AUGUST 2017 ISSUE 14.15
APRA and non-banks Details of APRA’s proposed new powers released /04
Commercial lending special feature Lenders explain how brokers can succeed in this space /18
JOHN MANCIAMELI The founder of Slipstream talks about how brokers can use their existing skills to elevate their businesses and help clients reach their property goals /14
Brokers have their say Banks pressuring brokers in digital revolution /23
ALSO IN THIS ISSUE … Fourth time’s the charm A broker who specialises in difficult loans /24 Housing market data Analysis provides insight on where mortgage demand will be strongest /26 Enjoy the ride A broker talks policy changes and being Mr Bean on a bike /30
NEWS
IN THIS SECTION
Lenders Details emerge about APRA’s new powers over non-ADIs /04
Associations Self-regulation progresses at second industry forum /06
Technology Crowdfunding could be the ticket to buying property /10
Regulators Government takes steps to make one-stop shop for EDR /12
Consumers Homebuyers express anxiety over future rate hikes /08
www.brokernews.com.au AUGUST 2O17 EDITORIAL Editor Otiena Ellwand News Editor Miklos Bolza Production Editor Roslyn Meredith
DATES TO WATCH
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16 AUGUST National Finance Brokers Day Dino Pacella founded this event back in 2015 to celebrate brokers and educate consumers. The goal this year is to raise $50,000 through charity drives for sick children
17 AUGUST
23 – 25 AUGUST
MFAA Darwin Golf Day
Vodafone National Small Business Summit 2017
Network with industry colleagues at this annual sell-out event at the Gardens Park Golf Links in Darwin. Register as an individual or as a team and practise your swing – there are prizes to be won
Small business leaders are invited to exchange ideas, shape policy and discuss the current interests and concerns of Australia’s small business owners at this year’s conference at the Event Centre Collins Square in Melbourne. Sessions will cover cybersecurity, banking and financial management and regulation red tape
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Aussie’s conference on the Gold Coast features thought leaders, panel discussions and networking events to energise and inspire broker business
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Credit Law Conference
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This Sydney event features some of Australia’s most successful businesswomen, including the CEOs of Suncorp, the City of Sydney and Mirvac, who will share their stories of leadership struggles and accomplishments, and teach women how to drive career growth
This year’s conference on the Gold Coast will equip brokers and other industry members with useful knowledge and practical strategies to help them succeed in an increasingly challenging market
The 27th annual event in Surfers Paradise brings together banks, credit unions, regulators, associations and market disruptors to discuss the future of credit and lending
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NEWS
LENDERS Source: Roy Morgan Consumer Single Source, 6 months to April 2017. Base: Has an owner-occupied dwelling with mortgage.
THE
speculation about rising interest rates, Prime Minister Malcolm Turnbull has assured the public that banks will take a softer stance with borrowers. “We always expect them to [show compassion],” he said in an interview with Neil Mitchell on 3AW on 20 July. “Ultimately their business is based on the goodwill of their customers.” Borrowers should be aware, however, that rates will eventually rise and they should exercise prudence in their financial activities, he added.
Malcolm Turnbull Prime Minister of Australia
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TAS
Hobart
WA
$120,000
$207,000
$202,000
$279,000 Perth
SA
$123,000
$195,000 Adelaide
$224,000 QLD
Brisbane
VIC
Melbourne
$149,000
$229,000
$243,000 $180,000
$200,000
$100,000
AMID
“That’s why it’s better if you’re buying your own home not to buy it with an interest-only mortgage but make sure you’re paying off principal. That’s the sort of common-sense financial advice your grandmother would have given you.”
$300,000
Sydney
Median amount outstanding on mortgages
PM BETS ON COMPASSIONATE BANKS
$400,000
NSW
government is considering looser restrictions on the use of the words ‘bank’, ‘banker’, and ‘banking’ in order to promote greater competition in the banking system. Only ADIs with capital greater than $50m are currently permitted to use these terms currently. “This acts to discourage innovative new players from entering the market, as the use of the term ‘bank’ can be key to their business model,” the government said. The new proposal would allow any banking business with an ADI licence to describe itself as such.
SYDNEY HAS THE HIGHEST OUTSTANDING MORTGAGES – FOLLOWED CLOSELY BY PERTH
$293,000
GOVT PLANS TO FREE UP USE OF TERM ‘BANK’
City
Region
GOVERNMENT REVEALS DRAFT DETAILS OF APRA’S EXPANDED POWERS The government is calling for public feedback on proposed legisation that would give the regulator greater power over non-banks government has released new draft legislation unveiling how APRA’s powers will be extended into the non-bank sector. APRA’s new powers over non-ADI lenders, which were first announced in this year’s budget, are meant to give the agency the ability to “respond flexibly to financial and housing market developments that pose a risk to financial stability”, the government said in a news release. The draft bill proposes amending the Banking Act of 1959 to provide APRA with the power to: make rules concerning the lending activities of non-ADIs for the purpose of addressing financial stability; issue a direction to a non-ADI lender should it fail to THE
comply with a rule; and introduce penalties should it fail to comply with a direction. The bill would also allow APRA to collect data from non-ADI lenders for the purposes of monitoring their activities and determining when to use its new powers. These rules may target all non-bank lenders, a specific class of non-bank lender, or individual non-bank lenders, and may impose different rules on different lenders under different circumstances. Prior to making, varying or revoking a rule, APRA has been ordered to consult with ASIC. APRA will also be able to give directions to non-bank lenders. These must be given in writing and can order the non-bank to: comply
with the whole or part of an APRA rule; refrain from lending out money with or without security; or refrain from carrying out activities that result in funding or originating loans. These new rules will be backed by “appropriate enforcement mechanisms”, including APRA directives ordering compliance and appropriate penalties. “These new powers will allow APRA to manage the financial stability risks posed by the activities of non-bank lenders, complementing APRA’s current powers over ADIs,” the government said. “APRA will use its independent judgement to determine how and when to use this tool, in consultation with the Council of Financial Regulators.” The exposure draft and related explanatory material is available on the Treasury website. The public has been invited to give feedback. Submissions will be accepted until 14 August.
NEWS
A S S O C I AT I O N S FLAT-FEE MODEL WILL HAMMER CONSUMERS by consumer advocacy groups to scrap upfront and trail commissions and bring in a flat fee for brokers will lead to negative consumer outcomes, says FBAA executive director Peter White. Altering the current commission structure would change the dynamics of the industry and significantly reduce the number of operators involved. Before brokers, interest rate margins were much higher, with these dropping to a more reasonable level once brokers entered the fray. Introducing a fee for service would reverse this trend, he added. CALLS
NOT FAIR TO BLAME COMMISSION, SAYS FBAA costs of broker commission are pushing mortgage rates up by 16 basis points per year, according to a May UBS report. A “blow-out” in commission, which exceeded $2.4bn in 2015 – increasing 18% from $1.46bn in 2012 – was linked to higher rates, the report said. FBAA executive director Peter White disputed the findings. “You get the same rate through a brokerage that you get through a branch. The cost of acquisition for a bank is factored into the interest rate … and what they have for the bank branches is the same as they have for the brokers.” RISING
SECOND INDUSTRY FORUM LAYS REMUNERATION FOUNDATIONS The joint forum has set the stage for further industry progress in responding to proposals of ASIC’s broker remuneration review second joint industry forum was held between major players in the broking and banking fields, at which they agreed to create a framework in response to ASIC’s broker remuneration review. Participants included representatives from five major industry associations – the MFAA, the FBAA, the ABA, COBA and AFIA – plus select aggregators, lenders and brokers. The meeting, held on 18 July in Sydney, was chaired by NAB and deputy chaired by Connective. Attendees discussed the draft terms of reference for the process and began to design a cross-industry working group structure, as well as develop an engagement and reporting plan to ensure the forum A
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works closely with all stakeholders. The next step will be to strengthen partnerships with consumer groups, ASIC and the federal government, ABA executive director of retail policy Diane Tate said. “We want to ensure their views are heard and reflected in the industry response. The industry will stay focused on ensuring that how mortgage brokers are paid, and the way this is structured, delivers good outcomes for customers,” she said. MFAA CEO Mike Felton said the forums demonstrated the progress all parties were making in working together as an industry. “We will soon have crossindustry working groups in place, focused on creating improved quality measures and solutions for
the issues raised by ASIC.” FBAA executive director Peter White said the goal of ensuring positive beneficial consumer outcomes was extremely important. “At the same time, we must also ensure that the broker value proposition to borrowers and the Australian lending landscape is reinforced, if not strengthened, by this process.” AFIA CEO Helen Gordon said the association was looking forward to contributing to the forum’s proactive engagement with government, as well as “working with all participants on solutions to effectively address identified key risk areas in a way that protects customers while continuing to give them choice on how they access mortgage lending”. The forum will continue to meet monthly to develop responses to ASIC’s proposals as well as Sedgwick’s recommendations for third parties. It will formally present its progress to ASIC, Treasury and the industry by the end of the year.
