• Zagga says we are in a credit cycle, not a crisis
• Nine years of investing has confirmed its focus on capital preservation
• Real estate fundamentals are strong, but discipline matters more than chasing yield
Zagga cautions investors not to confuse a cycle with a crisis, and calls for discipline, due diligence, and a focus on quality to navigate current market conditions
Markets have a nasty habit of making every wobble feel like the beginning of the end. Rates go up, property prices soften and suddenly every investor starts wondering whether the whole thing is about to fall through the floor.
But according to Alan Greenstein, CEO and co-founder of Australian real estate private credit company Zagga, that is not the right way to read the current market.
“A crisis is marked by financial system stress, widespread distress, and a lack of liquidity. We don’t see that today,” Greenstein told Stockhead.
“What we’re seeing is a market adjusting to geo-political factors, changed tax treatments, higher interest rates, changing demand patterns, and tighter credit conditions.”
For investors in real estate private credit, the question is not whether recent headlines warrant attention. They do.
The question is whether they point to a structural problem with the asset class, or simply a more normal, if uncomfortable, part of the property and credit cycle.
Zagga’s view is firmly the latter.
The market is bending, not breaking
Yes, the property market is softer. Values have come off their highs, while developers are still dealing with higher costs, labour shortages, planning delays and tighter feasibility assumptions.
None of that should be sugar coated.
But Greenstein said the broader system still had support underneath it – with resilient employment, strong population growth, migration-backed housing demand and a well-capitalised banking system.
“For sure, the property market is softer and values are down off their highs, but we’re seeing predictions of 10% reductions across the board, which is not a crisis level. Liquidity is still flowing.”
In other words, capital is still moving, but it’s becoming more selective.
According to Greenstein, the indicators Zagga watches most closely are “employment, credit availability, loan arrears, transaction activity, and borrower behaviour.”
“While there are pockets of stress, they are not systemic.”
The worst of the rate rises may now be behind the market, with better opportunities starting to appear for disciplined lenders and investors.
“The challenge today isn’t survival. It’s capital allocation,” Greenstein added.
Housing demand is real, but not every project warrants investment
Zagga says Australia’s housing shortage is the big structural tailwind behind the sector, with population growth still running ahead of new supply.
But in private credit, strong demand doesn’t automatically make every project worth backing.
Greenstein said the current environment created both opportunity and risk.
Australia needs more homes, but developers are still dealing with higher building costs, labour shortages, planning delays and supply chain issues.
That’s where the underwriting rubber hits the road.
Some projects will work and some won’t. And the difference comes down to the quality of the sponsor, the location, the cost assumptions, the exit strategy and the lender’s ability to stay disciplined.
“The opportunity lies in backing experienced sponsors delivering projects into markets where demand materially exceeds supply,” Greenstein said.
“The risk is assuming every project succeeds simply because housing is undersupplied. It won’t.”
Nine years, several bumps, one boring rule
Zagga originated its first loan in 2017 and has since funded more than $3 billion across more than 350 loans in Australia.
It has also delivered more than 250 successful exits, returning more than $1.5bn to investors.
That nine-year stretch has taken the company through more than a few credit cycles.
The business has invested through Covid, sharp rate rises and periods of property market stress. Those episodes have shaped the way it approaches risk.
“Absolutely. Every cycle leaves lessons,” Greenstein said.
“Covid reinforced the importance of liquidity and contingency planning. The rate-rising cycle reinforced the importance of stress testing and recognising how quickly conditions can change.
“More broadly, we’ve become increasingly focused on execution risk, not just market risk.”
Zagga says it now spends even more time assessing sponsor capability, funding capacity, construction risk and exit strategies.
“The biggest lesson is simple: capital preservation comes first,” Greenstein said.
“We often remind investors that a few extra basis points of return are never worth compromising downside protection.”
Don’t just stare at the headline yield
Greenstein also believes investors still need to look past the headline return.
The first question, he said, shouldn’t be: what return am I earning? It should be: how is that return being generated?
In other words, what risk am I taking to earn my return?
That means looking at things like loan-to-value ratios, borrower quality, asset diversification, the manager’s track record in defaults and losses, portfolio concentration, security position, covenants and risk controls.
The point is simple: Two managers can show investors a similar yield, but they may be taking very different risks to get there.
The objective for Zagga, Greenstein said, isn’t simply to generate yield.
“It’s to deliver consistent, risk-adjusted returns while protecting capital through multiple market cycles.”
Growth, but not at any price
Zagga’s recent growth has been strong.
FY26 was another strong year for the group, with close to $1.2bn in funding raised and just over $1bn in loans originated.
Funds under management grew by around 35% and Zagga also became a signatory to the UN-backed PRI (Principles for Responsible Investment).
But Greenstein said the growth had not come from loosening the credit focus.
“Simply, we don’t start with a deployment target and work backwards. We start with credit quality,” Greenstein said.
“Capital should follow opportunity, not the other way around.”
According to Greenstein, one of the biggest mistakes lenders make is feeling compelled to deploy capital simply because it’s available.
In FY26, Zagga reviewed almost $9bn in opportunities and funded approximately $1bn.
“Discipline means that not every dollar needs to be deployed immediately.”
Where the opportunity sits now
The bank pullback from parts of property lending has opened more room for private credit managers, especially for borrowers who need certainty of execution and commercially focused financing solutions.
“We’re not trying to replace the banking system. Banks remain a critical part of the market,” Greenstein said.
But he believes that for sophisticated borrowers, certainty of execution can be just as valuable as pricing, adding that the biggest risk is complacency.
To assume that favourable market conditions can compensate for weak fundamentals is often how capital gets into trouble.
“We remain optimistic about Australian real estate private credit, but our optimism is grounded in selectivity, disciplined underwriting and an unwavering focus on risk management.”
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As market volatility rises and traditional portfolios come under strain… where is capital turning for stability?
Our latest whitepaper explores the global search for yield, the risks and opportunities across private credit, and why Australia continues to attract attention.
This article does not constitute financial product advice. You should consider obtaining independent advice before making any financial decisions.
This article was developed in collaboration with Zagga, a Stockhead advertiser at the time of publishing and additionally published in The Daily Telegraph, Toowoomba Chronicle, Cairns Post, Geelong Advertiser, Gold Coast Bulletin, Herald Sun, The Mercury, NT News, Adelaide Advertiser, The Courier Mail, and Townsville Bulletin.
