“Our research shows that while banking relationships continue to anchor the market for core investments, non-bank lenders are increasing their market share for opportunistic business plans, in markets such as Australia, India, Hong Kong SAR and South Korea.”
For Michael Kwok, partner, head of capital markets at Knight Frank Australia, the country presents as one of the most attractive markets for global real estate private credit as a significant opportunity exists for lenders to step in where traditional financing is less competitive, particularly in development, value-add projects, and higher-leverage solutions, most notably in the living and commercial sectors.
“For investors, this creates access to scalable opportunities targeting net returns of 9-12%, supported by a transparent legal framework and a stable market environment,” Kwok said.
“Australia’s private credit market has expanded significantly over the past decade, driven by both global capital shifts and structural changes in the local lending market,” added Ben Burston, chief economist at Knight Frank. “Globally, institutional investors have rotated into private credit to capture strong risk-adjusted returns and diversify their traditional equity investment strategies. Locally, the major Australian banks have pared back their exposure to commercial real estate in response to the implementation of Basel III, which altered the risk weights applying to different forms of lending.
“Looking ahead, private credit strategies will continue to be a key part of the investment landscape. Falling interest rates and stabilising asset values are expected to support a rebound in transaction activity, generating more opportunities for credit funds to work with developers and investors and reducing the risk of loan impairments as the market shifts to a recovery phase.