Private credit steps up: Backing Australia’s housing push with smarter capital

Picture of Article by Alan Greenstein<br>28 March 2025
Article by Alan Greenstein
28 March 2025

The 2025–26 Federal Budget delivers clear intent: housing supply, affordability and construction workforce development are now front and centre of the national agenda.

With a $33Bn commitment and targeted initiatives, the incumbent Government is mobilising support for long-term structural improvement in a concerted effort to address both availability and affordability of residential accommodation.

These latest initiatives present opportunity for Australia’s ~$205Bn private credit sector, specifically the ~$87Bn real estate private credit segment, where capital is increasingly stepping in, as banks continue to pull back owing to regulatory and capital constraints, and NBLs fund the predicted 280,000 national dwelling residential accommodation shortage.

While private credit accounts for just ~17% of the total Australian Commercial Real Estate Debt Market (compared with ~50% in the US and ~40% in Europe), that share is growing—and with it, investor interest.

federal budget

The fundamentals for providing capital remain compelling:

  • house and unit prices continuing to increase
  • demand outstrips supply and average rental vacancies remain at less than 1%
Source: ABS
Source: ABS
  • bank total mortgage delinquencies is around 40% lower (0.91%) than six months ago (1.51%)
  • 90+ day mortgage arrears at 0.41%, around half of their March 2019 figure
  • ASIC stats to February 2025 reflect construction insolvencies trending down
Source: MPA
Source: APRA

Construction Insolvencies

Source: ASIC1
  • ABS’s latest GDP data to December 2024 showing YoY economic growth of 1.6%2
  • Real estate developers and investors may enjoy further reductions in interest rates over time.

At Zagga, we focus capital deployment in the most conservative parts of the real estate private credit universe:

funding experienced, repeat business with property developers and investors, in core eastern seaboard markets with deep liquidity, essential housing demand, and resilient economic fundamentals.

We avoid speculative assets and seasonal or highly cyclical sectors—focusing instead on transactions where there is clear line-of-sight on delivery, exit, and return.

Having invested in excess of $2Bn and repaid over $1Bn, we at Zagga continue to believe that private credit anchored by high-quality real estate assets and strong counterparties, offers a credible, risk-adjusted income solution for sophisticated and wholesale investors.

1. asic-insolvency-statistics-series-1-and-series-2-published-24-march-2025.xlsx
2. https://www.abs.gov.au/statistics/economy/national-accounts/australian-national-accounts-national-income-expenditure-and-product/latest-release

This article is for information purposes only. It does not take into account your objectives, financial situation or needs. Any opinion expressed in this article are of the author and is subject to change without notice. Readers are reminded to exercise caution and use their own judgment when interpreting and applying the information contained in this article.

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We would like to acknowledge the Traditional Custodians of the lands, seas, and communities in which we provide our services. We would also like to pay our respects to the Elders past, present and emerging, and the continuing cultural influence they have on Australia.

Zagga Market Pty Limited (Australian Credit Licence 490904) ACN 611 662 401 acts as the Servicer of loans acting on behalf of the credit provider, Zagga Investments Pty Limited (AFSL 492354) ACN 615 154 786, trustee of the Zagga Investments Lending Trust

Additional Disclaimer

All portfolio numbers quoted correct as at 31 January 2025.

*Average investor return across the active portfolio as at 31 January 2025.

**Target return is after expenses and any applicable management fees for the year ending 30 June 2024. OCR = Australian Reserve Bank Official Cash Rate.

Past performance is not a reliable indicator of future performance and investments are subject to investment risk, fees and costs. Returns are not guaranteed.

Prospective investors wishing to invest in a Zagga direct investment or a Zagga Fund should fully consider the Information Memorandum, ZFF Fact Sheet and/or ZWF Brochure, available from Zagga, before applying to invest. Investments are subject to risks.

Articles on this website have been prepared by Zagga Investments Pty Limited (AFSL 492354) ACN 615 154 786 (Zagga) for information purposes only. It doesn’t take into account your objectives, financial situation or needs, nor is it intended as a substitute for any accounting, tax or other professional advice, consultation or service. Nothing in this article shall be construed as a solicitation to buy or sell any financial product, or to engage in or refrain from engaging in any transaction.

Past performance should not be taken as an indication or guarantee of future performance and no representation or warranty, express or implied, is made regarding future performance. Economic conditions may change.

Any analysis provided in this article is based on information obtained from sources believed to be reliable but Zagga does not make any representation or warranty that it is accurate, complete or up to date. Zagga accepts no obligation to correct or update the information or opinions in it. Any opinions expressed in this article are of the author and is subject to change without notice. Readers are reminded to exercise caution and use their own judgment when interpreting and applying the information contained in this article No member of Zagga accepts any liability whatsoever for any direct, indirect, consequential or other loss arising from any use of such information.

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