“Now is the time to maintain momentum and work together to ensure we achieve a balance between strong competition across the industry and good consumer outcomes.” Mike Felton CEO, MFAA
NEWS
CONSUMERS MEDIAN HOUSE PRICE AT RECORD $818K national median house price went up by 1.7% to reach a whopping $818,416 during the June quarter, a new record high, according to the latest results from Domain. Despite the record price tag, the actual increase was the lowest per quarter since March 2016 and was well short of the recent peak rate of 4% recorded during the December quarter last year. For apartments, the median price also increased by 1.7% to $571,064 – the fifth consecutive quarter of growth.
SOME PEOPLE ARE PUTTING AS MUCH AS 60% OF THEIR INCOME TOWARDS HOUSING Source: ME Bank Household Financial Comfort Report, June 2017
30%
THE
majority of property investors THE prefer to purchase older dwellings rather than new builds or off-the-plan properties, new data has revealed. Mortgage Choice’s annual Investor Survey found that 76.9% of Australians intend to buy or have bought an existing dwelling, compared to 23.1% who have bought a new build. In 2015, 75.8% of investors said they intended to buy an existing property. In 2016, that number had risen to 76.7%, and now almost 77% of investors say they would prefer an established dwelling.
“Homeowners now need to start thinking about … higher interest rates and the strategies they can put in place to ensure they can meet their increased repayments.” Deborah Dickson Head of retail, HomeStart Finance
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% of a disposable income paid towards a mortgage or rent
ESTABLISHED DWELLINGS PREFERRED BY INVESTORS
Total
26% 25%
Those paying off a mortgage Those renting
24% 23% 21%
23% 21%
20%
19%
20%
16%
15%
15%
14% 12% 9%
10%
5%
4%
11% 11% 9% 7%
5%
8%
2% 0% 10% or less
More than 10% up to 20%
More than 20% up to 30%
More than 30% up to 40%
More than 40% up to 50%
ANXIOUS HOMEBUYERS PREPARING FOR RATE RISES Public optimism dips in homebuyer survey as more Australians steel themselves for future mortgage rate hikes numbers of homebuyers are preparing for mortgage rates to increase over the next 12 months, with 61% believing that rate hikes are imminent. These figures come from the latest bi-annual HomeStart Finance Index, which measured homebuyer sentiment among more than 200 people. The research also found that homebuyers are now less optimistic about the chances of rates decreasing, with only 11% predicting that rates will drop. This is lower than the 17% polled a year ago. Deborah Dickson, HomeStart Finance head of retail, said homebuyers clearly believed the GREATER
recent commentary that rate hikes were imminent. “Many experts are predicting rate hikes for the nation’s official cash rate, with one saying we could see eight rate increases in the next two years. Any change in the official cash rate will most likely result in banks raising their home loan interest rates,” she said. “The cash rate has remained at an extremely low level for a long period now – just 1.5% since August 2016. The results show that some Australians believe it’s only a matter of time before rates return to a more normal level due to a more positive economy.” The survey results could also be due to public sentiment around
More than 50% up to 60%
Greater than 60%
the federal budget’s bank levy, which many believe will be passed on to mortgage holders, she said. Even a 0.25% increase on a $300,000 home loan would add $50 per month in repayments – an amount that would be enough to strain some families financially. “A survey by Digital Finance Analytics of 26,000 households showed that 20% would find themselves in mortgage difficulty if interest rates rose by 0.5% or less, while half would find themselves under financial pressure if home loan interest rates increased from today’s average of 4.5% to a long-term average of 7%,” she said. “Historically, low interest rates have made buying property extremely attractive in recent years; however, homeowners now need to start thinking about an environment where there are higher interest rates and the strategies they can put in place to ensure they can meet their increased repayments.”
NEWS
TECHNOLOGY
NON-BANK RELEASES NEW LOAN TRACKING APP lender Liberty Financial has launched Liberty IQ, a new loan tracking app designed to offer a streamlined experience to residential brokers. The app enables real-time updates on milestones reached during the mortgage application process and an automated SMS service delivering progress updates as they happen. It also features streamlined document management that highlights any outstanding documentation or actions required. The in-built tap-and-send functionality allows brokers to upload documents through their mobile, tablet or laptop. NON-BANK
IS CROWDFUNDING THE FUTURE FOR PROPERTY INVESTORS? Pooled resources could help Australians enter the property investor market, new research shows stands out as a leading alternative for those seeking to invest in the Australian property market, a new study suggests. Researchers at the University of South Australia looked at individual investor motivation, their appetite for crowdfunding, and the method’s potential as another investment vehicle for those seeking to enter the market. “There’s a lot of debate about the current state of Australia’s housing market, and its inaccessibility, especially to first-time homebuyers, who lack foundation capital to get their first home,” said lead researcher Braam Lowies from the University of SA. Crowdfunding works by pooling capital from a large group of people
to purchase something, spreading the dollar investment and the risk among multiple players. In property crowdfunding, people could invest as little as $1,000, Lowies said, allowing people from all demographics to test out property investing. Their return would be directly proportional to the amount they invested. The study found that property crowdfunding is a long-term investment strategy offering low to medium risks, while yielding low to medium returns. It attracts investors from all demographics but is particularly appealing to those aged between 55 and 64 years (33% of investors). Only 4% of respondents interested in crowdfunding were under 35.
CROWDFUNDING
“There’s definitely an appetite among older investors for property crowdfunding, but we also know that millennials are using this type of investment vehicle to enter the property market,” said Lowies. “While there are fewer millennials using crowdfunding for property investment, those that do, tend to invest greater funds than their older counterparts. “In contrast, older investors make up a greater percentage of the property crowdfunding market, but they tend to diversify their investment portfolios, preferring to hold higher percentages of their portfolios in cash and cash equivalent investment vehicles.” Australia is the second-largest participant in the Asia-Pacific alternative finance market behind Japan, Lowies said. “Property crowdfunding is still in its infancy in Australia, but as more people become aware and accepting of new digitalised investment platforms, we’re likely to see this market expand.”
