Australia’s economy sits at an inflection point. Inflation has re-accelerated, monetary policy is tightening again, and the headwinds from geopolitical instability – particularly the ongoing Middle East conflict and its flow-on effects to energy and construction costs — are real. High government spending, subdued private sector activity and weak productivity are not conditions that favour indiscriminate property investment. 

But within this complex environment, there is a clear and compelling divergence. Not all states are exposed equally. And not all states offer the same opportunity. 

That divergence is central to how Ark thinks about underwriting. 

The three states where Ark is most active share a common set of structural tailwinds that, in our view, the report validates convincingly.

Western Australia remains the nation’s strongest performing economy, recording domestic growth of 2.9% in FY25. State Final Demand is forecast to rise by 3.75% in FY26 before moderating. Population growth has averaged 2.3% per annum since 2020 — well above the national average of 1.5% — and this has translated directly into the residential market, with median house prices growing 11.6% per annum over the same period. Critically, residential vacancy sits at just 0.7%, against a national average of 1–2%. WA’s pipeline of major infrastructure projects stands at $121 billion in total capex — by far the largest of any state — underpinned by the mining and renewables sectors. Retail spending growth of 53% since 2019, more than double the national figure, tells a story of genuine economic activity, not just population mathematics.

South Australia has recorded the strongest economic performance among all states, with GSP growth running 8.7% above its long-run average. Employment is at record levels, construction activity is solid, and the state’s expanding role in the global energy transition — through critical minerals, renewable hydrogen and defence — provides durable structural support. Adelaide has grown strongly at 1.5–2.1% annually since 2020, well above its historical norm. Median house prices have grown 10.6% per annum since 2020. Residential vacancy at 0.8% is among the tightest nationally. The industrial and retail sectors both present income growth opportunities, with occupancy cost ratios at historically low levels — suggesting meaningful rental upside remains unrealised.

Queensland continues to benefit from sustained population growth, with forecasts indicating 20,000 additional interstate arrivals per year and a strong pipeline of infrastructure investment anchored by the 2032 Olympic Games. The Games Independent Infrastructure and Coordination Authority is overseeing 17 new and upgraded venues across the state, with significant legacy asset and urban renewal value flowing through the system. Brisbane’s infill residential market remains supported by strong unit price growth and low vacancy. Industrial take-up in Brisbane led income return growth in 2025. The retail market, supported by a robust labour force and interstate migration, is forecast to grow at 4.2% per annum to FY30 – above the national average.

The Urbis Property Clock, reflecting market conditions as at January 2026, positions greenfield and infill residential markets across Perth, Adelaide and Brisbane broadly in the 6pm–midnight range — characterised as rising or approaching peak conditions. By contrast, Melbourne sits in the lower half of the clock across most sectors, with commercial office at market bottom and greenfield residential only beginning to recover. 

For a private real estate credit manager, this matters. We are not equity investors seeking to time market peaks. We are lenders seeking to deploy capital in markets where fundamentals underpin asset values, where collateral is supported by genuine demand, and where the project pipeline reflects real activity. In our view, the growth states continue to present a favourable environment for disciplined real estate credit investment

The supply side of the equation reinforces our conviction. Residential vacancies in WA and SA are at historic lows and are forecast to remain below eastern seaboard markets over the next 3–5 years, even if supply conditions improve modestly. New dwelling approvals in Adelaide and Perth have grown at 5.0% and 4.9% per annum respectively since 2020 –  but capacity constraints in labour and materials continue to limit actual delivery. This persistent gap between demand and supply is not a short-term anomaly. It is a structural feature of these markets that supports asset values and underpins the collateral quality of our loans. 

On the commercial side, industrial vacancy in WA and SA –  at 2.2% and 2.0% respectively – sits well below the national average of 3.2%. For Ark’s construction and commercial lending activity, this speaks to the underlying demand that supports project feasibility and exit outcomes. 

This is not a criticism of our home state or the nation’s largest market. But the report is clear. Victoria’s fiscal position is under increasing pressure, with net debt forecast to grow 16% over the next three years, and its AA credit rating under challenge. The tax burden on property development in Victoria remains elevated. Melbourne’s residential market has shown only 2.5% median house price growth per annum since 2020, compared to double digits in our target states. The commercial office market in Melbourne remains at the bottom of the cycle. These are not conditions we seek to lead with in our portfolio construction.

NSW, while more stable, continues to face high cost-of-living pressures and structural land constraints that limit greenfield activity. Sydney’s lot consumption is expected to remain subdued, and spending growth will likely continue to trail other major states.

None of this means the growth states are without risk. The report is candid: cost escalation in construction remains elevated, labour market tightness creates supply-side bottlenecks, and the prospect of further RBA rate increases introduces genuine uncertainty into development feasibility across all markets. Geopolitical instability – particularly through energy costs adds a layer of unpredictability that responsible lenders cannot ignore. 

But disciplined underwriting is precisely the point. We are not chasing yield in markets where fundamentals are weak. We are lending in markets where population growth is structural, where vacancy is tight, where infrastructure investment is real, and where collateral values are supported by genuine demand. In our view, the growth states continue to provide a favourable environment for disciplined real estate credit investment.

The Urbis data does not create our strategy. It confirms it.