Australian Broker 15.10

JUNE 2018 ISSUE 15.10

The small business broker How lenders are helping brokers embrace commercial /16

Going beyond specialist lending Bluestone celebrates move into the near-prime space /24

TONY CARN The sales director of NextGen.net talks about the leading role brokers can play as the industry’s digital transformation gains pace /14

Housing hotspots Darwin’s deal for first home buyers with big ambitions /26

ALSO IN THIS ISSUE …

Big deal Helping a home-based start-up get off the ground /20 Opinion Transforming and capitalising on the post-approval process /22 In the hot seat Business Initiative’s Matt White on client satisfaction – and humour /30

NEWS

IN THIS SECTION

Lenders Majors affected by industry change /04

Associations MFAA hosts Canadian mortgage body /06

Technology NAB unveils new digital broker tools /10

Regulators ASIC chair speaks up on industry conflicts /12

Market Guarantors could boost first home buyer market /08

www.brokernews.com.au JUNE 2O18 EDITORIAL

SALES & MARKETING

News Editor Rebecca Pike

Sales Manager Simon Kerslake

Journalist Nicola Middlemiss Production Editor Roslyn Meredith

DATES TO WATCH

Upcoming can’t-miss events

ART & PRODUCTION Designer Martin Cosme Production Manager Alicia Chin

2 8 M AY

5 JUNE

6 JUNE

Australian Mortgage Awards: Nominations open

ASIC’s Regtech Liaison Forum

Broker Business Exchange

Returning for the 17th year on 19 October, the Australian Mortgage Awards is the leading independent awards event for the mortgage industry. It highlights the outstanding achievements of those in the business across 31 categories. Nominations will be open from 28 May until 29 June

Hosted in ASIC’s Sydney and Melbourne offices from 2pm, the forum will connect with sites in Perth, Brisbane, Canberra, Hobart and Adelaide via video conference to support networking, discussion of regtech developments, and opportunities to collaborate on initiatives that promote positive applications of regulatory technology

Taking place at the Westin Sydney, Broker Business Exchange is Australia’s leading independent national broker event, featuring an agenda of insightful conversation and debate, as well as observations from leading industry personalities

Traffic Coordinator Freya Demegilio

Marketing and Communications Manager Michelle Lam

CORPORATE Chief Executive Officer Mike Shipley Chief Operating Officer George Walmsley Managing Director Justin Kennedy Publisher Simon Kerslake Chief Information Officer Colin Chan Human Resources Manager Julia Bookallil

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7 JUNE

13 – 21 JUNE

20 JUNE

MFAA National Roadshow concludes

Pepper’s National Insights Roadshow

FBAA Summit Adelaide

The MFAA wraps up its Changing Gears National Roadshow in Brisbane on 7 June, after more than a month on tour across Australia. Each event featured thought-provoking discussions and key insights, in addition to regional awards and a dedicated Opportunities for Women workshop in Sydney

In its fourth year, the Insights Roadshow forms a significant part of Pepper’s education offering to the third party channel. The roadshow starts in Melbourne on 13 June before moving to Adelaide (14 June), Perth (19 June), Sydney (20 June), and Brisbane (21 June)

Taking the stage at the Hilton Adelaide, senior business coach David Bayne will give a sales presentation that promises to be like no other. He will be joined by FBAA executive director Peter White and some of Adelaide’s top brokers, who will take questions from the audience

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Key Media Pty Ltd Regional head office, Level 1O, 1–9 Chandos St, St Leonards, NSW 2065, Australia tel: +61 2 8437 4700 fax: +61 2 9439 4599 www.keymedia.com Offices in Sydney, Auckland, Denver, London, Toronto, Manila, Singapore, Bengaluru

23 – 24 JUNE

25 – 26

JUNE

2 6 J U LY

Brisbane Property Expo

Training: From Specialist to Leader

MFAA National Excellence Awards

Thousands of property buyers and investors are set to arrive in Brisbane for the Property Buyer Expo – the largest and most complex property expo in the state. It will focus on major developments across Brisbane, Gold Coast, Sunshine Coast, Ipswich, Logan, and other hotspots

The first part of Informa’s nationwide training series concludes in Melbourne with a two-day course on the leadership skills that make a difference. Teaching how to transition from a specialist into a leader, the course will highlight emotional intelligence, respectful influence, and how to deliver on organisational and personal objectives

Taking place in Melbourne, the MFAA National Excellence Awards brings together the best of the best from the State Excellence Awards and will feature a number of additional categories, including the Aggregator Award and the Support Service Provider Award, in addition to four member voting awards

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This magazine is printed on paper produced from 1OO% sustainable forestry, grown and managed specifically for the paper pulp industry Copyright is reserved throughout. No part of this publication can be reproduced in whole or part without the express permission of the editor. Contributions are invited, but copies of work should be kept, as Australian Broker magazine can accept no responsibility for loss. Australian Broker is the most-often read industry publication, according to independent research carried out by the Ehrenberg-Bass Institute for Marketing Science at the University of South Australia in December 2008.

