As Australia faces a housing supply crisis, private credit is emerging as a crucial resource for developers aiming to initiate new projects. According to a recent industry survey, nearly 75% of developers and related stakeholders are now securing larger loans from non-bank lenders, highlighting private credit’s importance in filling financial gaps traditionally met by banks (Schlesinger & Kwan, Australian Financial Review).
In contrast to bank loans, non-bank private credit offers the advantages of faster processing, higher loan-to-value ratios (LVRs) and more flexible terms. As the report indicates, private lenders are often able to approve loans within three to six weeks -- significantly quicker than traditional bank timelines.
The survey also underscores that, spurred by rising construction costs, the average loan size from non-bank private lenders has increased substantially in recent years, with a large portion of these funds directed towards residential projects that address immediate market needs.
This rise in private credit has paralleled a decline in banks’ commercial property lending, which has dropped from 10% of their assets during the Global Financial Crisis era to about 5.5% today. Despite this shift, traditional banks and non-bank private lenders are increasingly collaborating, with banks supporting private finance vehicles and enabling mezzanine loans that complement bank loans. As the article notes, this trend underscores the sector’s professionalism and its capacity for innovative funding solutions (Schlesinger & Kwan).
With private credit experiencing a compound annual growth rate of 23% since 2015, now worth around $200 billion, it has firmly established itself as a key component in Australia’s real estate finance landscape (Australian Financial Review).
For more information, you can see the original article by Schlesinger, L., & Kwan, C. (2024). in the AFR.
If you are looking for more information on private credit loans, you can contact us on 1300 795 507 or email us at [email protected] and one of our lending specialists can assist with your enquiry today.