New Data from Stamford Capital Tips Lender Appetite for Construction Loans to Return
Leading commercial property finance group Stamford Capital has released the results of its 2025 Debt Capital Markets Survey, revealing a level of concern among lenders regarding Australia’s booming private credit market. It is the first official dataset to analyse lender sentiment around the private credit space in response to the rapid growth of non-bank finance amidst high demand for fast, flexible credit.
The annual Debt Capital Markets Survey has been a leading barometer of market trends since 2018 and canvasses the opinion of 100 lenders, including major banks, non-banks and second-tier banks. The latest survey is the ninth in the series to date and provides an insight into the impact of the last 12 months on debt capital markets while forecasting market expectations for FY26.
According to the Survey, more than two out of three lenders signalled concern over the size and current practices of Australia’s private credit market. This concern was significantly higher amongst bank lenders 86%, while remaining substantial amongst non-bank lenders at 60%.
Almost half of all respondents called for increased regulation of non-bank lenders.
“’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,” said Peter O’Connor, Managing Director at Stamford Capital.
With increased competition in market, the appetite to lend is stronger than ever across the board, according to Stamford Capital’s Survey, with 97% of lenders – including major banks – looking to grow their loan book over the next 12 months. It’s the highest number to be recorded since the Debt Capital Markets Survey’s inception eight years ago.
Banks are tipped to step up when it comes to commercial real estate construction and investment loans, with increasing competition for quality deals leading many to ease their credit and presale requirements, the Survey reveals.
Stamford Capital says that while this spells good news for the construction sector, lenders remain stringent with their due diligence processes. This includes relying on iCIRT ratings, with the tool used by almost half of all New South Wales lenders.
“We are seeing major banks starting to shift presales requirements, with a lack of housing supply and sustained demand fuelling confidence in residential developments. However, builders remain under the microscope, with ongoing insolvencies and high labour costs leading lenders to continue tightening due diligence requirements,” said Mr O’Connor.
Unregulated growth of private credit market sparks concern
Over the last few years, commercial borrowers have grown increasingly comfortable with private credit. Growing demand for fast and flexible finance has fuelled an explosion of private and non-bank lenders in the commercial real estate space.
Australia’s private lending market was valued at $57.1 billion in assets under management (AUM) in 2014. It has nearly tripled over the decade since, reaching $148.6 billion AUM in 2024, according to ASIC.
“Private credit has dominated market activity and now accounts for around 17% of Australia’s total commercial real estate debt. We’ve seen a similar shift in our loan book. Five years ago, our lender split was relatively even, but aligned with the shift towards the non-bank space, it has reached an 80/20 split,” said Mr O’Connor.
However, the unchecked rise of private capital is causing concern among the finance sector. Almost half (49%) of all lenders surveyed believe that the private lending market requires stronger oversight and tighter regulation, while more than two-in-three respondents said they had a level of concern about the size of the market and its conduct.
The Stamford Capital dataset reveals that the top issues raised by 69% of the total lending pool surveyed include pushy practices, inexperienced operators, and the sheer volume of players entering the market.
Unsurprisingly, the number of concerned lenders is higher amongst banks (86%), but interestingly, 43% of non-banks agree that the private lending market requires more oversight and regulation.
The Survey highlights the vast distinction between established non-bank players and newer, less experienced entrants, who are often grouped together. While newer private lenders make the market more competitive, their level of experience can present risk, according to Cory Bannister, Senior Vice President and Chief Lending Officer at La Trobe Financial.
“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,” said Mr Bannister.
With banks back, appetite to lend is stronger than ever
Not only are all lenders looking to grow their loan books this year, but they’re aiming high, according to the Stamford Capital Debt Capital Markets Survey – with 71% of survey respondents planning to expand by 15% or more. This includes major trading banks who, more recently, have been somewhat reluctant to finance commercial real estate construction projects.
Interestingly, a significant 46% of Survey respondents expect banks to increase commercial real estate construction loan activity this year.
Internal data from Stamford Capital has already shown a significant reduction in settlement times relative to the last 12 months, reflecting the pent-up appetite for deals amongst lenders.