The research also found that brokers rate Australian Broker as the best for both news content and feature articles, followed by sister publication MPA. Overall, on all categories, Australian Broker ranks top followed by MPA. The results were based on a sample of 405 respondents who were the subject of telephone interviews.

NEWS

LENDERS AMP FACES RECORD CLASS ACTION of mid-May, troubled lender AMP is set to face five duplicate class actions brought by its investors. Previously, judges have allowed identical class actions to proceed at the same time, before consolidating after a few months.

If all go ahead it would set a new precedent for corporate class actions. AMP has accepted the ‘fee for no services’ allegations and is further accused of misleading ASIC. In a later submission to the banking royal commission, AMP said this had been “overstated”.

AUSTRALIA SAYS GOODBYE TO PLASTIC Source: RBA, CommSec

Credit card accounts hit a two-year low and card numbers are falling at a record annual rate

AS

small business lender ONLINE Prospa hopes to raise approximately $146m through its IPO to fund growth in its existing business model, investment in new product categories, as well as expansion into New Zealand.

Venture capital investor Entrée Capital will support the IPO to maintain its 34% stake in the company. In addition, Airtree has invested an additional $3m (8.4% stake), while SquarePeg has invested a further $10m, increasing its holding to 4.4%.

“Staff who activated these [Youthsaver] accounts with their own money were generally out of pocket as the amount of the deposit was greater than any bonus” Matt Comyn CEO, Commonwealth Bank

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Credit card accounts, annual percentage change

PROSPA IPO TO FUND NZ EXPANSION

10%

8%

6%

4%

2%

0%

-2% Jan-96

Jan-00

Jan-04

Jan-08

MAJOR BANKS AFFECTED

BY INDUSTRY CHANGE KPMG’s half-year report confirms major banks saw a decrease in aggregate profits in the 2018 half-year data has shown that the major banks experienced a decrease in aggregate profits in the first half of FY2018.

KPMG’s Major Australian Banks Half Year Analysis Report 2017–18 found that the majors reported a cash profit after tax of $15.2bn, which is down 2% compared to the first half of 2017.

While the banks have reported continued improvement in loan impairments and margins, experts believe the result reflects a difficult regulatory and operating environment for the majors. They have faced slowed revenue growth, rising capital levels and increasing legal and remediation costs.

Ian Pollari, KPMG Australia’s head of banking, said, “Despite NEW

slowing demand for credit and increasing regulatory and capital costs, the majors are accelerating their efforts to transform their business portfolios, invest in digital capabilities and simplify their operating models.”

The results also showed that the major banks recorded an average net interest margin of 203 basis points, up three basis points compared to last year. This difference is primarily due to mortgage and deposit repricing offsetting lower earnings on capital markets income, and the impact of the major bank levy.

The majors recorded net interest income growth, which increased by 4.8% to $31.7bn for the half-year, while non-interest income decreased by 5.8% to $11.5bn, mainly due to

Jan-12

Jan-16

one-off asset disposals. Housing credit recorded growth in the half-year of 1.8%, compared to non-housing credit, which only grew by 0.9%.

Adrian Fisk, KPMG head of financial services, said, “The results begin to reflect the transformation that is underway. As the majors re-shape their business models for the future to reflect the societal, regulatory and technology agenda, careful consideration of the needs of all stakeholders will be required in their strategic decision-making.”

The majors’ aggregate charge for bad and doubtful debts decreased by 19.5%; their capital position continued to rise, and the average cost-to-income ratio increased by 265 basis points to 45.7%.

Also, thanks to the banks’ responses to regulatory requirements, the increase in their capital levels has continued to compress industry returns. The majors’ returns on equity decreased by 78 basis points to an average of 12.9% for the half-year.

NEWS

A S S O C I AT I O N S REGULATORS BEING ‘FUNDED FOR ACTION’ federal budget’s allocation of regulator funding means brokers should brace themselves for action, according to FBAA executive director Peter White. ASIC has been allocated $4.7m and APRA $2.7m, specifically linked to the royal commission. White said the industry must be prepared for change, and commented, “Regulators are being funded for action and there is no doubt that findings from the royal commission will compel them to act decisively.”

THE

INSTITUTE RESPONDS TO BUYER SURCHARGE Urban Development Institute of Australia has voiced disappointment that the WA government has increased its foreign buyers surcharge from 4% to 7%, to help the state’s finances and match other states. The charge will apply from January 2019 on the dutiable value of residential property purchased by foreigners, including corporations and trusts. The increase brings WA in line with NSW, Victoria and SA. Queensland will hike rates from 1 July.