VV COMBINED CAPITAL CITY DWELLING VALUES HAVE INCREASED OVER THE LAST FIVE YEARS Source: CoreLogic
25% 20% 15% 10% 5% 0%
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16–17
15–16
14–15
13–14
12–13
11–12
10–11
09–10
08–09
07-08
06–07
05–06
04–05
03–04
02–03
01–02
00–01
99–00
98–99
97–98
96–97
-5%
TOOL MATCHES CLIENTS TO MOST SUITABLE PRODUCT Pepper Money has unveiled a new online conversion tool that lets brokers provide clients with an indicative offer in two minutes. “The Pepper Product Selector helps a broker match their customer to the most appropriate Pepper Money home loan product,” said Aaron Milburn, director of sales and distribution. “It takes the hard work out of identifying the right product, and you have a genuine solution in the form of an indicative offer for your client in less than two minutes.” NON-BANK
NEWS
R E G U L AT O R S
LABOR: ROYAL COMMISSION WILL COVER REGULATORS elected, the Labor party has promised that a Royal Commission into the financial industry would also examine the financial regulators. In a speech to the Financial Services Council Leaders’ Summit 2017 in Sydney on 25 July, Shadow Treasurer Chris Bowen said it was important to understand and scrutinise the roles and accountabilities of Australia’s financial authorities. He said it would look at developments in financial regulation in a broad manner, focusing on areas above and beyond poor behaviour. IF
TRANSITION TOWARDS ONE-STOP EDR SHOP UNDERWAY The government expects the new external dispute resolution body to be operational by July 2018 government has announced the creation of a transition team that will take the next step towards a one-stop shop for external dispute resolution (EDR) within the finance industry. In a speech to the Financial Services Council Leaders’ Summit 2017 in Sydney on 26 July, Minister for Revenue and Financial Services Kelly O’Dwyer discussed the proposed Australian Financial Complaints Authority (AFCA). The final report by Ian Ramsay into Australia’s three financial sector ombudsman schemes recommended replacing the Financial Ombudsman Service (FOS), the Credit and Investments Ombudsman (CIO), and the Superannuation Complaints Tribunal (SCT) with a single scheme, the AFCA. THE
RESI LENDING SURGES BY $10BN IN JUNE total volume of residential lending by the banks, including owner-occupier and investor loans, has shot past $1.57trn, according to the newest figures from APRA. The regulator’s latest Monthly Banking Statistics show that total lending increased by $9.8bn (0.6%) between May and June. Owner-occupier loans sat at just over $1trn and represented 64.8% of total loans, an increase of $7.4bn (0.7%) from the month before. The remaining $552bn (35.2% of total lending) was made up of investment loans. THE
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“It will provide access to justice in a timely manner, with an independent arbiter and compensation where appropriate,” O‘Dwyer said. But at the end of May a number of peak finance industry bodies, including the MFAA and COBA, released a joint statement criticising the government’s proposed one-stop shop for EDR. “The Associations believe the ‘one stop shop’ will undermine the fabric of external dispute resolution (EDR) in the financial services sector because, as the weight of evidence submitted by industry suggests, the continued and separate existence of FOS, CIO and the SCT is vital in ensuring accountability, innovation and cost control in EDR,” the statement said. The Ramsay review based most of
its recommendations on insights from consumer advocates who represented fewer than 5% of all complaints taken to the FOS or the CIO, it said. Regardless, the government is ploughing ahead. The transition team will be led by former RBA assistant governor Malcolm Edey, who will ensure that AFCA is operational by 1 July next year. The single body will help eliminate confusion and uncertainty among consumers, O’Dwyer said, and ensure a smoother resolution for complaints with multiple issues. “AFCA will also be able to hear disputes of a significantly higher value, which provides greater access, so more consumers and small businesses can have their case heard, and receive fair compensation if they have wrongfully suffered a loss.” The government is currently waiting to pass legislation relating to AFCA, O’Dwyer said. Once this occurs, the transition team will oversee the operational transition from existing schemes to AFCA.
SINGLE PARENTS ARE STRUGGLING THE MOST TO MEET MINIMUM MORTGAGE REPAYMENTS Source: ME Bank Household Financial Comfort Report, June 2017
Proportion not meeting the current minimum repayment on their home loan 16%
15%
14%
Household type Loan type
12% 10%
6%
8% 6% 4%
3%
4% 2%
2%
Couple with young children
Couple with older children
3%
3%
2% 0%
Total
Young singles/ couples with no chiildren
Single parent
Empty nesters
Total investors
Total owneroccupiers
TOTAL VOLUME OF RESI LENDING BY BANKS SURGED PAST $1.57TRN IN JUNE Source: APRA’s Monthly Banking Statistics
$277.3 $276.7
$350bn
$241.3 $239.4
$300bn
$100bn
$146.8 $145.2 $103.4 $102.7
$82.8 $82.5
$150bn
$141.4 $140.4
$138.7 $139.3
$200bn
$165.0 $163.3
$250bn
$50bn
$0
ANZ Owner-occupier (June)
CBA Owner-occupier (May)
NAB Investor (June)
Westpac Investor (May)
RBA HIKES COULD TRIGGER CRASH, SAYS UBS signs in the housing market still point to a correction, one leading economist has predicted a true crash if the RBA makes the wrong decision when hiking the cash rate. George Tharenou, economist at UBS, said both dwelling commencements and approvals had slowed down even before macroprudential tightening brought in higher interest rates. “With the historical trigger for a housing downturn being RBA hikes, we still see rates on hold in the coming year, amid macro-prudential tightening on credit growth and interest only loans. Hence we still see a ‘correction, but not a collapse’, but if the RBA hikes too early or too much (as flagged by its hawkish minutes), it risks triggering a ‘crash’.” WHILE
FE AT URES
COVER STORY
WINNING EFFICIENTLY Broker John Manciameli’s new company, Slipstream, is Australia’s first independent aggregator dedicated to helping brokers diversify into the investment property market and tap into a lucrative revenue stream by assisting clients in achieving their property aspirations
KEY BUSINESS METRICS
40+
brokers on board
4 research houses and 4 buyers’ agents
on the panel, independently assessed
20 CPD points
earned through Slipstream’s training program each year
ZERO
cost to join Slipstream
$100,000
average extra revenue earned by brokers in 12 months
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the Tour de France, the best cyclists hang back and draft behind the other competitors, conserving their energy until the last push to the finish. Sitting in the competitor’s draft, or slipstream, is the most efficient way to win a race. This is not just a strategy that’s useful for cyclists. Brokers can also apply this concept to their business practice through Slipstream, a new company that’s pioneering a unique aggregation service, one that replaces the panel of lenders with a panel of heavily vetted buyers’ agents and research houses. Through Slipstream, brokers are given the resources to diversify into the investment property space and provide clients with access to experts who can help them get on the property ladder and build their wealth. Being empowered with knowledge, clients can decide where and how to invest intelligently. And as a result, the broker can turn a pre-approval into a home loan, receive a referral fee from the research house or buyer’s agent, and make more money in less time. “It’s a diversification model that’s wanted by your clients, and through proper training that complements your existing credit skills, you can turn your business into a much more profitable one,” explains Slipstream founder John Manciameli, an experienced investor himself with nine properties. “It’s not like financial planning where you’re trying to sell income protection insurance or life insurance – clients know they need it, but they don’t want it – whereas every Australian wants a house or wants to know what to do with their equity.” Manciameli, a broker of 15 years and director of Hunterwood Solutions, exudes passion for the craft. He IN
conceived and developed the idea to create a panel of investment property solutions as a franchisee at Mortgage Choice. Clients were constantly asking him for advice about property investing and he realised he had a responsibility and an opportunity to ensure clients were making well-informed investment decisions by partnering and pairing them with the right property experts. “Brokers are in this amazing, influential position to be able to have such a big impact. Our philosophy at Slipstream is that, when you really think about it, clients don’t
through the clutter to ensure its panel, which is currently four research houses and four buyers’ agents, are reputable, professional and have a track record of capital growth and integrity. The agencies are assessed on strict criteria and performance data on a regular basis to confirm that the quality of their research and knowledge of the industry is exceptional, Manciameli says. “Our industry is evolving, and what’s happening is we’re becoming trusted sources of information and we can be very influential in pointing our clients to people who can empower them with knowledge rather than being sold to,” he says. Get in the slipstream How it works is the broker refers their client to a research house for the purchase of new property, or a buyer’s agent for the purchase of an established property to renovate, and if the client takes that advice and
