Executive Summary

Real estate secured private credit is firmly entrenched in the investment mainstream. Australia’s private credit market now stands at approximately A$224 billion in assets under management, growing at around 9% per annum and on a trajectory to rival the domestic public bond market.¹ Within this universe, real estate secured private credit continues to gain momentum, with forecasts suggesting the segment could reach A$90 billion by 2029.²

As Australian banks have retreated from key segments of real estate lending under tightening regulatory capital requirements, specialist non-bank fund managers have stepped in and are offering wholesale investors access to short-duration, mortgage-secured loans targeting returns of 8% to 12% per annum. With the RBA cash rate held at 4.35% per annum in June 2026³ and inflation remaining above target, the case for real estate secured private credit as a source of reliable, inflation-beating income is compelling.

 

Target Return	Security	Loan Term	Market AUM (2025)
8%–12% p.a.	1st Mortgage	9–24 months	A$224 billion
4%–7% above Cash Rate	Registered over real estate	Short duration	Alvarez & Marsal, Nov 2025

 

 

The Investment Case

1. Attractive Income in a High-Rate Environment

Despite the RBA Cash Rate sitting at 4.35%,³ the highest one-year term deposit rates available to investors are around 5.35% p.a.⁴ Real estate secured private credit funds can target net returns of 8%–12% p.a., representing a premium of 4% to 7% above the Cash Rate. Depending on the investor’s individual preferences, this income may be received monthly or quarterly, providing a reliable and contractual cash flow well in excess of inflation, or at maturity of the underlying loan.

2. Capital Preservation Through Tangible Security

Every loan in a real estate secured private credit fund is backed by a first ranking registered mortgage over Australian real estate. This tangible security provides a critical equity buffer: if a borrower defaults, the underlying property can be sold to recover investor capital. This structural protection, alongside conservative loan-to-value ratios, distinguishes real estate secured private credit from unsecured lending and many other alternative asset classes.

3. Low Correlation to Public Markets

Private credit returns are driven by contractual loan income rather than equity market sentiment or public bond yields. Episodes of sharp market volatility, such as those triggered by geopolitical events, sanctions and tariffs, have reinforced the appeal of assets that deliver stable, uncorrelated returns. Real estate secured private credit’s defensive characteristics make it a valuable diversifier in a sophisticated portfolio.

4.Structural Tailwinds Support Continued Growth

Three powerful structural forces underpin continued growth in Australian real estate secured private credit:⁵

• Bank retreat: Stricter APRA and Basel III capital requirements have reduced bank appetite for construction and development finance, particularly in the middle market, creating a persistent funding gap.
• Housing undersupply: Federal and state government housing targets, combined with strong population growth and migration, mean private credit will remain an essential source of residential development funding for years ahead.
• Investor demand: As equity market volatility becomes the new norm, capital is increasingly shifting toward income and capital preservation strategies, precisely what real estate secured private credit delivers.

Real estate secured private credit currently accounts for less than 20% of Australia’s commercial real estate lending market, compared to far higher penetration in the US and Europe, indicating significant room to grow.⁶

5. Short Duration Reduces Risk

Loans are typically structured with terms of 9 to 24 months, meaning investor capital is recycled regularly. This short duration reduces exposure to prolonged economic downturns, limits interest rate risk, and allows fund managers to reprice loans as market conditions evolve, a meaningful structural advantage over long-dated fixed income.

6. Legal and Structural Protections

Each loan is governed by formal loan agreements and security documentation, providing investors with clear legal protections and a priority claim over the underlying property. Well-managed funds offer full transparency over the loan portfolio, enabling investors to understand exactly where their capital is deployed. 

Regulatory oversight is also intensifying, with ASIC having designated private credit as a supervision priority and commenced a formal surveillance programme, a development that is lifting governance and disclosure standards across the industry.⁷

 

Key Considerations for Investors

While the asset class offers compelling characteristics, wholesale investors should be mindful of the following:

• Liquidity: Investments are typically locked for the duration of each loan term. This asset class is suited to investors who do not require immediate access to capital.
• Manager selection: The quality of the fund manager is critical. Investors should assess credit experience, track record, lending discipline, fee structure (market norms are 1% to 1.5% management fee) and commitment to transparency.
• Concentration risk: Less diversified funds may carry higher exposure to individual loans or geographies. Diversification across loan types and property sectors is important.
• Regulatory evolution: ASIC’s active scrutiny of the sector is driving higher standards, but investors should ensure any fund they consider already meets best-practice governance and disclosure requirements.

Conclusion

Real estate secured private credit occupies a distinctive space in the investment landscape, offering wholesale investors the income of a credit product, the security of a property-backed asset, and the diversification benefits of a true alternative. 

In a market where traditional fixed income is underperforming inflation, equities remain volatile, and structural demand for private lending continues to grow, this asset class merits serious consideration as a strategic allocation within a diversified wholesale portfolio.

Investors are encouraged to seek independent financial advice and conduct thorough due diligence on any fund manager before investing.