Over the past decade, investors have increasingly turned to the Australian private credit market. Between 2015 and 2025, Australia’s private credit market increased at a CAGR of 21% to reach $234.5 billion, of which ASIC estimates that approximately half is real estate-focused. To look at this through a different lens, CBRE finds that private credit-funded residential development loans account for 26% of the total real estate debt in Australia—up from 14.7% in 2019—and forecasts this will reach 35% by 2030.
One explanation for this influx of capital into property-backed loans is the perceived downside protection they offer. Many investors can be attracted by seemingly conservative loan-to-valuation ratios (LVRs). For example, a fund might advertise a "maximum 65% LVR”, implying a 35% equity buffer if a project goes awry.
However, the critical question isn't always just the raw LVR percentage; it’s what exactly that percentage is being measured against. This is where understanding the difference between "as-is" and "as-if-complete" valuations becomes critical, particularly for investors assessing property development opportunities.
Below, we’ll explore the difference between "as-is" and "as-if-complete" valuations, including definitions of key terms, why this distinction matters for investors, and how some private lenders attempt to mitigate these risks.
Largely, both terms are self-explanatory: an ‘as-is’ valuation is simply the current market value of the property as it is right now, whereas an ‘as-if-complete’ valuation represents what the property would be worth if completed today under current market conditions (as distinct from what it could be worth when completed under future market conditions), assuming the developer completes the proposed works in accordance with the relevant plans and specifications.
More specifically, the International Valuation Standards Council (IVSC), which the Australian Property Institute (API) adopts, defines as-is (or market) value as: “The estimated amount for which an asset or liability should exchange on the valuation date between a willing buyer and a willing seller in an arm’s length transaction, after proper marketing and where the parties had each acted knowledgeably, prudently and without compulsion.”
Conversely, the API notes that an ‘as-if-complete’ valuation: “assumes the proposed work is complete and available for sale, as at the date of inspection/valuation. It does not reflect the current ‘as is’/‘existing property’ value of the property. It also does not reflect the value of the property ‘on completion’ at a future date.”
Understanding the distinction between ‘as-is’ and ‘as-if-complete’ valuations is crucial for investors because an LVR is only as informative as its underlying valuation.
For instance, a 65% LVR against an as-is valuation means the prospective loan is backed by existing equity. If the project stalled on day one, the lender still has a 35% gross buffer on the property's assessed current value.
On the other hand, a 65% LVR against an as-if-complete valuation means the loan is more reliant on future assumptions. If for whatever reason construction halts, the as-if-complete value cannot be realised. Instead, the lender is left holding an unfinished site, and they are suddenly exposed to the as-is value of that distressed asset.
Crucially, construction company failures are not merely a hypothetical risk. Rather, they are a statistical reality in the current Australian market. Analysis of ASIC data shows that construction company failures climbed from 1,284 in FY2021-22 to 3,596 in FY2024-25, marking a 180% increase in just three years.
What’s more, the construction sector is the largest industry for insolvency appointments, accounting for 24% of all Australian insolvency appointments in the first eight months of FY2025-26. This is partially attributable to the dramatic rise in construction costs in Australia post-COVID, with Cotality’s Cordell Construction Cost Index (CCCI) finding that “nationally, the five-year cumulative [cost] increase now stands at 29.5%.”
Perhaps most alarmingly, BuildStreet’s analysis of ASIC data found that the percentage of construction insolvency reports where the company was found to have been insolvent at least two years before the formal appointment increased from 33.1% in FY2020-21 to 55.1% in FY2024-25.
Cumulatively, these statistics shed light on some of the risks that can underpin an ‘as-if-complete’ valuation. While an ‘as-if-complete’ valuation may sound good on paper, between rising construction costs and a marked increase in construction company failures, there are no guarantees that the development will be completed in accordance with the assumptions underpinning the valuation, which significantly alters the risk profile.
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Definitions and abstract statistics are one thing, but how does this actually play out in practice? Consider the following hypothetical lending scenario.
Let’s say a developer purchases a block of land for $2 million. They secure council approval to build a townhouse complex that an independent valuer estimates will be worth $10 million upon completion (a.k.a. the as-if-complete value).