“Our philosophy at Slipstream is that ... clients don’t come to you for a mortgage, they’re coming to you for the help to achieve their dream” come to you for a mortgage, they’re coming to you for the help to achieve their dream,” he says. Manciameli says he was instrumental in setting up a very small panel of research houses for the franchisees to refer their investor clients to. He learned a lot through that pilot project and it helped him finesse the concept, which he commercialised 12 months ago as Slipstream and is now rolling out to the broader broking community. He already has 40 brokers signed up as members. One of the issues in the property research industry is that it’s fragmented and there’s a vast variation in research quality, Manciameli says, which is why Slipstream goes to great lengths to sift
purchases a property in the market or area that’s recommended, the broker gets paid a referral fee, which can range from $2,000 to $7,000, depending on the price of the property. Slipstream takes a 30% cut of that. “Slipstream only makes money when the broker has money in their bank account,” Manciameli says. While membership of Slipstream is free, brokers must go through a two-day in-person accreditation course to deepen their understanding of investing. The next accreditation course will be held in September. They’ll also receive software training and business skills, including how to structure an investment acquisition to cost a client $50 per week. Manciameli
to, he was able to buy a brand-new two-bedroom unit in Perth for $255,000, down from the advertised price of $389,000. It’s now rented out for $300 per week. “We were able to give him an opportunity to get on the property ladder, and he is beside himself. He cannot believe that he’s got a positively geared property that’s brand new. I love this job. … We’re changing people’s lives,” Manciameli says.
John Manciameli, founder of Slipstream and director of Hunterwood Solutions
says that if a broker can find one new client a month for 12 months, they can generate six figures’ worth of revenue from the referral and loan commissions. Once they become Slipstream members, they unlock an exclusive online education platform that provides business coaching and training, including face-to-face, online and group training (approved for CPD points), marketing support and tactics to make the most of their databases, genuine lead generation tools and access to technology, such as screencast and bulk voicemail. A recent campaign for a Slipstream member generated more than 100 leads, he says. “Us mortgage brokers have a
responsibility to help our clients be empowered with knowledge, so why wouldn’t you refer them to someone who represents them in the buying process so they can make an educated decision around investing? And in the process, really mitigate the risks involved,” he says. Manciameli says that unlike real estate agents who have a vested interest in selling in their area, the research houses are impartial and will provide clients with 50–80-page in-depth reports examining the four key drivers of capital growth in different property markets, covering supply and demand, infrastructure spending, economics and unemployment, and demographics. They’ll identify
which property market is most likely to increase in value, giving clients the information they need to make informed decisions. Some brokers have already benefited from referring their client to the Slipstream panel and then getting to write their loan. With information from a buyer’s agent, one broker’s client decided to buy and renovate an old house in Brisbane. In six weeks, the net result was an additional value of $143,000, he says. A client living in Sydney’s eastern suburbs was gifted $40,000 from his father. With that money and his salary, he couldn’t even buy a garage in that area, so with the help of a research house that Slipstream connected him
Property investing is not slowing down Despite APRA’s tightening of lending criteria, Manciameli doesn’t think property investing is going to hit a lull any time soon because Australians are culturally predisposed to investing. “Because we’re a land of migrants. And it’s always been that dream that when you leave your family and friends and everything to make a success of your life, it falls into having this piece of Australian land,” Manciameli says. “Every Australian has super, every Australian wants to buy their first property and every Australian wants to use their equity to buy another property.” Based on APRA’s June banking statistics, Manciameli is right. The statistics show that 35% of total residential lending ($552bn) that month was made up of investment loans – an increase of $2.4bn (or 0.4%) from the previous month. And according to a new survey by Galaxy Research on behalf of State Custodians Home Loans that polled 1,005 people nationwide, 64% of Australians are interested in property investment; however, many express anxiety about how feasible it actually is. Over the years, Australia’s housing market has proved to be a stable and resilient asset class, enduring many forms of speedbumps, whether regulatory or market-related. It survived the oil crisis of the ’70s, stock market crashes, and just about every major geopolitical issue, Manciameli says, and with brokers committed to helping clients steer through the challenges ahead, business will only get better. AB www.brokernews.com.au
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FE AT URES
BUSINESS PROFILE
HOW BROKERS CAN THRIVE IN COMMERCIAL LENDING
Four commercial lenders explain how brokers have the existing skills – and customer base – to succeed in commercial lending. All it takes is some education, practice and support for brokers to future-proof their businesses by diversifying into this rewarding market space
PETER BOYLE ING
Q brokers already have customers who have commercial lending needs, except that someone else is servicing those needs currently. There are more than two million small businesses in Australia, and in many cases they are the very people brokers are already helping to buy their homes. They also have small businesses with financing needs. Commercial lending can therefore become a natural extension of retail lending. The broker already knows the customer and understands their risk profile and needs. The addition of commercial lending allows the broker to extend their relationship with customers and become a more valued partner with a deeper relationship. Brokers need to do what they already do so well: understand their customers and clearly articulate their customers’ needs to the lenders. While the process is more manual, the basic requirement is similar to retail mortgage lending. The clearer the articulation of the customer’s needs, the faster and more RETAIL
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transparent the loan process will be. Essentially, the broker needs to understand the client in a similar way to what they already do for their retail lending. The big difference with commercial lending is that the broker needs to undertake periodic reviews to ensure the loan remains on track. The lender needs this information to accurately assess the risk of the loan and to ensure the needs of the customer can continue to be met. The commercial lending industry is at the same spot that the retail lending business was at about 10 years ago. What I mean by that is that commercial lending is still a very manual interaction between the broker and the banks. With retail broking, much of this process is seamlessly automated. For commercial lending, process automation and standardisation is very much in its infancy. As a result, processing commercial deals takes a lot longer than retail deals and this is leading to frustration both on the broker and the customer side.
Peter Boyle, head of business lending, ING
However, what is encouraging is that many industry players are considering adopting the same technology that is currently used in the retail space. ING, for example, is looking at how technology can be used to ease this bottleneck. We are talking to technology providers to automate that party-to-party interaction. We are also looking at ways of standardising how we interact with brokers. This standardisation, regardless of technology, will help to significantly improve turnaround times, transparency and simplicity. As the landscape for commercial lending continues to change rapidly in response to regulatory requirements, regulators and lenders
are going to be increasingly focused on responsible lending practices. The broker has a major part to play in this by being able to make the right representation on behalf of their clients to the lender. Increasingly, there is a requirement for accurate and correct representation. This transparency will better protect the customer, lenders and brokers. ING invests in professional development days for brokers, particularly those who are keen to transition from retail lending to commercial lending. We do this because we see significant upside for brokers to grow and diversify their businesses and for ING to better meet its customers’ needs.
