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Why Aussie Property-Backed Private Credit is Capturing Savvy Investors

 

As Singapore's property cooling measures tighten and traditional fixed-income yields remain anaemic, discerning investors are increasingly turning their attention across the Tasman Sea. Australian property-backed private credit has emerged as a compelling alternative asset class, offering yields of 6-9% whilst benefiting from one of the world's most resilient property markets. However, with new regulatory frameworks and evolving market dynamics, success requires sophisticated due diligence and strategic positioning.

Stewarts Bay Beach House, Port Arthur. Tasmania 1.0 km from Historic Site.  - Port Arthur | Stayz

The Perfect Storm: Why Now?

Singapore's Tightening Grip

On 3 July 2025, Singapore delivered its latest salvo in the ongoing battle against property speculation. The Seller's Stamp Duty (SSD) holding period has been extended to four years, with rates climbing to a punitive 16% for early sellers. For many high-net-worth individuals, this has effectively locked capital into domestic property investments for extended periods.

Simultaneously, private home price growth has decelerated to just 0.5% in Q2 2025, signalling a maturing market where traditional property appreciation strategies face diminishing returns. The writing is on the wall: Singapore's property market, whilst stable, no longer offers the explosive growth opportunities of yesteryear.

Australia's Home Price Growth Holds Steady at Elevated Level - Bloomberg

Australia's Structural Undersupply

Across the Tasman, a fundamentally different story is unfolding. Australia faces a chronic housing shortage of approximately 350,000 units, driven by what industry experts describe as a "perfect storm" of demographic and economic factors.

"Australia's had over 32 years of almost uninterrupted economic growth. Just one year in there. With COVID, we've got phenomenal population growth, which coupled with GDP growth and a very low unemployment rate, makes our country a very safe place to be investing funds," explains Craig Schloeffel, Head of HMC Private Credit, a A$2 billion fund manager specialising in commercial real estate lending.

The numbers are stark: Australia welcomed one million new residents post-COVID, yet housing completions have failed to keep pace. According to KPMG's latest Residential Property Market Outlook, the nation requires dwelling completions to be 17% higher than current forecasts merely to normalise rental growth, let alone address the accumulated deficit.

The Yield Imperative

For Singapore's sophisticated investors, the mathematics are compelling. With T-bills yielding barely 2% and savings accounts offering similar returns, the search for yield has become increasingly urgent. Private credit, specifically property-backed instruments, offers a middle path between the volatility of equities and the anaemic returns of government bonds.

Understanding the Australian Private Credit Landscape

Barings launches first Australian private credit fund - Alternative Credit  Investor

Market Fundamentals

The Australian private credit market has matured significantly since the 2008 financial crisis. As traditional banks retreated from certain segments due to regulatory constraints, private lenders filled the void, bringing sophisticated risk management and flexible structuring capabilities.

"What that did was in fact, that crippled the market even worse, especially to the mid-market, right? So all this regulation, tightening of regulation banks, traditional bank had to exit from sectors that they were quite active. This is when the private credit started to fill in the gap," notes Meelan Gurung, Senior Director, Aspial Corporation.

The sector focuses primarily on residential development projects valued between A$15-100 million, targeting what industry professionals term the "mid-market." These developments typically comprise 5-10 storey apartment buildings on the outskirts of major cities—large enough to achieve economies of scale, yet small enough to maintain manageable risk profiles.

From left, Quah Kay Beng, BigFundr CEO & Founder, Koh Wee Seng, CEO of Aspial Corporation Ltd and Meelan Gurung, Senior Director, Corporate Finance & Investments, Aspial Corporation Ltd

The Mechanics of Returns

Private credit managers typically price loans at 4-6% above traditional bank rates. With Australian banks lending to developers at bank bill swap rates plus 1-1.5% margins, private lenders achieve gross yields of 8.5-9% on quality transactions.

For retail investors accessing these opportunities through platforms like BigFunder, net returns of 6-7% in SGD terms represent the sweet spot after accounting for platform fees and currency hedging costs. Direct investment in AUD-denominated notes can yield upwards of 10% for investors comfortable with currency exposure.

Risk Mitigation Strategies

Conservative underwriting remains paramount. Leading managers maintain loan-to-value ratios of 65-70%, providing substantial equity buffers against market volatility. Even during Sydney's sharpest post-COVID correction—a 14-15% peak-to-trough decline—properly structured loans remained well-protected.

"If a property fell, 14% are even thinking about it. They've still got a big buffer," emphasises Craig Schloeffel, Head of HMC Private Credit, highlighting the structural protection inherent in conservative lending practices.

The Regulatory Landscape: Opportunities and Constraints

MAS's Evolving Framework

Singapore's regulatory environment continues to evolve. The Monetary Authority of Singapore (MAS) proposed a new framework in March 2025 allowing retail investors access to private market investments, including private credit and infrastructure opportunities. This represents a significant shift towards democratising alternative investments previously reserved for institutional players.

Under the proposed Long-term Investment Fund (LIF) framework, retail investors may soon access professionally managed private credit portfolios with enhanced regulatory oversight. However, implementation timelines remain uncertain, creating a window for direct investment strategies.

Australian Foreign Investment Restrictions

The landscape became more complex on 1 April 2025, when Australia implemented a temporary two-year ban on foreign purchases of established dwellings. This restriction, running until 31 March 2027, affects direct property investment but importantly exempts new developments—precisely the sector where private credit opportunities flourish.

For Singapore investors, this creates an interesting asymmetry: whilst direct property purchase options have narrowed, lending to developers creating new supply remains not only permissible but actively encouraged by Australian policymakers.

Tax Considerations

Singapore residents investing in Australian property-backed debt face several tax implications. Interest income is generally taxable in Singapore, though the absence of withholding tax on properly structured private credit investments can improve after-tax returns compared to traditional bank deposits.