A private lender agrees to fund the project at a maximum 65% LVR against that as-if-complete value. In this scenario, the lender is willing to provide up to $6.5 million in total funding.
Now, imagine the lender advances $4 million upfront to cover the land purchase and early construction costs. A month later, the builder goes into liquidation. Construction halts, and the $10 million as-if-complete valuation effectively evaporates.
As a result, the lender ultimately needs to realise the security by selling an unfinished construction site. In its current distressed state, the site’s as-is value might only be $4.5 million, making the loan balance $4 million against a $4.5 million asset. Accordingly, the original, seemingly conservative 65% LVR has ballooned to an 88.9% LVR. If the market dips slightly, or if the distressed sale incurs heavy legal fees, the investors' capital may be at risk.
Given these potential risks, some private lenders, such as ASCF, will not lend against as-if-complete valuations. However, some investors may find discerning which private lenders do or do not lend against ‘as-if-complete’ valuations to be tricky.
If you are struggling to determine whether a potential lender uses ‘as-if-complete’ valuations, try following these steps:
As is often the case for prospective investors, checking the PDS should be your first option. Per ASIC Regulatory Guide 45, the PDS for Mortgage Schemes must address eight disclosure benchmarks and principles. Benchmark 6 pertains to LVRs and mandates that:
Every PDS for mortgage schemes must address these requirements and explain whether the Fund complies with the benchmark.
If for whatever reason you’re still unclear after reading a Fund’s PDS, it’s often a good idea to check the lender’s FAQs as well. For instance, ASCF’s FAQs note that “The Funds do not provide funding to property developers for development purposes based on the anticipated end value of any improvements to be constructed on the proposed security property.”
If, after completing steps one and two, you still require further clarification, it does not hurt to reach out to the fund manager directly and ask them: "Do you fund property developments based on anticipated end-values, or do you strictly limit your maximum LVR calculations to current 'as-is' market valuations?"
By verifying these policies upfront, investors can better understand how the lender’s exposure is anchored to the current value of tangible assets rather than anticipated end values.
Of course, a lender using ‘as-if-complete’ valuations doesn’t automatically mean investors should rule them out or that a loan is inherently unsuitable. However, it's worth understanding that an LVR may be dependent on assumptions about completion, which can materially change the potential loan’s risk profile.
As private credit continues to grow and mature as an asset class, it is becoming a consideration for a rising number of Australians. However, with construction costs increasing by nearly 30% since COVID and the number of construction company failures increasing by 180% in the last three years, it has become increasingly crucial for investors to understand the difference between ‘as-is’ and ‘as-if-complete’ valuations.
So, when evaluating your next property-backed investment or private credit fund, consider adding these points to your due diligence checklist:
Remember that the difference between ‘as-is’ and ‘as-if-complete’ valuations can be significant. What might initially appear to be a conservative LVR if judged against the ‘as-if-complete’ value can quickly balloon if judged against the ‘as-is’ value.
Know that a lender saying ‘maximum 65% LVR’ could potentially mean two different things. Ask instead what that LVR is being measured against.
Check the lender’s PDS or other official documentation to independently verify whether they lend against ‘as-if-complete’ valuations, as this can significantly alter the risk profile of the prospective loan.
By looking beyond headline metrics, investors are better positioned to enjoy the potential benefits of property-backed private credit exposure while gaining a clearer understanding of the tangible assets supporting their investment.
The Fund objective is to provide monthly income through a selection of investments in short-term registered first and second mortgage loans.
The objective of the Fund is to provide monthly income through a selection of investments in short-to-medium term registered first mortgage loans.
The objective of the Fund is to provide monthly income through a portfolio of direct and indirect investments in loans and fixed income products.
The objective of the Fund is to provide monthly income through a selection of investments in short-term registered first mortgage loans.
Disclaimer: This article is prepared by Dominic Murray. It is for educational purposes only. While all reasonable care has been taken by the author in the preparation of this information, the author and InvestmentMarkets (Aust) Pty. Ltd. as publisher take no responsibility for any actions taken based on information contained herein or for any errors or omissions within it. Interested parties should seek independent professional advice prior to acting on any information presented. Please note past performance is not a reliable indicator of future performance.
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