Private credit has become a core part of many property developers’ arsenal in recent years. The lending method, which deploys the capital of high-net-worth investors to borrowers generally at a higher interest rate than banks, has grown substantially since the GFC. Recent data from EY-Parthenon shows that, in late 2025, the size of the Australian private credit market was about $234.5 billion. This represents a growth of 21 per cent since 2015. Private credit’s advantage over banks is speed.
Given private credit providers are not subject to Australian Prudential Regulation Authority oversight they can usually set up a loan faster than a bank. This is a huge drawcard for property developers who outlay significant holding costs on development land. For apartment developers in particular, private credit can be very attractive because providers in this market often do not require the same level of pre-sales that banks do.
In some cases, non-bank lenders will loan to a developer who hasn’t secured any sales contracts but is keen to start a project.
WA push
Relatively speaking, Perth’s private credit market is small compared with the eastern states. This was highlighted in a recent Stamford Capital survey, which showed that Western Australia’s commercial real estate debt market was predominantly led by banks.
However, as the private credit sector expands, WA is tipped to mirror the trends on the east coast by growing its market share of private credit providers.
As a commercial real estate broker, Stamford Capital has a handle on what’s occurring across the market. Speaking to Business News, Stamford Capital WA partner Andrew Dilorito said the rise of non-bank lenders was an emerging theme in this state.
“One thing that’s pretty prevalent, even from last year to this year, [is] there has been a significant jump in the number of those non-bank private credit lenders in market in WA,” he said.
“WA is a market that presents a lot of opportunity; the economy is strong … property prices are strong, so we’ve continued to see that rise.”
National provider Pallas Capital is among those private credit providers to have established a WA presence in the past 12 months. Since setting up in WA in November, the company has grown its loan book in Perth to about $200 million.
“Having a national presence is important,” Pallas Capital group executive origination Jason Arnold told Business News.
“We started doing a few deals in Perth and we saw that it was resonating.
“But we’ve always had the philosophy of having local, experienced staff on the ground in local areas.
“We heard of east coast lenders coming over, flying in [and] flying out … I don’t think you gain that much traction [that way].”
Pallas Capital, which provides loans in the $1 million to $50 million range, has grown its WA team to seven staff members in a short space of time. The company is backed by New York Stock Exchange institutions including Goldman Sachs.
Mr Arnold said it was this institutional backing that had helped the company grow.
“With the institutional fundings lines, it has helped bring the cost of capital down,” he said.
“It helps us deliver lower interest rates to our clients and brokers in today’s environment.
“If you don’t have institutional capital, you’re almost out of the market on a pricing basis. And then you’re chasing risk if you’ve got private capital to get the returns that you need.”
Fellow private debt player MaxCap Group has been in Perth for four years. It has funded several local projects, most notably Sirona Urban’s $150 million student accommodation project in Perth.
The company recently added to its Perth staff with the recruitment of Rory Passingham as associate director of debt investment.
MaxCap Group chief investment officer Bill McWilliams explained that the private credit sector had evolved in recent years.
“The industry started with predominantly development funding; that’s where the banks retreated the most in, and where the largest returns were for investors,” Mr McWilliams told Business News.
“We’re [now] seeing a lot more opportunity through all the life cycles of property, post-development as well.”
Avari Capital is a more recent arrival to WA, opening its Perth office 12 months ago. Its director origination, Gary Louis, spent four-and-a-half years leading NAB’s commercial real estate team in WA and South Australia. He said having a seat at the table in WA had proved invaluable.
“Avari believed there was a lot of funding opportunities within the WA, South Australia, and Queensland markets, which we were not seeing because we didn’t have boots on the ground,” Mr Louis said.
“Over the past 12 months we have established a presence in these markets, which is providing increased visibility and therefore affording us a seat at the table to look at deals we would not have otherwise seen.”
Scruitny
The Australian Securities and Investments Commission recently issued a warning to investors about their exposure to private credit.
In mid-June, ASIC stated that the sector was “facing its first real test”.
“Tighter liquidity, emerging borrower stress and signs of credit deterioration are testing valuations, governance and investor disclosures,” ASIC stated.
“The market is moving from a period of rapid growth into a more demanding phase, with persistent macroeconomic pressure and a slow creep in credit stress indicators.
“In the US and Europe, conditions are already driving rising defaults, valuation uncertainty and redemption pressures.
