August brought the first serious test of private property lending in this cycle. The economic data explains why the test arrived now, and the way it unfolded says something useful about the difference between a credit problem and a liquidity problem.
| Measure | Latest | Detail |
|---|---|---|
| Cash rate | 4.35% | Held on 11 August, with a bias to raise it further |
| Headline inflation | 3.5% | Year to July, from 3.8% in June |
| Trimmed mean inflation | 3.6% | Year to July, unchanged since May; up 0.5% in the month |
| Unemployment | 4.5% | July, near a four year high |
| National home values | -0.9% | August, a fifth monthly fall; 3.6% below the March peak |
| Sydney home values | -1.4% | August; 7.1% below the February peak |
| Next Reserve Bank decision | 29 September |
Where values sit.
Cotality’s index fell 0.9 per cent nationally in August, the fifth fall in a row, leaving values 3.6 per cent below their March peak. July’s fall has been revised to 1.2 per cent, from 0.7 per cent as first published. Sydney fell 1.4 per cent in August and is 7.1 per cent below its February peak, a faster decline than over the equivalent period of the 2022 to 2023 correction, when values had fallen 6.6 per cent.
The split between capital cities and the regions is wide: regional values are still up about 7.7 per cent over the year, against 1.1 per cent for the combined capitals. Sydney’s median dwelling value is now about $1,223,000.
Inflation and the Reserve Bank.
The Reserve Bank held at 4.35 per cent on 11 August, unanimously, and kept the option of a further increase. Its forecasts have trimmed mean inflation easing to 3.3 per cent by December and unemployment rising to 4.5 per cent.
Two weeks later the July inflation figures complicated that path. Headline inflation fell to 3.5 per cent, but the trimmed mean held at 3.6 per cent for a third month and rose 0.5 per cent in July alone, its largest monthly rise in a year. Housing costs were up 5.0 per cent over the year. Some forecasters moved their calls to an increase at the September meeting.
Jobs.
Unemployment rose to 4.5 per cent in July, as employment fell by about 16,000 people and hours worked dropped. That is the highest rate in close to four years, and it arrived while underlying inflation was still rising. A central bank facing both at once has no comfortable option, and borrowers are exposed to whichever risk it decides to accept.
A developer fails, and funds limit withdrawals.
On 25 August administrators were appointed to Bathla Group, a Western Sydney residential developer, which owes about $3.4 billion to roughly 40 lenders, most of them private credit funds. Several private credit funds paused or limited investor redemptions during August, one of them eleven days before the administration.
Two separate problems are visible in that sequence. The first is credit: whether loans to the developer are covered by the value of the projects securing them, which depends on completion costs, builder availability and sale prices in a falling market. The second is liquidity: whether a fund that offers investors regular withdrawals can meet them when many investors ask at once. A fund can have the second problem without the first, and withdrawal limits do not by themselves say anything about loan losses. They do show what happens when the promise made to investors about access to their money is shorter than the time it takes to recover a property loan.
What this means for lending
Match the money to the loan.
The lesson of August is old and worth restating plainly: a twelve month loan funded with money that can leave in thirty days has a mismatch built into it, and the mismatch only becomes visible when sentiment turns. Concentration matters as well. Forty lenders were exposed to one borrower group.
For our own lending, the practical tests are the ones set out in our research papers: first registered security, loans at 65 to 70 per cent of an independent valuation on current evidence, and quarterly published numbers, including the largest loan as a share of the book, so that an investor can check each claim for themselves.
Sources.
- Cotality, Home Value Index, September 2026 release (data to 31 August 2026): national, capital city and regional changes, change from peak, median values, as first published.
- Reserve Bank of Australia, Statement by the Monetary Policy Board and Statement on Monetary Policy, 11 August 2026.
- Australian Bureau of Statistics, Consumer Price Index, Australia, July 2026 (released 26 August 2026).
- Australian Bureau of Statistics, Labour Force, Australia, July 2026 (released 20 August 2026).
- Public reporting of the administration of Bathla Group on 25 August 2026 and of redemption pauses and limits at private credit funds in August 2026.
This commentary is general information only, prepared by Oxford Capital Pty Ltd (ACN 700 065 872). Oxford Capital Pty Ltd is the investment manager of the fund and a corporate authorised representative (CAR No. 1323556) of Non Correlated Advisors Pty Ltd ACN 158 314 982, AFSL 430126. It does not hold an Australian Financial Services Licence of its own. The trustee of the fund, and the issuer of units in it, is Non Correlated Capital Pty Ltd ABN 99 143 882 562, AFSL 499882. It is not financial product advice, does not take account of anyone’s objectives, financial situation or needs, and is not an offer or invitation to acquire any financial product. It reflects the author’s views at the date of publication, which may change. Figures are drawn from the sources listed and are subject to revision by the issuing agency. Nothing here is a forecast of the performance of any Oxford Capital fund.