“Increased competition in the market means that we have seen the average time to settlement tightening by around 14.4% over three years. In contrast, last year’s Survey found that construction deals were taking over 50% more time from inception to settlement,” said Mr O’Connor.
Lenders are now prepared to compete for quality deals with many banks reducing presale requirements – a significant shift from their previous, more conservative stance. Several initiatives, including CBA’s recent acceptance of presales secured by digital off-the-plan deposit platforms, further reflect the major banks’ shift to a more flexible approach.
Last year, 53% of Stamford Capital Debt Capital Markets Survey respondents had a presale hurdle of 35% of less. In contrast this year, 71% of lenders surveyed are accepting presales of 35% or less – with 29% having no presale requirement.
The Survey also revealed that 62% of respondents expect credit requirements to loosen and for loan margins to decrease across the board. And with most respondents expecting the cash rate to fall further by December this year, loan margins are now expected to decrease further – increasing competition amongst lenders.
This is backed up by Stamford Capital’s own data, which already shows a significant reduction in margins.
“We have seen loan margins compress by up to 50 basis points over the last 12-18 months, to their lowest in recent memory. 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,” said Mr O’Connor.
However, despite banks returning to the table, non-banks are still likely to dominate construction lending, with 73% of respondents expecting non-banks to also increase their exposure to the building sector.
Borrowers will also benefit from increasing competition in the investment lending arena, where banks have performed strongly over the last few years. 61% of Stamford Capital’s Debt Capital Market Survey respondents expect major banks to increase commercial real estate investment loans this year – triple the almost 20% from last year’s dataset.
Construction lending to return, under tight due diligence conditions
The Survey reveals that while lenders are keen to increase construction lending, they are holding firm on due diligence amid ongoing builder insolvencies, construction challenges, and contractor risks.
Last year, a substantial 82% of Survey respondents planned to implement new due diligence processes to combat the risks from these challenges. In 2025, that number remains high at 68% – reflecting that stricter practices are now in place and still a priority.
According to Stamford Capital, lenders are increasingly likely to require financial statements, credentials and an overview of project pipelines prior to funding construction loans, in some cases, engaging a third party to compile in-depth reports.
Last year, 33% of lenders in New South Wales relied on the NSW Building Commission’s iCIRT rating system as part of their due diligence process. This year, almost half of all NSW lenders surveyed are examining builders’ iCIRT ratings – with 40% of them having turned down a loan application on the grounds of a poor iCIRT rating (or none at all).
Interest rate optimism already sparking market activity
While the last few years were marked by interest rate uncertainty following a string of successive hikes, this year’s outlook brings greater clarity and a tangible sense of optimism amongst lenders.
With the RBA slashing interest rates for the second time in 2025 following its May board meeting, most of Stamford Capital’s Debt Capital Markets Survey respondents expect the cash rate to fall further – from 3.85% to between 3.50 and 3.70% by December this year.
According to Stamford Capital, this positive outlook – if it materialises – will have a ripple effect on the broader market.
“The majority of this year’s Survey respondents expect interest rate reduction of around 25 basis points by the end of the calendar year. This is good news for investors and developers, with further rate cuts set to potentially decrease margins, and ease feasibility constraints on some construction deals,” said Mr O’Connor.
Markets Overview: Offices, retail on the upswing as industrial peaks
Just over two-thirds of Debt Capital Markets Survey respondents identified the commercial office sector as recovering – a marked increase in optimism compared to last year, when only one-third of respondents said the same. Just under a quarter of respondents perceive the office sector to be in decline, while just 10% see the sector to be in a period of early growth.
This year, 55% of respondents agreed that the industrial sector has peaked, buoyed by the continued focus on onshore manufacturing. This is compared to the 64% of respondents who said the same last year. Just 16% believe that industrial is now in decline.
There is also cautious optimism surrounding retail, which 47% of respondents perceive as being in recovery, in contrast to the 27% who believe it’s in decline. Easing inflation could lead to an uptick in discretionary spending following the cash rate pain of the last two years.
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