THE

MFAA HOSTS CANADIAN MORTGAGE BODY Delegation arrives in Australia to research mortgage and finance industry and compare opportunities in Canada from the industry

DELEGATES association in

Canada visited Australia last month to research similarities between the two countries’ financial sectors and open up greater communication.

Hosted by the MFAA, the team from Canada said that while they were not experiencing anything like a royal banking commission, they were facing discussions around government regulation.

They joined the MFAA for its roadshow and awards in Melbourne, before visiting Sydney to meet other industry bodies.

Discussing the visit, Paul Taylor, president and CEO of Mortgage Professionals Canada (MPC), said, “We wanted to make sure we

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have a better understanding of the regulation structure here.

We have got roughly the same number of people, number of national banks; our broker channel is the same size, we have got regulatory pressure on both industries and we’ve got equivalent comparative markets.

“If we have a clearer vision on how things are operating here, then in our own discussions with regulators back home we can be much more valuable with our input in those discussions.

Hopefully we can help them avoid some of the landmines of poor policy decisions, because we can compare and contrast the different landscapes.”

Also visiting as part of the group

was Mark Kerzner, president of The Mortgage Group and former chair of the MPC board.

“We kept hearing how similar our markets were, so we wanted to validate that for ourselves,” Kerzner said.

“We believe where we can create dialogue and opportunities for shared learning, it can benefit both parties. If there’s an experience we’ve respectively gone through, we can share it. We’ve made some connections down here; we’re looking for creating reciprocal planning.”

Canada currently has around 35% of home loans being driven through the broker channel, compared to around 55% in Australia. However, the number of first home buyers coming through brokers there is up to 55%. In Australia this share is only up to around 30%.

Kerzner added, “As the channel matures and people have had a good broker experience, they’ll refer their friends and family too.”

“Whereas housing affordability was a centrepiece of the 2017 budget, there was nothing in this year’s budget that directly addressed this” Malcolm Gunning President, Real Estate Institute of Australia

APPLY YOUR SMARTS

SEAL THE DEAL FIRST TIME EVERY TIME WITH APPLYONLINE

Contact us to book a training session: training@nextgen.net

®

NEWS

MARKET CONSTRUCTION, LOAN APPROVALS DOWN number of home loans approved across the country in March fell by 2.2%, according to figures from ABS. The value of properties also fell between February and March, for both owner-occupied housing and investment properties. In seasonally adjusted terms, the total value of all dwellings fell by 4.4%. The value of investment housing declined by nearly 10%, and the number of construction projects approved fell by 4.4%.

THE

WESTPAC TOPS CAREER PROGRESSION RANKINGS has been named best in the industry for career progression, with CBA named best for financial health and Bendigo & Adelaide Bank taking a top spot for CSR and reputation. The rankings from Randstad’s 2018 Employer Brand Research also saw finance drop one place as “Australia’s most attractive industry to work in”, to 19th overall. Perceived benefits include financial health, technological innovation and career progression.

WESTPAC

GUARANTORS COULD BOOST FIRST HOME BUYER MARKET White paper concludes intergenerational wealth is key to supporting young buyers looking for their first homes many as 95% of all first home buyers are potentially delaying or missing the opportunity to get on the property ladder by not including a guarantor on their home loan.

According to research from Mortgage Choice and CoreData, only 4.9% of first home buyers said they had used a guarantor to purchase a property. Currently, the average first-time buyer needs to put down approximately $100,000 for a median dwelling value of $554,605.

Mortgage Choice CEO Susan Mitchell said, “For many first-time buyers, the biggest hurdle they face is saving a sufficient deposit that amounts to 20% of the purchase price, and

this has been made even harder by strong property price growth over recent years.”

In its white paper, The Evolving Great Australian Dream 2018, Mortgage Choice found that 40% of buyers would need some form of assistance to enter the property market, as they had just 15% or less of the required deposit for a property.

Mitchell said it was important for buyers and their prospective guarantors to weigh up the pros and cons, and that mortgage brokers were the right people to speak to.

“One way first home buyers can get a leg up onto the property ladder is to access intergenerational wealth created

AS

“If downward trends continue as borrowing costs rise and APRA demands tighter lending standards, small business owners may regret using their home as a bank” Greg Charlwood Managing director, Australian Invoice Finance 6

by the boom in the property market, and ask a parent to be a guarantor by offering their own home as extra security.

“This strategy lets them get onto the property ladder sooner rather than later and with a smaller deposit.

“It has the added advantage of avoiding lenders mortgage insurance, which can total thousands of dollars for cashstrapped first home buyers.”

In a state-by-state comparison, Western Australia had the highest proportion (16.5%) of prospective buyers saying they would have a guarantor on their mortgage. They were followed by New South Wales at 13.9% and Victoria at 13.3%.

Of those who purchased with a guarantor, 77.2% turned to their parents.