“Australia’s market has acknowledged structural differences, including greater exposure to real asset-backed loans in construction and property. But those differences are not a defence against risk.”
When done well, the regulator said, private credit provided “an important source of funding and supports economic growth and innovation”.
“But weaknesses in governance, disclosure, valuation practices and conflicts management become more pronounced as conditions tighten,” it continued.
While it is a fine balance between having greater regulation hampering the speed at which lenders can do business, the private credit operators
MaxCap’s Mr McWilliams said with hundreds of private credit providers registered on ASIC, there was a low barrier to entry for these businesses.
“They put this blanket ‘private credit manager’ as a statement, but you can be a group like MaxCap … [which is]… set up to manage institutional capital,” he said.
“We welcome the scrutiny from ASIC because it’s going to raise the standards of private credit across the entire sector.”
Value factor
Industry experts say if property values decline, which is happening across some Australian markets, it could increase the risks of investors exposed to private credit.
Prominent developer Nigel Satterley voiced his concerns about private credit in a recent interview with Business News.
Mr Satterley’s main issue was with the high loan-to-value ratios (LVR) offered by non-banks.
LVR refers to the size of a loan compared with the property that is securing it, so, the higher the LVR the greater the risk.
Private credit providers can offer LVRs of close to 80 per cent, whereas banks generally lend against about 65per cent of a property’s value.
“These [private] lenders have been quite aggressive,” Mr Satterley said.
“In Melbourne, where englobo land has dropped in value and people have paid too much at the top of the market, the investors or lenders will start losing money because the LVR has gone up and the values have dropped.”
He said the recent actions of regulators should serve as a warning to investors.
“It’s about to unravel,” Mr Satterley said.
“You can see [the regulators] sticking their heads up … value has gone down [and borrowers] can’t pay their interest.”
Risks
The higher risk associated with private credit is reflected in the interest rates and the level of investor returns associated with it, often in the 9-to-12 per cent range.
Because of this, private lenders can attract developers that fly close to the sun in terms of the feasibility oft heir projects.
While these applications are usually rejected, private lenders admit they have dealt with ‘cowboy’ developers.
And the loan structures associated with private credit, which can allow borrowers to defer interest repayments, mean loan defaults can be more common.
In Sydney, private credit fund Centuria Bass has recently frozen two of its funds in light of investor concerns over its exposure to property developer Bathla.
According to reports, Bathla owes close to $3 billion, mostly to private credit providers. One of these is Centuria Bass.
A spokesperson for the fund said it had temporarily paused redemptions and applications to the Centuria Bass Credit Fund and the Bass Property Credit Fund.
“This follows an increase in redemption requests driven by recent commentary regarding the Bathla Group,”the spokesperson said.
“It is anticipated that these measures will remain in place for between two-to-six months, although the timeframe remains subject to review by the trustee.
“This decision has been taken to ensure all investors are treated fairly and equitably.”
Evolution
Perth commercial real estate broker Benchmark Finance Group has about $1.3 billion in loans undermanagement.
Of those, about 10 per cent are with private credit providers.
Benchmark Finance managing director Rebecca Justice said this was a reduction from five years ago when the figure was closer to 20 per cent.
“Generally speaking, we do less with private lenders now than we did, which is also a reflection of the quality of our book: most of our clients are pretty heavily supported by the majors,” she said.
“Where the privates came in was at that riskier end of the lending curve, whereas now the banks are taking going up the risk curve themselves.
“The biggest competition I think for private lenders is banks, it’s not each other.” Ms Justice said the behaviour of banks was changing as competition with non-bank operators intensified.
“When we took our last apartment deal out for funding terms, we actually had some banks at lower levels of pre-sale requirements than the private lenders,” she said.
“We had some private lenders with around 60 per cent pre-sales required, and we had banks at 40 and 50 cent pre-sales required.
“We did have a private at 25 per cent pre-sales required.
“We also had some privates actually that were more competitive pricing-wise than banks, and so it’s a bit of a mixed bag.”
Ms Justice added that non-bank lenders were historically more nimble than banks.
“Where privates have historically done really well is the fact that they’re quicker, more nimble, [if] we need something done faster than a bank,” she said.
“Banks inherently can be quite slow with all the process.
“That has been beneficial to the privates because, from a speed-to-market perspective, they can get term sheets out faster. If you do have lower pre-sales or do have a higher loan-to-cost ratio, you can get started quicker.”