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The growth of Australia’s private credit market is prompting renewed scrutiny from lenders, according to Stamford Capital’s 2025 Debt Capital Markets Survey.
With private lenders now accounting for a significant portion of the commercial real estate debt landscape, industry participants are raising concerns around regulation, due diligence, and market practices.
The survey, conducted annually since 2018, gathers insights from 100 lenders including banks, non-banks, and second-tier institutions. Its ninth iteration reveals that 67% of respondents hold concerns about the size and behaviour of the private credit sector. Among banks, that concern rises to 86%, while 60% of non-bank lenders also flagged issues.
Private credit now comprises approximately 17% of Australia’s total commercial real estate debt, with assets under management rising from $57.1bn in 2014 to $148.6bn in 2024, according to ASIC data.
This shift is reshaping loan origination, with Stamford Capital noting its own lender composition has moved from a 50/50 bank and non-bank split to an 80/20 weighting in favour of non-bank lenders over the past five years.
Almost half of all respondents support increased regulation in the non-bank space. Lenders point to pushy sales tactics, limited experience among newer market entrants, and the rapid influx of participants as key concerns.
However, industry leaders have urged caution against regulatory overreach. Peter O’Connor, managing director at Stamford Capital, said private credit plays an essential role in filling market gaps. While he acknowledged rising concerns about regulatory and compliance shortfalls in the non-bank lending space, he warned that heavy-handed oversight could restrict the sector’s development. According to O’Connor, many participants in private credit are well-established and highly sophisticated, even in the absence of bank-style supervision.
Cory Bannister, chief lending officer at La Trobe Financial, said that new participants offer borrowers more choices but warned of potential risks if operators lack experience or capital, potentially impacting outcomes for borrowers and the reputation of the sector.
“If these businesses are not sufficiently experienced and capitalised and maintain inadequate standards, it could lead to adverse consumer outcomes and negatively impact the reputation of the private sector overall. We view longevity in the sector as a prized asset,” said Bannister.
At the same time, lender appetite for growth remains high. According to Stamford Capital, 97% of lenders are aiming to expand their loan books this year, with 71% targeting growth of 15% or more. This trend includes major banks, 46% of which are expected to increase lending to commercial real estate construction. Some lenders are easing pre-sale requirements, with 71% accepting presales of 35% or less and 29% having removed them entirely.
Settlement times have also accelerated. Stamford Capital reported a 14.4% reduction over three years, with last year’s average times more than 50% higher than current figures. Loan margins are also narrowing, with many lenders reporting decreases of up to 50 basis points in the last 12-18 months. Margins and line fees now average around 200 basis points.
Construction lending, however, continues to be subject to heightened scrutiny. Builder insolvencies and rising costs remain key issues, and 68% of lenders plan to maintain or introduce new due diligence protocols. iCIRT ratings are being used more frequently, particularly in New South Wales, where 40% of lenders reported rejecting applications due to unsatisfactory or absent ratings.
Survey respondents anticipate further downward movement in interest rates. Following the Reserve Bank of Australia’s recent cut to 3.85%, most expect a further reduction to between 3.5% and 3.7% by year-end. Stamford Capital says that this outlook is already contributing to more deal activity.
Sector-specific expectations also vary. Offices are seen by 67% of respondents as recovering, up from 33% last year. For industrial assets, 55% believe the segment has peaked, while 16% see it entering a decline. Meanwhile, 47% view retail as rebounding, with potential for increased consumer spending if inflation continues to ease.