CORY BANNISTER LA TROBE FINANCIAL
Q commercial lending simple and accessible for all brokers has been the catalyst for some staggering results at La Trobe Financial. One of La Trobe Financial’s key differentiators is the simplicity and usability of their broad product range. Not only is this intentional, but it’s also integral to the recent record levels of growth experienced in La Trobe Financial’s commercial loan portfolio. We rely exclusively on mortgage brokers for our loan originations, therefore the broker user experience has rightly been the core focus of our product and process engineering over the years. We pride ourselves on being able to cater not only to consumers who are underserved by the major banks but also to brokers who may have been locked out of referring loan applications for non-residential products without first completing what are often onerous accreditation procedures and volume requirement hurdles. This approach has led to significant take-up by brokers recently as they heed the warnings about the need to diversify in order to maintain a relevant finance business over the long term. Our commercial loan portfolio has grown significantly over the past 12 months, largely as a result of first-time ‘commercial’ users. These results are encouraging and rewarding, knowing that we are not only achieving our objective of being easy to deal with but are also assisting brokers with developing their respective businesses by educating them through the process, giving them skills that will help them KEEPING
take their business to the next level. La Trobe Financial recently surveyed a range of brokers who were yet to submit a commercial loan application, in order to ascertain what barriers they perceived were preventing them from giving it a chance. Here are some of those responses. Top three perceived barriers for entry into commercial lending: Knowledge – The two most common responses were: “I don’t know how” and “I don’t where to start”. By far the most common misconception is that commercial lending is incredibly complex; our view on this is that it doesn’t need to be. La Trobe Financial caters to new entrants to the commercial space as our products are designed to look and feel like standard residential transactions. We keep the process simple. As for knowing where to start, it is important to note that many lenders require brokers to be separately accredited in order to even lodge a commercial application. Depending on the volume of commercial business a broker writes with a lender, that may simply not be worth the time and effort. We recognise that this accreditation hurdle limits many brokers, and that’s why we do not require separate commercial accreditation. Brokers should make these enquiries prior to lodging.
1
Support – “I lack the assistance/ training required to try”. One of the most crucial decisions a broker will make when thinking of lodging a transaction is which lender
2
Cory Bannister, vice-president/chief lending officer, La Trobe Financial
to use. Brokers should investigate a lender’s policy and processes for the specific transaction prior to lodging to avoid any unnecessary delays or surprises. It is also important to partner with a lender that is willing to invest time to guide you through the process. Our credit analysts and sales staff are keen to help brokers unfamiliar with commercial transactions, adopting an educative approach, and are all directly accessible to brokers. Opportunity – “I don’t receive commercial loan applications”. Unfortunately this is often because a broker simply doesn’t
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advertise or ask for this type of business. Like anything, if you don’t ask, you don’t get, and understandably if you’re not comfortable with these transactions you won’t go looking for them. The problem is, others are, and in order to future-proof your business, brokers need to begin creating opportunities in this area. Brokers already have all of the lead generation tools they need to make the transition to commercial lending: it starts with their CRMs. By reviewing clients’ A&Ls, brokers can identify opportunities to write commercial loans for existing clients, and we recommend this as a great, starting point. www.brokernews.com.au
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STEVE KANE NAB
Q business is the engine room of the Australian economy and presents a big opportunity for brokers to both deepen existing relationships and gain new customers. Through NAB’s continued commitment to the broker channel, we are providing enhanced products and services for small business lending to help brokers diversify their revenue streams. SMALL
Four reasons small business lending is a great step for brokers: Many brokers already write loans for self-employed customers, or manage their asset and equipment finance needs. These customers are also likely to have business needs, so by asking ‘how’s business ?’ brokers can open a new door of opportunities.
1
By helping customers with a greater range of lending solutions, brokers give their customers more holistic lending solutions, and enhance their position as trusted, expert advisers across the lending spectrum.
2
There is also a natural affinity brokers can generate between themselves and their customers when it comes to small business lending, as many brokers are small business owners themselves.
3
It’s no secret that brokers operate in a competitive market. By developing a small business lending offer, brokers can stand out and increase their value proposition beyond residential loans.
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As Australia’s leading business bank, each year we provide more loans to companies and small business operators than any other bank. This means we are well placed to provide brokers with the right advice to deliver the support and guidance their small business customers need. We are emphasising our service to brokers on small business because we truly believe we have created a broker-centric offering that ticks all the right boxes. We are confident about this because when we set about building our small business lending solution we spoke directly with brokers about their small business lending experiences, both with NAB and other lenders. We asked them what they wanted in a small business lending solution. The key insight we received was that, for brokers, a market-leading offer isn’t just about the product, price or service. It’s about a combination of these, and the ability to be empowered by the lender to speak in an informed way about the product and the credit approval process. Our prequalifying tool is a key example of how we’ve incorporated these insights. This tool is designed to help brokers gather necessary customer information prior to submitting an application. Once completed, the tool tells brokers whether an application would meet NAB’s qualifying criteria for the relevant facility. We’ve also implemented a specialist team of BDMs to assist with small business lending, and we have a dedicated business banker team. This stands out against what competitors offer, as most use bankers from their proprietary channels to manage broker enquiries.
Steve Kane, general manager, broker distribution, NAB
A sector on the move With 57% of Australia’s GDP generated by small to medium enterprises (SMEs), and approximately a quarter of all applications coming to brokers from small business owners, this is a market filled with opportunity and with clear scope for brokers to grow their involvement. Our research has shown that SMEs are optimistic, with 73% feeling successful in their business. Growth and expansion are firmly on their agenda, with almost half (45%) intending to expand their business in the next three years. Furthermore, one in 10 SMEs remain in a constant state of expansion.
Australia’s small businesses are on the move. Diversifying into small business lending can help brokers grow their business as well as maintain and deepen current relationships. Our emphasis on small business lending is testament to NAB’s concept of ‘broking for life’, which celebrates the meaningful impact that each broker makes throughout the customer life cycle. As brokers move into this new area, or expand an existing business lending book, we’ll be beside them every step of the way, guiding them through the nuances of the small business landscape, and ensuring it’s easier than ever for them to help customers achieve their business aspirations.
