Stamford Capital’s 2025 Debt Capital Markets Survey has delivered the first official dataset on lender sentiment in Australia’s rapidly expanding private credit market, uncovering widespread concern among banks and non-banks about the sector’s explosive growth and current practices.
The survey, which canvassed 100 lenders including major banks, non-banks, and second-tier banks, found that more than two-thirds of respondents are uneasy about the size and behaviour of Australia’s private credit market.
The concern is particularly pronounced among bank lenders, with 86 per cent expressing apprehension, compared to 60 per cent of non-bank lenders.
Nearly half of all respondents called for increased regulation of non-bank lenders.
Peter O’Connor, Managing Director at Stamford Capital, highlighted the sector’s importance but warned against excessive intervention, stating: “Private credit fills a critical gap in the market, and there is potential for heavy-handed oversight to stifle the sector’s growth.
“While concern is elevating around the lack of compliance and regulation in the non-bank lending space, we do deal with many established and sophisticated counterparts in the non-bank space.”
The survey revealed that private credit now accounts for about 17 per cent of Australia’s total commercial real estate debt, with assets under management surging from $57.1 billion in 2014 to $148.6 billion in 2024, according to ASIC data.
Stamford Capital itself has seen its lender split shift from an even balance to an 80/20 weighting in favour of non-bank lenders over the past five years.
Cory Bannister, Senior Vice President and Chief Lending Officer at La Trobe Financial, cautioned about the risks posed by inexperienced new entrants, stating: “The recent increase of new participants in the private credit sector offers creditworthy borrowers suitable financial options; however, it does carry potential risks.
“If these businesses are not sufficiently experienced and capitalised and maintain inadequate standards, it could lead to adverse consumer outcomes and negatively impact the reputation of the private sector overall. We view longevity in the sector as a prized asset.”
Despite regulatory concerns, the appetite to lend is at a record high.
The survey found 97 per cent of lenders, including major banks, aim to grow their loan books over the next 12 months — the highest level since the survey began in 2018.
Notably, 71 per cent of respondents plan to expand by at least 15 per cent.
Banks are expected to increase their activity in commercial real estate construction and investment loans, with 46 per cent of respondents predicting a rise in bank-led construction lending.
This renewed competition is driving many lenders to ease credit and presale requirements.
Last year, 53 per cent of lenders had a presale hurdle of 35 per cent or less; this year, that figure has jumped to 71 per cent, with 29 per cent of lenders having no presale requirement at all.
“We are seeing major banks starting to shift presales requirements, with a lack of housing supply and sustained demand fuelling confidence in residential developments,” said O’Connor.
“However, builders remain under the microscope, with ongoing insolvencies and high labour costs leading lenders to continue tightening due diligence requirements.”
While lenders are keen to increase construction lending, they remain vigilant about risk.
68 per cent of respondents plan to maintain stricter due diligence processes this year, reflecting ongoing concerns about builder insolvencies and contractor risks.
In New South Wales, almost half of lenders now use iCIRT ratings as part of their due diligence, with 40 per cent having declined loans due to poor or absent ratings.
The survey also signals optimism about the interest rate environment.
Most respondents expect the cash rate to fall further, from 3.85 per cent to between 3.50 per cent and 3.70 per cent by December, which could further compress loan margins and boost lending activity.
“We have seen loan margins compress by up to 50 basis points over the last 12-18 months, to their lowest in recent memory,” said O’Connor.
“We’re currently seeing line fees and margins align at 200 basis points, whereas 12 months ago, they were sitting at 240 and 250, respectively.”
Sector sentiment is shifting as well. Two-thirds of lenders identified the commercial office sector as recovering, while 55 per cent believe the industrial sector has peaked.
There is also cautious optimism for retail, with 47 per cent of respondents seeing the sector in recovery, up from last year.
Stamford Capital’s latest survey underscores both the dynamism and the risks in Australia’s debt capital markets.
As private credit continues its rapid ascent, lenders are calling for a balanced approach to regulation and risk management, even as competition and optimism return to the construction and investment lending sectors.
