Risk appetite is changing – but growth ambitions remain near-record highs
More than half of Australia's commercial property lenders have already changed their risk settings or loan appetite in direct response to the Iran conflict, according to new data released this week by Sydney-based commercial brokerage Stamford Capital.
The group's 2026 Real Estate Debt Capital Markets Survey – conducted in March and April across 110 lenders including major banks, non-major banks, non-bank and private lenders – is the first comprehensive read of commercial lending sentiment since hostilities in the Middle East triggered further monetary tightening by the Reserve Bank of Australia (RBA).
Despite the global headwinds, 94.5% of respondents plan to grow their loan books in 2026 – the second-highest result in the survey's nine-year history, behind only the 97% who flagged expansion intentions in 2025. More than 69% are targeting loan book growth of 15% or more.
The data points to something of a buyer’s market in commercial lending.
Stamford Capital managing director Peter O'Connor (pictured) said: "The years following COVID-19 brought an inundation of new lenders to the capital markets, all chasing yield and driving significant lender margin compression in the process. While that momentum has slowed, borrowers continue to benefit from the conditions it created. Lenders, meanwhile, are finding themselves with very less levers to win deals.”
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Among private lenders, 86% report being affected by the Iran war. Major banks appear more insulated, with 59% reporting no change, though several are applying greater scrutiny to construction cost assumptions.
Rising input costs – particularly for oil-dependent materials such as asphalt, piping and steel – are of particular concern, alongside flow-on effects on inflation and borrower serviceability. One respondent raised the prospect of stagflation.
So-called "war clauses" are also emerging in construction contracts, mirroring COVID-era provisions from 2020.
One non-bank lender said: "We are certainly still hungry to grow our loan book. There is just more consideration to how further rate increases impact on cap rates and whether borrowers have the capability to weather the storm ahead."
Margin pressures easing
Despite the market tilting towards buyers, margin compression is easing off.
A year ago, 62% of respondents expected margins to contract through 2025, driven by fierce competition and abundant liquidity. Now, just 12.5% expect margins to decrease in 2026, while 76% expect them to hold steady – one of the largest year-on-year swings in the survey's history.
Expectations for bank investment loan margins have strengthened considerably, with more than 66% of respondents anticipating it to stay the same, up from 47% in the prior year. Construction loan margins for banks reflect a similar trend, with 61.8% expecting stability.
In the non-bank sector, sentiment is more divided – 28% expect decreases, 26% anticipate increases, and 45% expect margins to hold.
O'Connor said: "We did see strong margin contraction over the past 12 months, which means there is not really much more banks or non-banks can shave. Relaxing conditions, like loan covenants, presale requirements, deal structure, are a more palatable option than increasing leverage for most lenders. It remains incredibly competitive in the lender market."
Rather than competing on price alone – a strategy favoured by just 18% of respondents – 70% said they would deploy a combination of pricing, leverage, and relaxed conditions to attract quality sponsors and projects.
Presale requirements continue to ease, reaching their lowest point since the survey launched in 2018. More than 37% of construction lenders now require zero presales, up from 29% in 2025 and 18% in 2023. The 60–100% bracket, which held nearly 45% of lenders in 2021, has fallen to just 8.1%.
Banks surge into construction as ASIC casts a regulatory shadow
The return of major banks to construction lending – first flagged in the 2025 Stamford Capital survey – has accelerated sharply.
Almost 62% of respondents now expect major banks to increase construction lending activity in 2026, up from 46% in 2025 and a substantial recovery from just 13% in 2023. Investment lending expectations for banks are equally strong, with 63.6% expecting increases.
Over a third of respondents expect banks to loosen construction credit criteria, while 32% expect to see investment credit criteria relaxed.
"Last year banks were back in play and they're keen to regain some of their market share (from non-banks),” said O’Connor. “Is this signalling a rebalance? Not necessarily. Both lender types have historically served different needs for borrowers. A lot of our clients need the additional leverage banks simply can't lend. They have been two distinct markets, albeit with major bank expectations, there could be emerging signs of more crossover coming.”
Non-bank expectations, meanwhile, have moderated. Over 65% expect non-banks to increase construction lending in 2026, down from 73% in 2025, and 52.7% for investment lending, down from 65%. While non-banks remain the dominant force in construction finance, the gap between bank and non-bank growth expectations has meaningfully narrowed.
This coincides with the overwhelming majority of respondents expressing a level of concern about current practices and market size of the private lending space.
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Respondents describe aggressive lending by inexperienced operators, stretched loan-to-value ratios (LVRs), poor compliance practices, inflated valuations and lenders taking, in the words of one respondent, "quasi equity risk for the equivalent of bank debt returns”.
The concerns come as the Australian Securities and Investments Commission (ASIC) brings the private credit space under further scrutiny. 35% of non-bank and private lenders say they have already been approached or audited by ASIC. A third say their due diligence approach has already changed in response, with a further 5% planning changes within 12 months.
O’Connor said: "From what we've heard in market, ASIC is concerned around lenders making thorough and appropriate disclosures to investors around risk. It's less about trying to curb this type of lending and more as to whether investors fully understand it. We haven't seen any effect to lending parameters as yet.”
Yet deal appetite has remained strong, with over half of respondents reporting no impact from greater regulatory attention on their willingness to fund certain types of deals, with only 5% describing the impact as material.
Sectors at a glance: office recovering, industrial at peak
The commercial office segment continues its recovery, with 64% of respondents placing it in a recovery phase – virtually unchanged from 63% last year and a stark contrast to 2023, when 63% viewed the sector as being in decline.
The industrial sector is largely seen as having reached its cyclical peak, while residential apartments and housing shows its strongest growth reading since 2021.
Even retail is showing renewed confidence, with 35% of lenders see the sector in early growth and a further 29% view it as in recovery. Sentiment around residential development sites is more divided – 33% tip early growth, while 32% believe it has peaked.
Victoria and Melbourne dominate geographic concerns. Respondents highlight land-valuation pressures, a stagnating residential market, and the compounding impact of state taxes and levies.
Looking ahead
“Australia remains a safe haven for real estate debt, with lenders responding to geopolitical headwinds by tightening risk settings rather than pulling back,” said O’Connor. “The post-COVID wave of new lenders also drove sharp margin compression, but banks are increasingly in pursuit of deals, with competition now about structure rather than price.”
The defining challenge for the remainder of the year will be how lenders navigate the macroeconomic U-turn – from the RBA's three rate cuts in 2025 to three hikes in the first five months of 2026 – and whether that will dampen the competitive fervour that has defined the market for the past two years.
"For borrowers, there's still an abundance of capital available, and lenders are willing to be creative to win quality deals,” added O’Connor. “But with regulatory scrutiny, rising interest rates, geopolitical issues and construction-cost pressures, having an experienced capital partner to break down the complexity and navigate the ever opaque lender set has never been more important.”
