Australia’s construction pipeline is telling two stories at once in 2026. Proposal values are climbing and the underlying demand is clearly there.
Yet approvals have tightened and feasibility is under real pressure. The squeeze is not coming from one direction. It is build costs, lender caution, and the major banks staying out of development funding all landing on the same project at once.
As the banks have pulled back from the higher-risk end of lending, private credit has moved in to fill the gap. According to EY, the sector now holds around $234 billion in assets, and real estate is its single largest exposure. The funding is there. It just no longer comes from one place, or in one shape.
What I see on the ground is the gap that combination creates.
More and more, the projects crossing my desk stack up on the fundamentals. The site is right, the demand is real, the numbers work on a sensible feasibility. And they still stall at the finance stage.
The issue is rarely the project itself. It is that the project has been taken to one lender as one loan, when in truth it carries three separate funding needs. Each sits on a different timeline, carries a different security profile, and no single facility is built to carry all three.
Trying to collapse them into one loan creates a bottleneck. A lender’s appetite for funding a fast site acquisition does not match its appetite for an 18-month construction drawdown, and neither matches what it wants to see on a completed, income-producing asset.
The builders and developers getting funded cleanly in this market are the ones who match each phase of the project to the facility, and the lender, built for it.
Phase one: securing the site, where speed beats structure
The first problem in most projects is timing. Good sites move quickly, and the funding that wins a site is rarely the funding that builds on it.
This is where bridging finance does its work: a short-term facility that settles the acquisition fast, or covers the gap between settlement and the main facility landing, so the deal does not fall over on a deadline.
Speed is the whole point here, which is why private and non-bank lenders carry most of this phase. Their credit processes are built for it in a way the majors’ are not.
The mistake I see is borrowers waiting on a long-form development approval to fund an acquisition that needed to settle weeks ago. The site is gone by the time the answer comes back.
A bridging facility is deliberately short and deliberately fast, designed to be refinanced out by the project funding once that is in place.
Phase two: funding a ground-up development
Once the site is secured, a ground-up project needs its own facility, and this is the part the majors have largely vacated.
Development finance is a different discipline to a standard commercial loan. It is assessed on project feasibility, gross realisation value, presale requirements and a credible exit, and it is drawn progressively against the build rather than advanced as a lump sum.
With the big banks holding back, non-bank and specialist lenders have become the active funders of this space.
But their appetite is conditional. In a market where build costs are running hard, I see lenders derisking by trimming LVRs, requiring larger contingency and interest-reserve allowances, and asking for stronger presales before they commit.
The developers I help get funded are the ones who arrive with a feasibility that holds up under a sensitivity test, not just the optimistic case. If the project still works when costs run over and revenue softens, the conversation with the lender is a very different one.
Phase three: funding the build itself
Not every build is a development to sell. A growing share of the work I write is for businesses constructing their own premises: a manufacturer building a new factory, a logistics operator building a warehouse, an operator building the asset they will occupy and hold.
That is construction finance, and it sits apart from development finance because the assessment leans on the business behind it rather than a presale and exit story.
Here the lender underwrites the build alongside the operating business: serviceability, the progressive drawdown schedule, the builder’s contract, and the value of the completed premises to the business.
The owner-occupier path often opens a wider lender pool and better terms than a speculative development, because the exit is the business itself rather than a sale into an uncertain market.
Builders frequently do not realise how differently this is treated, and present it as though it were a development deal, which narrows their options before they start.
What has actually changed
None of these three facilities is new. What has changed in 2026 is that the conditions punish any attempt to make one loan do the work of three.
Tighter credit, conservative risk pricing and the majors’ absence from development funding mean the margin for a poorly structured application has shrunk.
The projects I see getting funded are the ones where each phase is matched to the right facility and the right lender, the feasibility is defensible under pressure, and the funding stack is sequenced so each piece refinances cleanly into the next.
In a market this tight, structure is doing as much work as the project economics. If you are weighing up a project and want a no-obligation talk through of how to fund it across its phases, call me on 1300 262 098.
Nadine Connell is a commercial finance broker at Smart Business Plans, specialising in commercial property and development finance across Australia. This article is general information only and does not constitute financial, credit or tax advice. Speak to a licensed professional about your specific circumstances.