Currency hedging strategies become crucial for SGD-based investors. Platforms offering built-in hedging can eliminate FX risk but typically charge 1-2% annually for this service. Sophisticated investors may prefer direct AUD exposure, particularly given the Australian dollar's historical correlation with commodity cycles and China's economic performance.

Due Diligence: The Professional Approach

Platform Selection Criteria

The proliferation of private credit platforms demands rigorous due diligence. Leading platforms maintain several key characteristics:

Track Record and Scale: Established managers with A$1.5+ billion in assets under management demonstrate institutional credibility. BigFunder, for instance, reports A$525 million in completed transactions with 85% investor retention rates—a compelling testament to consistent performance.

Professional Risk Management: Sophisticated platforms employ former Big Four bank professionals with decades of commercial real estate experience. HMC Private Credit, for example, employs 33 professionals across Australia with over 300 years of combined Big Four lending experience.

Independent Oversight: Quality managers utilise independent quantity surveyors and valuers throughout the development process. This creates multiple layers of verification before funds are released, significantly reducing execution risk.

Project-Level Analysis

Individual project assessment requires examining five critical elements:

  1. Sponsor Quality: Developer track record, financial strength, and previous project completion history
  2. Location Fundamentals: Proximity to employment centres, transport infrastructure, and demographic growth patterns
  3. Design and Construction: Builder capabilities, project complexity, and realistic completion timelines
  4. Market Absorption: Local demand drivers, competitive supply, and pricing assumptions
  5. Exit Strategy: Pre-sales progress, end-buyer financing availability, and refinancing options

What It's Like to Visit Sydney Australia Now: Food, Festivals, Camping,  Sports - Bloomberg

Ongoing Monitoring

Professional managers maintain active oversight throughout the development cycle. Monthly site visits, progress reports, and financial monitoring ensure early identification of potential issues. This hands-on approach distinguishes quality private credit from passive bond investments.

Strategic Positioning for Singapore Investors

Portfolio Allocation Considerations

Private credit should complement, not replace, traditional fixed-income allocations. For high-net-worth individuals, a 10-20% allocation to property-backed private credit can enhance portfolio yields whilst maintaining overall risk discipline.

The illiquid nature of these investments requires careful cash flow planning. Most opportunities offer 6-12 month tenors with options to roll over at maturity, providing periodic liquidity windows without forcing premature exits.

Currency and Diversification Benefits

Australian property-backed private credit offers geographic diversification away from Singapore's property market whilst maintaining exposure to a stable, developed economy. The Australian dollar's commodity linkage provides natural inflation hedging—particularly relevant given current global monetary conditions.

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Timing Considerations

Current market conditions appear favourable for entry. Australian interest rates have likely peaked, with the Reserve Bank of Australia expected to begin cutting rates in Q2 2025. This environment typically supports property values whilst maintaining attractive lending spreads.

Simultaneously, the supply-demand imbalance in Australian housing is expected to persist through 2026, according to KPMG forecasts. This structural backdrop supports continued development activity and private credit opportunities.

Risk Assessment: The Nuanced Reality

Market Risks

Despite structural tailwinds, Australian property markets face headwinds. Construction costs have risen 35% since COVID, whilst skilled labour shortages persist. These factors can extend project timelines and increase development costs, potentially impacting returns.

Interest rate sensitivity remains a concern. Whilst rate cuts may support property values, they could also compress lending margins over time. Investors should evaluate managers' ability to maintain spreads in a falling rate environment.

Platform and Operational Risks

The democratisation of private credit has attracted numerous new entrants, not all of which maintain institutional standards. Platform failure, inadequate due diligence, or operational shortcomings can result in significant losses.

Regulatory risk also looms. Changes to Australian foreign investment rules, taxation policies, or MAS regulations could impact investment structures or returns. Staying abreast of regulatory developments is crucial for long-term success.

Australia toughens enforcement of foreign investment rules | The Strategist

Liquidity Constraints

Unlike listed securities, private credit investments cannot be easily sold before maturity. This illiquidity demands careful planning and sufficient liquid reserves for unexpected needs. The illiquidity premium compensates for this constraint but requires investor acceptance of reduced flexibility.

The Verdict: Calculated Optimism

Australian property-backed private credit represents a compelling opportunity for Singapore's sophisticated investors, particularly given current market dynamics. The combination of structural housing undersupply, experienced management teams, and attractive risk-adjusted returns creates a favourable investment thesis.

However, success requires professional-grade due diligence, appropriate portfolio positioning, and realistic expectations. This is not a "set and forget" investment but rather an active allocation requiring ongoing monitoring and strategic adjustment.

As traditional yield sources remain constrained and Singapore's property market faces increasing restrictions, Australian private credit offers a pathway to enhanced returns whilst maintaining reasonable risk parameters. For investors willing to embrace the complexity and illiquidity inherent in alternative assets, the rewards can be substantial.

The key lies in approaching these opportunities with the same rigour and sophistication that characterises Singapore's most successful investors—combining thorough analysis with strategic patience to capture the premium returns that discerning capital deployment can generate.


Disclaimer: This article is for informational purposes only and does not constitute investment advice. Private credit investments carry significant risks including potential loss of principal. Investors should conduct their own due diligence and consult with qualified financial advisors before making investment decisions.

Sources:

  • KPMG Residential Property Market Outlook, January 2025
  • MAS Consultation Paper on Retail Private Market Investment Funds, March 2025
  • Housing Australia Supply and Demand Analysis, 2025
  • BigFundr Platform Data and Industry Expert Interviews
  • Australian Bureau of Statistics, Building Activity Data
  • Reserve Bank of Australia, Financial Stability Review

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