PETER VALA THINKTANK
Q lending is an all-encompassing term that covers a wide range of finance options, from small business and unsecured loans to asset finance, cash flow and debenture-secured lending, construction facilities and all manner of commercial property loans. While brokers have been successfully servicing each of these segments for decades, some are more complex than others, though there is no doubt all the relevant skills can be acquired with the right blend of education, experience and assistance from others around you. For those who are new or have limited experience in commercial, it is probably best to approach the areas where the comfort factor is the quickest to pick up. In our view, this revolves around asset finance and sub-$2m commercial property transactions. In jumping in, it is important to keep in mind that no matter which stream of the commercial market you choose to engage with, a number of fundamentals remain the same across them all, and this makes extending your expertise all the more achievable. To kick off, give some thought to how you will educate yourself and stay in touch with current market activities and trends. Ask, “How am I going to find ongoing and repeat business in this sector?” Also, and just as importantly, “Who should I be dealing with in terms of lenders and how am I going to engage with them?” From our many years of accumulated commercial experience here at Thinktank across all the disciplines, we would recommend three key things. First, have a good look over your current client base and network. Gain the necessary COMMERCIAL
confidence in being able to develop solid business opportunities from the sorts of clients and referral partners you have access to. Second, turn to your aggregator, find out who the specialist is in the field, and look to build a great relationship with them. They may even introduce you to other brokers with deep experience who can extend a mentor-type link to help build your knowledge and transaction skills. Third, get introductions to recommended lenders who can be there for you and genuinely provide help from the first deal, then onwards and upwards from there. Lenders can provide tremendous insight into how key parts of the industry function and, in the end, it is how you interact and work with lenders that determines how each deal comes together for you and your client. Beyond that, keeping up to date with industry news from the various media publications and the lenders themselves is very valuable. It will help keep you informed in regard to changes in lending policy, products and current lending appetite, which we all know can change from time to time. Finally, seeking ongoing education in relevant subject areas is always going to add to your skill set and lead to a deeper knowledge of a specific market. Thinktank offers free training, education and industry update sessions to keep brokers up to speed in all areas of commercial property finance. Over the last month we delivered a series of 45-minute sessions around the country on commercial property SMSF-LRBAs and how the recent budgetary and proposed legislative changes are likely
Peter Vala, head of sales and distribution, Thinktank
to impact this significant and still expanding area of finance. Thinktank also offers more general commercial lending and prospecting courses free to brokers. We also provide one-on-one sessions and offer to workshop all new loan applications supported by our team of highly experienced relationship managers. Be mindful, though, when choosing to deal with a lender, to find out whether they pay full upfront and trail commissions or just fixed spot and refer payments. The spot and refer model commonly means merely providing the lender with a client name and details of a transaction in return for a one-off fee, as the lender’s staff take it
from there. However, other institutions, such as Thinktank, prefer to help you write the commercial loan, build your knowledge, retain your customer and referral relationships, and grow your trail book deal after deal. While looking over your existing database of clients, give some thought to accountants, financial planners, solicitors, conveyancers, insurance brokers and real estate agents who are all good sources of repeat referrals. The team here at Thinktank is always happy to work with you and share our thoughts and experiences on the art of successful prospecting where the client and commission earned stay with you. AB www.brokernews.com.au
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PEOPLE
CAUGHT ON CAMERA Pepper Money held its third annual Insights Roadshow in five major capital cities this May and June. The event provided brokers with exclusive access to new tools, technologies, techniques and products specifically designed to grow broker businesses through specialist lending. Andrew Paterson, Pepper’s head of credit; Mario Rehayem, managing director, Australian mortgages and personal loans; and Aaron Milburn, director of sales and distribution, Australian mortgages and personal loans, all delivered presentations, and introduced the company’s new digital offering. Photos here are from the Sydney event on 30 June at Waterview Bicentennial Park. Photo credit: Ou Wen Yan
Aaron Milburn, director of sales and distribution, Pepper
From left: Arthur Galis; Mario Rehayem, managing director, Pepper; and Ziad Kalach 22
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Andrew Paterson, head of credit, Pepper
Get involved in the discussion Share your thoughts at
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FROM THE FORUM
Top comments from trending stories on brokernews.com.au
BANKS PRESSURING BROKERS IN DIGITAL REVOLUTION As the industry moves towards a 100% digital mortgage process, one legal specialist says resistance by the banks to change has resulted in brokers squeezing lawyers to meet demands. Peter Mericka, property lawyer at Lawyers Conveyancing, says he’s been “inundated” with emails from brokers requesting paperwork for the banks that no longer exists. In the past, customers had to fill in multiple paper forms, including concession forms and forms for the transfer of land. PEXA has combined 17 of these into a single digital duties form, but banks are still demanding hard copies.
We assist clients to gain an approval from their relevant lender, we don’t settle loans. This is between the lender and the solicitor. Sure, we will help where we can, but if your industry system is in disarray due to the recent changes, join the club, suck it up princess and put together your own template, and when a client or lender contacts you, then you do the education. Take ownership of your own problems and stop passing them onto others. OzBoy on 26/07/17 at 10:17 AM
How is this the broker’s problem? Oh, that’s right, brokers are to blame for everything. Fair chance one of us even shot JFK! TJ on 26/07/17 at 10:44 AM
When a bank asks for any legal document after loan docs have been returned, I don’t even read what it is anymore, just flick straight to the lawyer. I’ve done my bi – loan collated, loan submitted, loan approved, documents issued, docs returned – then it’s the lawyer’s turn to deal with the bank. Ha ha on 26/07/17 at 3:19 PM
This attitude is at the root of the problem. Even when the broker is asked by the bank to obtain documents from the customer, this broker will have the lawyer spend professional time (and presumably charge costs to the client) for doing what the bank has asked the broker to do. Then, if the lawyer doesn’t do as the broker demands, the broker contacts the client and tells the client that settlement may be delayed because the lawyer is being difficult. … I think the point is being missed here. As the purchaser’s lawyer, I really don’t want to be caught in the processes and procedures adopted by banks and brokers. It is up to the bank to obtain whatever information, documents or forms it may require, and the broker is the person best placed to obtain these from the borrower. … I don’t want to be involved in the mortgagee’s processes, and I don’t take kindly to being forced to do so by brokers or banks, and particularly when neither seems to be up to date with the current conveyancing procedures. Peter Mericka on 27/07/17 at 8:49 AM
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PEOPLE
Have an interesting deal? Had a particularly difficult or interesting deal? Why not share it with us? Email:
Otiena.Ellwand@keymedia.com.au
A BIG DEAL
Peter Ellis, founder of Lending Mate, on how he helped a couple who had been declined by three lenders and had given up all hope of buying a new home
Location: Drouin, a regional town 90km east of Melbourne
THE FACTS
repayment history since then, they had developed a system to ensure bills were paid on time. For me, this deal was a no-brainer. I discussed the deal in detail with four different lenders to compare all the available options. The postcode of the property ruled out two of them, so the choice remained between the other two. Although the rate was higher than what they would have had, I was able to show them that with their intended repayments they would still pay it off in around 15 years. They were ecstatic when their loan was approved. Within a day of listing their existing home, they had three offers for $50,000 more than what they expected and were able to settle on the purchase just days before Christmas. THE TAKEAWAY
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Loan term 30 years
Client Early 50s, married couple
Goal Buy a new home
they then approached another major bank, disclosed why they had been previously declined and were absolutely assured of approval. They were devastated when their application was declined. One last try at a regional bank ended the same way.
THE SCENARIO
The borrowers, in their early 50s, had decided that they wanted to move to where they could afford a bigger, newer home on a larger block of land with room to be comfortable. With only $80,000 owing on their current mortgage and their current home worth around $400,000, it never occurred to them that getting finance approval would be a major roadblock. They found the perfect property for $750,000 in Drouin, a regional town 90km east of Melbourne with a population of 10,000, and sought pre-approval, pending the sale of their existing home. Without a second thought, they approached their current lender who they had been with for 15 years with a perfect repayment history. To their utter disbelief, their application was declined. The reason given was a couple of late payments on a credit card held with that lender. They also discovered a land rates default of $1,500. With their loyalty counting for nothing,
Loan size $360,000
THE SOLUTION
Peter Ellis is the founder of Lending Mate and is an experienced specialist lending broker
On the verge of giving up, they happened to chat to a real estate agent I had helped in the past. She knew that I specialised in difficult scenarios and was the go-to broker for declined loans. When I looked carefully at their scenario, I found it to be very strong. They had both been with their respective employers for around 10 years. The male applicant had consistently earned around $40,000 annually in overtime. They had lived in the same house for 20 years, had a $5,000 credit card, $40,000 in savings and $210,000 in super. The explanation of the late payments and the default stacked up. With perfect
In your research, include questions about any past dealings and facilities borrowers have had with potential lenders. Credit issues drop off credit reports, but previous conduct in a lender’s archives can come back to haunt for years to come. Remember that the lender’s document checklist only includes the minimum number required to secure a straightforward deal. To package a loan effectively, you need to really understand what that particular lender is looking for and ensure you include the reasoning and evidence they need to approve the deal. This includes addressing NCCP requirements as well as specific issues with the scenario, like what happened, why it happened and if it will happen again. Apart from a full credible explanation of the default, I also gave extended repayment history on other debts to prove their more recent repayment record. I serviced the loan without using the overtime of the male applicant but still gave a few years of history to evidence its ongoing nature. The reason I specialise in difficult loans is because of the satisfaction I get from it. I tell everyone I know that this is what I do. Know your niche and make sure everyone you know knows it too. You can’t be all things to all people, so by being focused you will do the type of work you enjoy and develop skills and a reputation for being the go-to expert. AB Disclaimer The scenario is for illustrative purposes only and does not take into account the individual’s needs and requirements. Your full financial situation will need to be reviewed prior to acceptance of any offer or product. Credit Representative 442518 is authorised under Australian Credit Licence 389328.
