At the recent Commercial Property & Development Finance Summit, industry leaders came together to discuss one of the most significant shifts in Australia’s commercial real estate finance — the rapid rise of private credit.
Representatives from ANZ, La Trobe Financial, ASIC, and Zagga, shared perspectives on how private credit is reshaping the funding landscape, where collaboration can thrive, and why governance and transparency will be crucial for sustainable growth.
The backdrop: a structural shift in funding
Over the past decade, Australia’s private credit market has grown at pace, filling the gap left by traditional funders operating under tighter regulatory and capital requirements. This shift has created new opportunities for lenders, brokers, and developers — particularly in sectors underserved by banks — but it also brings a responsibility to ensure the market develops with integrity.
As ASIC’s Calissa Aldridge noted, a significant portion of the wholesale private credit sector operates outside the direct regulatory oversight applied to retail markets. While many fund managers operate at high standards, ASIC’s surveillance has identified areas where minimum expectations are not being met. The regulator sees an opportunity to increase visibility, improve disclosure, and address gaps in oversight — with the goal of setting the sector up for long-term success.
Collaboration between banks and private credit
The panel discussed the evolving relationship between banks and private credit lenders, with examples of cooperation that benefit borrowers and broaden market capacity.
From Zagga’s perspective, collaboration can take several forms:
- co-lending arrangements where banks and private credit jointly fund transactions in first or second mortgage positions
- takeout financing where private credit funds construction or repositioning, and banks provide long-term debt once the project reaches stability
- asset recycling where loans move between non-bank and bank balance sheets depending on risk appetite and project stage.
These symbiotic relationships can accelerate delivery of projects that might otherwise stall — such as the case of a shopping centre development funded by private credit after the majors initially declined, and later attracting multiple bank term sheets for takeout.
Market discipline in a competitive environment
A recurring theme was the importance of maintaining robust credit standards as competition intensifies. With more private capital chasing opportunities, there is pressure on pricing and risk parameters.
Both bank and non-bank panellists emphasised the value of:
- comprehensive credit governance — including investment committees with independent members and clear underwriting standards
- multiple layers of review to ensure consistency, particularly on larger transactions
- rigorous due diligence on counterparties and partners to reduce execution risk.
Planning reforms, housing supply, and construction innovation
Government planning changes and housing policy reforms were identified as catalysts for new development activity. In NSW, low-to-mid rise housing policy changes have increased deal flow, with medium-density opportunities emerging in previously low-density zones. However, this also presents valuation challenges as floor space ratios change, creating untested pricing territory.
Construction innovation — from modular and prefabricated methods to 3D printing — was recognised as a potential lever to improve feasibility in a high-cost environment. While promising, lenders emphasised the need for industry-wide adoption, multiple capable providers, and solutions for funding progress payments on off-site works.
Key takeaways for market participants
Private credit is here to stay
Its role in bridging funding gaps and supporting development is now embedded in Australia’s finance landscape.
Collaboration works
Banks and non-banks can operate symbiotically, sharing risk and capital to achieve better borrower outcomes.
Standards matter
Governance, transparency, and disciplined credit processes will be the foundation for long-term investor confidence.
Adaptability will define success
From responding to planning changes to adopting new construction methods, lenders that can pivot without compromising standards will be best placed.
Conclusion
The expansion of private credit presents a compelling opportunity for Australia’s commercial real estate sector — but with that opportunity comes the responsibility to uphold high standards of practice. Through collaboration, transparency, and disciplined risk management, private credit can continue to complement the banking sector, address funding shortfalls, and contribute to the delivery of housing and infrastructure Australia needs.
At Zagga, we believe the sector’s long-term health depends on striking the right balance: enabling growth while safeguarding investor trust and market integrity.
