Property consultancy Cushman & Wakefield has revealed that Australia’s Build to Rent sector is relatively insulated from the stress emerging in private credit markets, but tighter lending conditions and continued pressure across the construction sector could make an already challenging development equation harder to solve.
Recent borrower stress and redemption restrictions at some exposed funds have intensified scrutiny of underwriting standards, asset valuations and liquidity management across private credit, with the Australian Securities and Investments Commission describing the sector as facing its ‘first real test’.
For Australia’s emerging institutional Build to Rent market, the direct exposure is comparatively limited. Institutional Build to Rent schemes typically have substantial long-term equity backing and access to senior debt from both banks and non-bank lenders. Conventional Build to Sell developers are more likely to rely on private credit where greater flexibility is required around presales, leverage or project complexity.
“Build to Rent is not immune to what is happening in private credit, but its funding profile is quite different to much of the traditional residential development market.
“Institutional Build to Rent is generally backed by deeper, long-term equity and has access to a broader range of senior debt. That provides some insulation from a pullback in private credit, particularly compared with Build to Sell projects that may rely more heavily on flexible non-bank funding.”
Josh Rose-Nokes, Director, Living Research APAC, Cushman & Wakefield
The bigger issue for Build to Rent could be whether stress in private credit ultimately feeds through to the wider lending market. Higher margins, lower leverage or more conservative lending covenants would increase the amount of equity required to deliver projects and potentially push some developments below feasibility thresholds.
To date, however, Cushman & Wakefield has seen little tangible evidence of this occurring across the broader Build to Rent funding market, with competition among banks remaining healthy and well-capitalised groups continuing to secure competitive terms.
The sensitivity comes at a time when feasibility is already the biggest challenge facing investment into the Australian living sector. Cushman & Wakefield’s 2026 APAC Living Investor Survey found 56 per cent of investors targeting Australia are pursuing private rented sector (PRS) or Build to Rent opportunities, while 40% nominate scheme feasibility as the main barrier to increasing their exposure to Australian living assets.
Separate Cushman & Wakefield modelling illustrates how finely balanced that equation has become. Based on representative 2026 scheme assumptions and forecast construction costs, Build to Rent rents would need to grow by approximately 6% annually in Sydney and 6.5% in Melbourne through to 2030 to reach the economic rent required to support development costs at prevailing yields.
That compares with FY2026 Build to Rent rental growth of 5.2% in Sydney and 6.4% in Melbourne. Josh Rose-Nokes stated that even relatively modest changes in debt markets could therefore have implications for future supply.
“Feasibility is already finely balanced, so the concern for Build to Rent is less about direct exposure to stressed private credit and more about the potential second-order effects.
“If risk is repriced across the broader debt market, leverage falls or lenders require more equity, that can move the feasibility hurdle again. In a sector already working hard to make projects stack up, relatively small changes to financing assumptions can influence whether new housing proceeds.”
Josh Rose-Nokes, Director, Living Research APAC, Cushman & Wakefield
Contractors working across both Build to Rent and Build to Sell can carry financial stress from one project to another. Delayed payments or losses on fixed-price contracts can weaken working capital and affect a contractor’s capacity to deliver otherwise well-funded projects.
The construction backdrop remains challenging, with the research also tracking a sharp increase in Australian construction companies entering external administration since FY2021, as shown in the chart on page four of the report.
“Investors need to look beyond the funding structure of the Build to Rent project itself and understand the financial position and workload of the contractors delivering it.
“Strong due diligence, realistic construction pricing, contractual protections and ongoing monitoring are increasingly important when the broader development market is under pressure. “If viable Build to Sell projects stall because developers cannot achieve presales, refinance or secure development debt on workable terms, there is an opportunity for institutional Build to Rent capital to step in.
“The strongest opportunities are likely to be sites or early-stage projects where there is still scope to adapt the unit mix, amenity, operating model and capital structure for long-term rental. “That won’t solve the wider feasibility challenge, but it could keep some housing projects moving while creating opportunities for Build to Rent platforms with committed capital and a long-term investment horizon.”
Conal Newland, International Director, Head of Living APAC, Cushman & Wakefield
Cushman & Wakefield said recent private credit stress was unlikely to result in a wholesale retreat of non-bank lenders from Australian real estate but was more likely to raise the bar for borrowers and projects. For well-capitalised Build to Rent platforms, that dislocation could ultimately strengthen their position in the market.
