Where smart money is moving in Australian real estate
Strong fundamentals are drawing investors to Australian property. The key is choosing the right avenue to access that growth.
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Australian property has attracted renewed investor attention as strong population growth, tight rental markets and limited new supply support demand. Residential development and industrial assets have benefited from structural drivers that have kept vacancy rates low and demand resilient.
The strong underlying conditions are prompting many investors to reconsider how they gain exposure to the asset class as the market adjusts to higher interest rates and stricter lending standards.
Traditionally, most investors have accessed real estate through two options: listed real estate investment trusts (REITs) or direct ownership of property. But institutional and sophisticated investors are increasingly turning to private real estate debt as an alternative.
Andrew Lockhart, CEO and Managing Partner at Metrics Credit Partners, an alternative asset manager with deep experience in Australian real estate, says the conventional approach often exposed investors to more risk than they realised.
“Historically, they’ve invested in REITs with a view to getting an income, yet they’re exposed to equity risk in the property.”
Debt holders have the first claim on the assets of a borrower in the event of insolvency.
“Debt should be the income source. Equity is where you will be exposed to risk if you want growth in value,” he says.
Private real estate debt typically involves lending against property assets, providing investors with a contracted income stream.
Equity investors, by contrast, are more exposed to changes in property values and development outcomes.
Growing opportunity
Private credit has attracted attention as the property financing landscape has shifted. Tighter capital requirements and regulatory scrutiny have made bank lenders more selective.
That has opened a larger role for non-bank lenders such as Metrics, who can tailor finance to individual developments in sectors where demand remains strong – from residential projects addressing housing shortages to logistics facilities benefiting from e-commerce.
Development lending carries risks, particularly if projects face delays, rising construction costs, or shifts in market conditions. But Lockhart argues a disciplined lender is better positioned to manage that than the volatility faced in equity markets.
“A lender has a lot of say in setting the appropriate terms, conditions, controls, covenants, and security. A lender doesn’t make a loan available without strings attached.”
For development loans, funds are released progressively at construction milestones, with credit quality monitored continuously, and the capacity to act quickly if conditions deteriorate.
“Unlike a real estate equity investment, where a manager may be unable or unwilling to sell an asset if valuations deteriorate, in a private debt portfolio, the borrower must repay by the contractual maturity date.”
Building the portfolio
Still, investors should view real estate debt as one component of a broader property allocation, not a complete substitute for equity.
Aligning with a traditional portfolio split of roughly 40% defensive assets and 60% growth assets, Lockhart says private real estate debt can serve as a defensive income allocation. In contrast, private real estate equity sits in the growth sleeve.
The opportunities Metrics is pursuing on the debt side reflect that focus: development and construction financing in residential and industrial projects – where low inventory, rising rents and infrastructure-driven demand support property fundamentals.
On the equity side, the focus is on value‑add projects that combine strong planning, quality design, and fast execution, which together seek to enhance project performance and investment returns.
Unlike corporate private equity, where shifting valuation multiples and uncertain exit timelines can leave investors exposed for longer than anticipated, real estate development strategies offer a more defined timeline.
“It’s often a project undertaken over two to three years, with a high degree of confidence around revenue, costs, and therefore project profitability.”
As Australia’s property cycle evolves, the balance between income-producing debt and growth-oriented equity may become an increasingly important consideration for investors.
Issued by Metrics Credit Partners Pty Ltd ABN 27 150 646 996 AFSL 416 146. For general information only and does not take account the objectives, financial situation or needs of investors. All investments contain risk and may lose value. Past performance is not indicative of future performance.
Learn more at metrics.com.au
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