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Spooked by rising rates and tariffs, private credit draws investors’ eyes

STOCKHEAD & THE AUSTRALIAN
‘Turbulent’ is how many investors define the month that was.

Locally, the Reserve Bank of Australia (RBA) passed on a rate rise due to stubborn and accelerated inflation, while, globally, Trump surprised with 15 per cent global tariffs, significantly higher than anticipated. Coupled with ongoing geopolitical tensions, persistent market volatility, and uncertain macro conditions, many investors are spooked.

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private credit growth

Australia’s private credit growth story is just the beginning

INVESTOR DAILY
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.

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geopolitical

The economic recovery continues to unfold as geopolitical issues escalate

The earlier cautious optimism about an economic recovery is translating to confirmation about broader economic strength. While serious uncertainties dominate the global outlook amid elevated geopolitical threats to markets and economic activity, particularly in the Middle East, the domestic drivers of the economy are broadly positive.

A combination of prior interest rate cuts, moderate fiscal stimulus and an increase in commodity prices have helped to spark the more positive tone.

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The focus is on inflation as the RBA strives to get inflation back to target

The sudden and unexpected about-face in economic conditions saw the RBA move from cutting interest rates with a bias for more cuts in August 2025, to hiking them with a bias for more hikes in February 2026.
In simple terms, the facts on the economy changed.
In data since the rate hike, there has been confirmation that household spending growth is registering moderate growth; business investment is lifting; unfortunately the recovery in the number of dwelling building approvals has stalled while consumer sentiment remains pessimistic.

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Real estate private credit hits its stride as Zagga keeps scaling

STOCKHEAD & THE AUSTRALIAN
If 2025 was the year real estate private credit stepped into the mainstream, 2026 could be shaping up as the year it becomes a permanent pillar of the financial system.

Australia’s private credit market now exceeds $220 billion and continues to enjoy close to double digit growth. Real estate private credit alone is forecast to approach $90 billion by the end of the decade.

What’s driving that momentum is not just investor appetite, but a structural reshaping of how property is funded.

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Mixed economic news complicates the RBA’s interest rate options

Signs of stronger economic activity have been tempered by softening labour market conditions, on going consumer pessimism and heightened global geo-political issues.

The recent data flow has confirmed a further pick up in economic activity, particularly household spending and dwelling construction. These are welcome outcomes after what has been more than two years of below trend growth. There are early but encouraging signs of a recovery in private sector business investment, which is vital to boost productivity. Growth in government demand is slowing as some key public sector projects are at or near completion.

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smsf potential

The $90 billion opportunity: SMSFs are realising new potential in Australian real estate

Australia’s SMSF sector has always had a deep affinity with property. Today, SMSF investors have approximately $139 billion invested in the property market, accounting for ~13 percent of total SMSF assets. Yet, with property prices at record highs and traditional income assets under pressure, SMSF trustees are increasingly looking beyond direct ownership to access the strength of Australian real estate. For many, the answer lies in real estate private credit – a segment once seen as niche, now emerging as a critical source of income, diversification, and stability for SMSF portfolios.

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We would like to acknowledge the Traditional Custodians of the lands, seas, and communities in which we provide our services. We would also like to pay our respects to the Elders past, present and emerging, and the continuing cultural influence they have on Australia.

Zagga Market Pty Limited (Australian Credit Licence 490904) ACN 611 662 401 acts as the Servicer of loans acting on behalf of the credit provider, Zagga Investments Pty Limited (AFSL 492354) ACN 615 154 786, trustee of the Zagga Investments Lending Trust

Additional Information

All portfolio numbers quoted correct as at 31 December 2025.

*Average investor return across the active portfolio as at 31 December 2025.

**Target return is after expenses and any applicable management fees for the year ended 30 June 2026. OCR = Australian Reserve Bank Official Cash Rate.

Past performance is not a reliable indicator of future performance, and should not be taken as an indication or guarantee of future results. Investments involve risk, fees and costs, and returns are not guaranteed. No representation or warranty is made regarding future performance, and economic conditions may change.

Prospective investors wishing to invest in a Zagga direct investment or a Zagga Fund should fully consider the Information Memorandum, ZFF Fact Sheet and/or ZWF Brochure, available from Zagga, before applying to invest. Investments are subject to risks.

Articles (including white papers and audio or video content) and FAQs on this website have been prepared by Zagga Investments Pty Limited (AFSL 492354) ACN 615 154 786 (Zagga) for general information only. They do not take into account your objectives, financial situation or needs, and are not a substitute for accounting, tax or other professional advice. Nothing in these articles or FAQs is an offer or solicitation to buy or sell a financial product, nor a recommendation to enter into or refrain from any transaction.

Any analysis provided in the articles (including white papers and audio or video content) or FAQs on this website is based on information believed to be reliable, however Zagga does not represent or warrant that it is accurate, complete or up to date. Zagga is not obliged to update the information or opinions contained in any article it. Opinions are those of the author and may change without notice. Readers should exercise their own judgment when relying on information contained in the articles or FAQs. To the maximum extent permitted by law, no member of Zagga accepts liability for any loss arising from the use of such information.

Media coverage featured reflects the independent opinions of the authors and does not necessarily represent the official views of Zagga.

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