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DATA
WESTERN AUSTRALIA
QLD SPOTLIGHT
Rental activity in metro Perth has been high Leasing activity, in particular, improved in Perth through May 2017. Almost 5,000 properties were rented out that month, according to the Real Estate Institute of WA (REIWA). “At a suburb level, East Perth, Perth and Scarborough in the Central sub-region had the highest volume of properties leased in May,” says Hayden Groves, president of REIWA. “The South West and Central sub-regions also had particularly strong months, recording increases in leasing activity of 33.7% and 33%, respectively.” However, the top performer in the rental market was the North East subregion, with a 35.5% rise in activity. Additionally, Perth is addressing the issue of stock and is looking to sustain demand by tempering the volume of properties for rent. “When compared to May 2016, the volume of properties for rent had only increased marginally by one per cent, which hints to signs that listing levels have finally begun to stabilize,” Groves says.
Area
Type Median value
Quarterly
12-month
growth
growth
Perth
H
$510,000
-1.9%
-2.5%
WA Country
H
$360,000
0.0%
-6.4%
Perth
U
$410,000
0.2%
-3.5%
WA Country
U
$285,000
0.0%
-7.3%
NEW SOUTH WALES
Possibly as a response to high prices in the metro, regional areas are getting a boost “There will be sustained capital growth and opportunity for investors in the major regions that are commutable to Sydney, ie Newcastle, Central Coast, Wollongong and the Blue Mountains,” says Jane Slack-Smith, director of Investors Choice Mortgages. “Major regional centres built on multi-industries, like Dubbo, Bathurst, Tamworth, will continue to have good property demand. This is primarily due to affordability in Sydney’s feeder cities, and good rental returns that will attract investors.” Moreover, although added supply could at first derail the market in Sydney, it also has the potential long-term benefit of solving the price problem. “It balances supply and demand initiatives,” says Cheryl Thomas, deputy executive director of Property Council NSW. “More housing supply must not be restricted by misleading preconceptions of what increased density is – solutions can be found.” Area
Type Median value
Quarterly
12-month
growth
growth
BOON AND BANE OF BRISBANE
Growth is limited due to high unit stock, but low prices maintain the appeal of Brisbane and the Sunshine Coast to Sydneysiders Conisbee, chief economist at REA Group, says tenants in Brisbane are developing a taste for apartment living since such properties are considerably cheaper than houses; however, this has not translated into heightened rental demand as new developments are creating too much supply. Thus, older second-hand units could be an option for buyers on a budget – these types of properties have become bargains in this market, with the influx of new apartment stock pushing their prices down even more. For investors desiring to get a foot in the door of premium suburbs, renovation may be a smart move. To avoid overcapitalising, Herron Todd White recommends looking into near-city suburbs offering limited stock, rising values and established precincts, as well as proximity to the CBD and school catchments. “There are capital gains already underway in a number of these locations and you want to be the first buying into the market, not the last,” states the June 2017 Month in Review report. That said, Jane Slack-Smith, director of Investors Choice Mortgages, doesn’t see Brisbane as a good long-term investment. “Brisbane really has not performed as it should have in the last few years. The population growth has also been lacklustre, and with the downturn associated with the major infrastructure projects in Gladstone and the mining boom coming to a quick halt, the state has not enjoyed the growth that was anticipated during this last cycle,” she warns. While the Commonwealth Games are expected to spur growth in the market, Slack-Smith believes this event will only bring short-term benefits. “It is more likely that the very experienced investors who might trade in and out of this market quickly will be the ones making money,” she says. AB NERIDA
H
$905,000
-9.5%
3.6%
Median price (houses)
NSW Country
H
$445,000
1.1%
5.7%
$641,409
Sydney
U
$710,000
-0.3%
2.9%
NSW Country
U
$365,000
0.0%
2.9%
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The Brisbane property market continues to position itself as a secretly strong performer Data from CoreLogic lists Brisbane as the third busiest property market in Australia, with property values increasing by 3.7% over the last quarter and by 20.7% over the last five years. In the future, we may see property prices rise even further in this market as both national and foreign investors start to look beyond Sydney and Melbourne and invest in other areas. Brisbane could be a safe bet for investors. Not only are property prices rising at a fairly consistent rate but vacancy rates remain relatively low. According to the latest SQM Research, vacancy rates for the city are currently sitting at 3.1%, which is largely in line with both Sydney and Melbourne. It isn’t just investors who can benefit from the robust Brisbane property market. Record-low interest rates are keeping the cost of borrowing low, which is great news for owner-occupiers. While no one knows what the future will bring in terms of rate adjustments, it is likely that mortgage rates will remain at near record lows for the short to medium term at least. Matt Cunliffe Franchise owner manager, Mortgage Choice in Brisbane
SUBURB TO WATCH: CARINA HEIGHTS
Sydney
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BROKER PERSPECTIVE
Median price (units) $450,574
12-month growth
3-year growth
5-year growth
Indicative gross rental yield
4.3%
15.9%
34.2%
3.5%
12-month growth
3-year growth
5-year growth
Indicative gross rental yield
-3.0%
9.3%
11.1%
5.0%
AUSTRALIAN CAPITAL TERRITORY
The rush to buy at auction may be motivated by the renovation potential of properties on large blocks of land OPPORTUNITIES AND KEY INFRASTRUCTURE
Games Village
Howard Smith Wharves
After CG2018, the athletes’ village will become a mixed-use residential community
A retail, dining and tourism centre is being created in Brisbane’s heritage-listed buildings
Stadium cheers
Resort development
Local jobs are Community consultation beginning to flow from on Gold Coast parkland the $250m North development plan has Queensland Stadium been completed
HIGHEST-YIELD SUBURBS IN QUEENSLAND Suburb
Type
Median price
Weekly median advertised rate
12-month growth
Blackwater
H
$90,000
$220
13%
Dysart
H
$75,000
$168
12%
Charters Towers City
H
$125,000
$270
11%
Jubilee Pocket
U
$141,000
$275
10%
Mount Morgan
H
$105,000
$200
10%
“Recently, there has been some significant capital growth in these areas. Well renovated houses have been selling at a premium,” reports Herron Todd White in its June 2017 Month in Review. Renovators looking to work on older houses that simply require upgrading can find such homes in inner-north suburbs like Lyneham, Watson and Downer, which offer houses built in the 1960s and ’70s. In addition, Ainslie, Braddon, Campbell and Yarralumla teem with dwellings constructed in the 1930s to ’50s. Small, ex-government properties on large blocks are also popular since there is a lot of room for expansion, which is perfect for families. Thus, many renovators actually do not intend to profit off the end results but aim to occupy the homes themselves.
