Private credit fills Asia-Pacific real estate gaps

Australia is emerging as the region’s key growth market.

Asia-Pacific real estate private credit is accelerating as banks retreat from complex lending and investors seek predictable, asset-backed income. Knight Frank forecasts up to US$110 billion in new private credit over the next three years, with Australia expected to drive half.

Simon Mathews, Director of Capital Advisory, Global Capital Markets at Knight Frank, said regulation is tightening bank risk appetite. “Banks globally are operating under much tighter capital rules, following Basel three and Basel four,” he said, making them “more cautious around development lending higher leverage deals,” while shifting toward “more core stabilised assets.”

Mathews said this shift is widening a funding gap, particularly for developers and investors with more complex or time sensitive requirements.

Neil Brookes, Executive Managing Director and Head of Asia Pacific Capital Market at Savills, said the shift is structural. “Growth in real estate private credit, it's really being driven by structural retreat of the traditional banks,” he said, as Basel changes make real estate lending more capital intensive, “pushing banks away from the more complex development and value added loans.”

Higher rates are boosting investor demand. Mathews said private credit is attractive “in a higher for longer interest rate environment where predictable, asset backed income is highly attractive.” Brookes added that rates have “reset yields,” strengthening demand for “income and downside protection.”

Refinancing pressure is adding urgency. Brookes pointed to “a growing refinance wall,” as loans written at peak valuations mature, creating “a clear gap where private credit, with its speed, flexibility and bespoke structuring, is uniquely positioned to step in.”

Australia is expected to dominate because it offers scale and investor protections. Brookes said the market combines “scale, transparency and credit protection,” backed by a “highly transparent legal system… with very reliable enforcement.” Mathews said banks remain competitive for lower-risk deals but are constrained in “development, value add and higher leverage scenarios,” creating “a clear and consistent role for private credit lenders.”