Source: Investor Daily
Author: Alan Greenstein
Date: 4 March 2026
Private credit is no longer a niche allocation, it is a core component of sophisticated portfolios – and nowhere is this more evident than in Australia’s real estate market.
For much of the past decade, investors have navigated a sequence of shocks: pandemic disruption, inflation spikes, rate tightening cycles, geopolitical tensions, and equity market turbulence.
Traditional portfolio construction models have been tested. The once-reliable negative correlation between equities and bonds is arguably gone forever. Income has become harder to secure, and capital preservation harder to guarantee.
This backdrop has provided the perfect conditions for private credit to come of age. In Australia, the market has surpassed AUD$220 billion in assets under management, growing nine percent year-on-year. Real estate private credit, in particular, is forecast to nearly double to $90 billion by 2029, according a review by Alvarez & Marsal late last year.
The structural tailwinds are clear
Three powerful forces are driving this continued expansion of real estate private credit in Australia.
First, traditional lenders have retreated. Regulatory and capital constraints have reduced bank appetite for construction and development funding, particularly in the mid-market. This has created a funding gap – one that experienced, well-capitalised private lenders are well positioned to fill.
Second, Australia’s housing shortage remains acute. Federal and state governments have made supply a national priority, with policy settings aimed at unlocking new development. At the same time, population growth and migration continue to underpin long-term demand. The imbalance between supply and demand is structural, not cyclical.
Third, investor behaviour is changing. As volatility becomes the new norm, capital is increasingly shifting from growth and appreciation toward income and preservation strategies. Private credit, particularly when backed by property, can offer an attractive blend of yield, downside protection, and diversification.
We have described this evolution as the move from “alternative” to core, with private credit increasingly recognised as a stabilising force in portfolios, delivering consistent income independent of daily market noise.
Growth in context
The expansion of private credit is no longer theoretical. We are seeing it firsthand in capital flows, borrower behaviour, and portfolio allocations.
Over the past 12 months, Zagga’s originations and investor inflows increased by 55 per cent year-on-year. Active funds under management rose 44 per cent, while the registered investor base grew 36 per cent, taking the total book beyond $1.5 billion.
These numbers are less about headline growth and more about what they signal: sustained demand for secured income strategies at a time when traditional asset class correlations have become less reliable.
Since originating our first loan in 2017, Zagga has deployed close to $3 billion across more than 300 transactions. The firm operates predominantly in the mid-market — typically loans between $5 million and $100 million — a segment often too complex for banks operating under tighter regulatory constraints, and too granular for large global debt funds seeking scale.
Risk management in a maturing market
Private credit’s growth has been rapid. With that growth comes scrutiny – and rightly so.
Not all credit is created equal. Structures, underwriting standards, and investment guardrails vary widely. Defaults are a natural feature of any credit cycle; they do not automatically translate into losses. What ultimately determines outcomes is risk management – the quality of underwriting, the strength of structuring, and the experience with which recoveries are managed.
We lend conservatively, typically at or below 65% loan-to-value ratios. We undertake multi-layered due diligence, assessing not only asset quality but sponsor capability, covenant strength, and project feasibility. Importantly, we remain actively engaged throughout the life of a loan, with the capability to step in early, restructure where necessary and manage recoveries decisively to protect investor capital.
More than 50% of our loan book comprises repeat borrowers – a reflection of long-term partnerships built on performance, transparency and disciplined execution across cycles.
Measured growth, conservative structuring, and appropriate risk-adjusted returns are the sustainable path to growth.
A market still maturing
Despite surpassing AUD $220 billion, Australia’s private credit market remains in a relatively early stage of development. We believe private credit could ultimately account for 30% or more of the commercial real estate debt market in Australia. If that trajectory plays out, the market has considerable room to expand.
But growth must be responsible. As private credit comes of age, industry standards and governance frameworks will play an important role in sustaining trust and credibility. Transparency, alignment, and robust valuation practices are essential to ensure that the asset class matures with integrity.
The question is no longer whether private credit will remain relevant. The question is how it will reshape the funding landscape over the next decade.
In Australia, the structural drivers are firmly in place: a housing shortfall, strong demand and increasing pool of capital as investors seek defensive income. The mid-market – our chosen lane – sits squarely at the intersection of these forces.
Private credit is no longer the side story in Australian real estate finance. It is becoming one of the main chapters providing capital preservation, reliable income, and structural growth tailwinds.