Area
Type Median value
Quarterly
12-month
growth
growth
Canberra
H
$675,500
4.7%
6.7%
Canberra
U
$428,000
-2.7%
2.4%
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DATA
SOUTH AUSTRALIA
CAPITAL CITY AUCTION CLEARANCE RATES
Neither weak nor strong, Adelaide is ‘not a market to ignore or notice’
WEEK ENDING 23 JULY 2017
growth
growth
Adelaide
H
$450,900
2.5%
3.8%
SA Country
H
$295,000
3.5%
1.8%
Adelaide
U
$365,000
3.5%
4.1%
SA Country
U
$179,250
-8.1%
2.7%
Investors are seeking out good-quality apartments
$1,000,000
Quarterly
12-month
growth
growth
Melbourne
H
$650,000
-5.1%
8.1%
VIC Country
H
$326,000
0.0%
3.2%
Melbourne
U
$480,000
-3.4%
1.0%
VIC Country
U
$258,000
-2.1%
1.6%
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40
Not sold
18 69.0%
PERTH Total auctions
35
Sold
12
Not sold
14 46.2%
$1,100,000
Sydney Melbourne Brisbane Adelaide
Perth
Hobart
$535,000
$277,500
$360,000
$0
$400,000
$100,000
$509,000
$200,000
$315,000
$300,000
$425,000
$500,000 $400,000
$520,000
$700,000 $600,000
$690,000
$800,000
$920,000
$900,000
Houses
$715,000
There is a significant difference in the rental rates and returns of houses and units in Melbourne, and apartments are getting a lot of attention from investors because of their higher average yield (4.26% compared to 2.93% for houses). Jane Slack-Smith, director of Investors Choice Mortgages, notes that a top choice is older, high-quality units located in established suburbs with good public transport. While there are concerns about oversupply, the level of apartment development remains appropriate, according to REA Group’s chief economist, Nerida Conisbee. With houses becoming more and more unaffordable for first-time buyers, units are an attractive alternative, and if oversupply pushes prices down, this could push demand up to meet the existing stock levels. Moreover, the changes announced in the federal budget have made it easier for first-time buyers to make deposits.
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Sold
Clearance rate
MEDIAN HOUSE AND UNIT PRICES
Type Median value
64
Clearance rate
All data sourced from CoreLogic
VICTORIA
Area
Total auctions
Darwin
Units
$410,000
12-month
ADELAIDE
$592,500
Quarterly
$370,000
Type Median value
$530,000
Area
The combined capital city preliminary clearance rate increased to 74.8% for the week ending 23 July, up from a revised final clearance rate of 69.4% in the week prior, while auction volumes increased week-on-week. There were 1,712 properties taken to auction this week, up from 1,627 in the previous week, and higher than the same time last year, when 1,329 auctions were held and a clearance rate of 67.9% was recorded. Based on the preliminary numbers, all but one of the capital cities saw the clearance rate increase week-on-week. Melbourne’s auction market has continued to show some resilience to softer auction conditions, recording the highest preliminary clearance rate of 79.4%. Final auction results show Sydney’s auction clearance rate has been tracking below 70% over the past six weeks, so it will be interesting to see if the preliminary clearance of 74.9% is again revised below the 70% mark.
$400,000
While Charles Tarbey, the chairman and owner of Century 21 Australasia, does acknowledge that SA’s economy has struggled since the closure of major plants and industries, he holds a more positive view of Adelaide’s growth prospects. “As of the end of May, dwelling values were up 0.8% over the month and 2% over the quarter,” he says. “The South Australian market is one that is well balanced in terms of demand and supply and holds the promise of steady growth. Investors looking to purchase property may benefit from this stability.” For Nerida Conisbee, chief economist at REA Group, Adelaide is a market that’s in the middle of the pack. “It’s never a strong or weak performer, and always had low growth. [There are] no high levels of volatility or growth – [it’s] not a market to ignore or notice,” she comments.
Canberra
CAPITAL CITY HOME VALUE CHANGES Capital city
Weekly change
Monthly change
Year-to-date change
12-month change
Sydney
0.0%
2.1%
7.5%
13.4%
Melbourne
0.0%
4.2%
9.2%
16.7%
Brisbane
-0.6%
0.3%
1.4%
4.0%
Adelaide
0.5%
0.5%
2.3%
2.5%
-0.2%
-0.8%
-2.1%
-2.8%
-0.1%
2.2%
6.2%
11.1%
Perth Combined 5 capitals
*Brisbane results are for the combined Brisbane and Gold Coast region. The monthly change is the change over the past 28 days.
BRISBANE CANBERRA Total auctions
40
Sold
25
Not sold
11
Clearance rate
Total auctions
116
Sold
45
Not sold
63
Clearance rate
41.7%
69.4%
SYDNEY Total auctions
609
Sold
380
Not sold
169
Clearance rate
69.2%
TASMANIA
MELBOURNE Total auctions
756
Total auctions
7
Sold
526
Sold
4
Not sold
176
Not sold
3
Clearance rate
Clearance rate
74.9%
TASMANIA
Hobart is a lifestyle choice; property prices are very affordable Investors Choice Mortgages director Jane Slack-Smith says local industry closures could negatively impact Tasmania’s economy. Nonetheless, there is still much underlying growth in the Hobart area. “For some investors, the 5% per annum rental returns are hard to resist, especially at a median house value of $415,000,” she says. “A savvy super planner may even find this capital city a great investment for their super fund and a long-term tree change for themselves. “As with any city market, there are always pockets of potential – you just need to search them out.”
Area
57.1%
Type
Median value
Quarterly growth
12-month growth
Hobart
H
$385,000
-1.5%
6.4%
TAS Country
H
$260,000
-5.1%
0.0%
Hobart
U
$308,000
2.7%
2.8%
TAS Country
U
$237,500
1.9%
0.0%
All data sourced from CoreLogic.com.au
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PEOPLE
IN THE HOT SEAT Leon Spadavecchia, managing director of Afirm Financial, talks about the importance of keeping on top of lenders’ frequent policy changes to stay in the game, the joy of helping a family secure their first home in Australia, and how he rides a motorbike like Mr Bean
Who or what inspired you to become a broker? Prior to becoming a broker, I spent 10 years in the banking A and finance industry. To this day, I have a strong passion for excellent customer outcomes. I love being able to offer choice and deliver successful results with great financial advice. I’m really passionate about what I do and I love helping people.
Q
What has been one of your most memorable experiences as a broker? From a client point of view, it was when I helped a family from A overseas buy their first home in Australia. The client had been declined by the bank and by another broker and had lost all hope. And seeing my executive assistant, Shauna, win a national loan administrator award last year. To see one of your staff win an award is an amazing elation, and it’s really heart-warming.
Q
What do you think will be one of the biggest challenges facing the industry in the next couple of years? Change. There’s so much happening at the moment with A regulation obviously, with the investment and interest-only speed humps. For brokers, it’s keeping abreast of the ever-changing policies and rates. It’s probably the most challenging time I’ve seen in 13 years of broking. I offered a client a product with a bank on Friday, and on Monday I found out that it was no longer available and the policy had changed. Brokers must subscribe to all lender updates and dedicate time to actually reading and absorbing it. You have to, or you’ll be out of the game.
Q
What do you like to do in your spare time? Spend time with my family. I try to go for a motorbike ride A every now and then. I’m not a yahoo; I’m more like Mr Bean on a slow motorbike ride. There’s not a lot of spare time. It’s a big juggle between being a broker and a financial planner, running a business, having two young children, and building a home at the same time. But I love what I do; I love the adrenaline pumping through my veins. AB
Q
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