustee lending is considered only for existing clients who have held a credit facility or term deposit for at least six months. Maximum loan to value ratio (LVR) is typically capped at 70 per cent.
- ANZ – A hard stop on all residential trust lending via the broker channel, whether the trustee is a company or an individual.
- Westpac – Applications are only considered where more than 50 per cent of the income used in the application is self-employed income.
- Macquarie (broker channel) – A hard stop on all trust or company lending for residential property until further notice.
- NAB – No formal restrictions announced at this stage, though this remains a fast-moving space.
These positions are changing frequently, sometimes with little notice, and they reinforce just how cautious lenders have become.
What this means for property investors.
While trust structures are still valid and useful in the right circumstances, residential trust lending is no longer a “set and forget” strategy. We expect this area to evolve in a similar way to SMSF lending:
- Fewer lender options
- Tighter assessment criteria
- Higher interest rates and fees
That doesn’t mean residential trust funding is disappearing. It does mean that getting it right from the outset and working with advisors who understand both the lending and structuring landscape is more important than ever.
The bottom line.
Trusts can still play an important role in property and wealth strategies, but the days of easy solutions and “loopholes” driven by TikTok and social media hype are well and truly over. As major lenders retreat, the market will favour borrowers who are well-prepared, well-advised and realistic about what’s achievable.
If you’re considering buying residential property through a trust, or already hold property in one, now is the time to review your structure, funding strategy and long-term objectives. Get in touch with our award-winning finance team today.
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Dean Menzies is a Partner at Cutcher & Neale with more than 25 years of experience in financial services. Known for his candid and knowledgeable approach, he has built the firm’s Residential and Commercial Finance division into a core service offering, helping clients navigate property lending and investment decisions with clarity and confidence.
