Housing supply crisis hits SMEs hard

The New South Wales housing market is at a critical juncture. With the state falling short of its National Housing Accord target to deliver 377,000 new homes by 2029, a new report by the NSW Productivity and Equality Commission reveals that small and medium-sized enterprise (SME) property developers are bearing the brunt of the challenges. Rising construction costs, restrictive lending practices by traditional banks, and stringent planning conditions have rendered many residential projects financially unfeasible.

As governments focus on macroeconomic levers, a key question remains: who will step in to bridge the gap and support the SME developers essential for housing supply growth?

Traditional lenders falling short

Access to finance has emerged as a significant barrier for SME developers. Major banks, wary of construction risk and imposed high regulatory capital requirements, have tightened lending conditions. Pre-sale requirements — often exceeding 100 percent of the loan amount — are forcing developers into protracted holding patterns. Coupled with skyrocketing construction costs and rising interest rates, these conditions have contributed to a slowdown for many SME developers.

The report highlights that developers are increasingly turning to non-bank lenders for funding solutions. Unlike banks, these lenders offer more flexible and tailored financing options, reducing the dependency on restrictive pre-sale hurdles and enabling developers to focus on execution rather than compliance.

Crowding out and high costs add pressure

Another constraint for SME developers is competition for resources. Governments’ extensive public infrastructure programs have inflated labour and material costs, leaving private housing developers struggling to compete. The commission’s findings underscore that government spending is effectively ‘crowding out’ housing construction by monopolising the capacity of the construction sector.

Against this backdrop, non-bank lenders are emerging as a vital ally for developers. These institutions not only provide capital but also offer innovative financial solutions tailored to the unique needs of smaller players in the property market.

The role of non-bank lenders in unlocking housing potential

CrowdProperty, an innovative non-bank lender focused on property development finance, is well-positioned to address the challenges SME developers face. By offering flexible financing structures and streamlining the loan approval process, CrowdProperty enables developers to proceed with projects that may otherwise stall due to traditional bank constraints.

Unlike traditional lenders, CrowdProperty evaluates projects based on their feasibility rather than rigid pre-sale or collateral requirements. This approach aligns with the report’s recommendation to focus on feasibility and capacity-building rather than regulatory red tape.

CrowdProperty’s ability to assess projects swiftly also reduces holding costs for developers, a major expense exacerbated by current economic conditions. By funding a wide range of projects — from infill housing to medium-density developments — CrowdProperty plays a critical role in unlocking much-needed housing stock in key areas across NSW.

SME developers as the backbone of housing supply

SME developers, while often overlooked, are critical to addressing the housing shortage. They are agile, locally focused, and well-versed in creating projects that meet the specific needs of their communities. However, the current finance ecosystem disproportionately favours larger, well-capitalised players, further exacerbating the housing supply gap.

CrowdProperty directly targets this imbalance. By empowering SME developers with financial backing and expert guidance, the company ensures these smaller players remain active contributors to housing supply. The platform’s model also fosters trust and transparency, providing confidence to investors and developers alike.

A collaborative path forward

While non-bank lenders like CrowdProperty are stepping up, broader structural reforms are needed to stabilise the market. The commission recommends that governments prioritise infrastructure projects that directly enable housing delivery and streamline post-approval processes to avoid bottlenecks. Combined with non-bank innovation, such reforms can create a pro-housing environment that benefits developers, buyers, and renters alike.

CrowdProperty’s proactive approach demonstrates how innovation in the lending market can mitigate the challenges faced by SME developers. By bridging the finance gap, non-bank lenders are proving to be indispensable partners in solving NSW’s housing crisis.

As traditional banks tighten their purse strings, it’s clear that non-bank lenders are not just an alternative — they’re potentially the future of property development finance. For SME developers, partnering with forward-thinking lenders like CrowdProperty could be the key to unlocking a new era of housing growth.