Private credit funds are rapidly expanding their share of Australian construction finance, as the major banks continue to pull back from higher-risk development lending in favour of established, pre-sold projects.
Non-bank lenders now account for a meaningfully larger share of mid-market residential and mixed-use construction facilities than three years ago, according to brokers active in the space, with pricing typically 200 to 350 basis points above major bank rates.
Developers say the trade-off is worth it for speed and flexibility. “A bank might take three months and still knock you back on pre-sales; a private lender can turn a term sheet around in a fortnight,” one Sydney developer said.
The growth has not gone unnoticed by regulators, with APRA flagging closer scrutiny of bank exposure to non-bank lenders that ultimately fund the same underlying projects.