Private Credit Growth Hits a Wall
Private Credit Growth Hits a Wall
When developers default, private credit lenders act in days. Banks take months.
Australia's $40 billion private credit market has become a sophisticated ecosystem that's reshaping property development - and how defaults get handled.
Private lenders restructure terms, extend timelines, and facilitate equity injections.
Banks follow rigid procedures: committees, assessments, reviews - then call receivers.
The Collaboration Advantage
Private credit lenders have more skin in the game per deal. They can’t just write off a $50 million development loan like major banks, this can powerful incentives for collaboration during distress.
When projects hit trouble, private lenders leverage networks of high-net-worth individuals and family offices seeking equity opportunities. They adjust loan terms to make equity investment attractive - reducing interest rates temporarily, extending maturity dates, or modifying loan-to-value ratios.
Sometimes they subordinate debt to make equity positions more secure.
Traditional banks lack this flexibility. Internal policies and regulatory requirements make creative restructuring nearly impossible, forcing binary choices: extend loans under existing terms or call them in.
When Collaboration Fails
But collaboration has limits. Some lenders became unwilling equity partners in doomed projects.
One development got restructured three times in 18 months. Lower rates, extended terms, new equity each time. The problem: overpaid land, shifted market.
The lender lost 40% of principal.
Lesson learned: distinguish temporary headwinds from fundamental incompetence.
Technology Enables Transparency
Smart lenders now monitor construction milestones, sales velocity, and cost overruns in real-time.
Loan agreements require monthly reports, weekly draw schedules, and system access.
Developers hate the admin burden.
Digital platforms solve this. One system captures everything: construction progress, costs, sales, compliance. Single source of truth.
Transparency pays: better terms, lower rates, flexible structures.
Market Split Accelerates
Funds that built monitoring systems 2-3 years ago now dominate. They underwrite faster, price better, manage risk effectively.
Qualitas and Metrics Credit Partners moved early. They get better deals because developers want speed and certainty.
Sophisticated lenders complete deals 40-50% faster. Speed wins.
Lagging funds compete on price for deals nobody wants - higher risk, lower returns. Death spiral.
Network effects accelerate the gap: better data → better pricing → better developers → more data.
Adapt now or get relegated permanently.
Industry Professionalism
The real transformation happens in how developers operate. Those succeeding with private credit are not just getting different financing - they are becoming more professional, data-driven, and transparent.
The financing forces them to adopt better project management, cost controls, and market analysis, raising the bar for the entire industry.
Better developers get better financing terms, allowing them to take on more projects. This gives them more data and experience, making them even better developers. Old-school developers who resist transparency get systematically squeezed out.
A natural selection process emerges where the most professional developers access the best capital, whilst less sophisticated ones face higher-cost, more restrictive financing.
With 2,832 construction companies entering insolvency in 2023-2024, this pressure intensifies.
The Future Takes Shape
Australia's heading toward two-tier private credit: 4-5 dominant tech-enabled players capturing 70-80% of quality deals, plus fragmented specialists serving niches.
Barriers to entry are rising. Technology democratises access, but capital and sophistication requirements explode.
US and UK players may enter with global capital and proven platforms. Banks will retreat to vanilla CRE lending.
Consolidation is inevitable - through acquisition or attrition.
Beyond Alternative Financing
Private credit didn't just fill a gap - it upgraded Australia's entire development industry.
Banks retreated because development was "too risky." Private credit made it less risky through transparency and better practices.
Survivors will operate with real-time monitoring, sophisticated risk management, and transparent reporting as standard.
The irony: market stress created Australia's most professional development industry.
Platforms like Lendhaus connect developers with global financiers whilst streamlining processes. Single source of truth enables transparency and efficiency.
In commercial real estate, financing is a big deal. Lending and borrowing shouldn't be.
This isn't just new capital - it's complete industry transformation.
References
Reserve Bank of Australia. (2024). Growth in Global Private Credit. RBA Bulletin, October 2024.
University of New South Wales. (2024). Construction Nightmares: How Builder Bankruptcies Are Costing Australia. UNSW Newsroom.
Qualitas. (2024). Private Credit and Real Estate Financing Solutions. Company Website.
Metrics Credit Partners. (2024). Australian Private Credit Market Leadership. Company Website.
Lendhaus. (2024). Global Commercial Real Estate Financing Marketplace. Company Website.