Mitchell added, “If a buyer has a guarantor on a home loan, it is essential they speak with a qualified mortgage broker and a solicitor to protect both parties.”

ACGB DEBT ON ISSUE Source: Budget papers, AOFM, ANZ Research

Gross amount of Australian Commonwealth Government Bonds (ACGB) on issue 600 Budget 2018-19 – Total ACBG on issue

500

MYEFO 2017-18 – Total ACGB on issue

$bn

400 300 200

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2021-22

2020-21

2019-20

2018-19

2017-18

2016-17

2015-16

2014-15

2013-14

2012-13

2011-12

2010-11

2009-10

2008-09

2007-08

2006-07

2005-06

2004-05

2003-04

2002-03

0

2001-02

100

NEWS

TECHNOLOGY

BLOCKCHAIN AGAINST FRAUD ENTERS TESTING Against Fraud (BAF), tipped to mitigate fraud and reduce human error in finance and lending, has entered the next phase of testing after concluding a pilot scheme with an unnamed major bank. Founded

by Lakeba Group and former MFAA president Tim Brown, BAF provides any bank with real-time verification of payslips, tax returns and other documents and can even be used for applications made by foreign and overseas applicants.

BLOCKCHAIN

NAB UNVEILS NEW DIGITAL BROKER TOOLS To help brokers support SME customers, the bank’s innovations, powered by NextGen.net, include QuickBiz unsecured business loans, and ApplyOnline has announced two new digital platforms to help brokers in arranging lending for small businesses.

The first, NAB QuickBiz for Broker, enables brokers to apply digitally on behalf of their small business clients for unsecured business finance of up to $100,000.

This can be either in the form of a business loan to help with short-term funding needs, or an overdraft, which gives small business clients the flexibility to manage their cash flow and unexpected payments. On application, brokers receive an instant online decision and their small business clients can access funds within one business day once signed documents are returned.

NAB has also introduced NAB

ApplyOnline, which will allow brokers to lodge small business loans – it’s a tool that helps streamline the application process, as well as reduce duplicate information and administrative work.

Brokers can lodge both small business and residential loans online together, making the process simpler, faster and more consistent.

Aggregators like AFG, Connective, Mortgage Choice and Finsure have already rolled out the services to their brokers. It is hoped they will be fully rolled out by the end of the month.

GM of NAB commercial broker Chris Thomas said, “NAB is continuously investing in smart technology, and we remain focused on supporting brokers to deliver

good outcomes for their customers in a simple, streamlined and supported way.

“Our research shows that around a quarter of a broker’s residential customers are also business owners.

With the new ApplyOnline capability, we’re enabling brokers to extend customer conversations and meet a broader range of customer financing needs.”

Speaking at the launch of the products, NAB’s GM of broker distribution, Steve Kane, said, “We recognise the value that the broking channel provides to the community.

Because of the times, brokers are going to have to do different things.

It’s going to be important for them to be looking at what they can do to broaden their business.

“We are very focused on delivering for the broker channel. The Productivity Commission and the royal commission are reviewing it and we’ve been very transparent in supporting them. We really focus on ensuring we deliver the best we can for the broker channel.”

FINTECH STRATEGY OBJECTIVES BY INDUSTRY Source: KPMG International global fintech survey, 2017

Ranking of fintech strategy objectives – by industry Banking

Insurance

75%

Enhance customer experience

31%

Deliver cost-efficiencies

19%

22%

26%

Expand into new lines of business

23%

19%

1% % ranked highest importance

www.brokernews.com.au

67%

47%

Protect core business against threats

Develop new quantitative investment strategies based on AI

10

86%

48%

Transform current capabilities

Asset management

5% % ranked second-highest importance

57% 14% 14% 33% 14%

ONLINE MARKETPLACE SEEKS $5M FUNDING has turned to equity crowdfunding platform Equitise to raise $5m by the end of June. The venture will allow anyone to invest, with a minimum of $250 for 200 shares.

The money is earmarked for brand awareness, new technology to scale the business, and team development. CEO Mandeep Sodhi said the crowdfunding route was taken to maintain independence. HashChing converted to a public unlisted company to make the move.

HASHCHING

NEWS

R E G U L AT O R S

REMUNERATION SHOULD ECHO INSURANCE INDUSTRY industry analyst has outlined the potential lasting impact of the royal banking commission, advising that regulators should adopt remuneration models closer to those employed by the insurance industry. Further, banks could become smaller, going back to basics in terms of their core business of lending. IBISWorld senior industry analyst Tommy Wu said, “This will be the case if financial institutions remain vertically integrated, as highlighted by Westpac revising its remuneration model.”

AN

ASIC CHAIRMAN SPEAKS UP ON INDUSTRY CONFLICTS Scathing overview delivered at annual conference includes comments that firms have failed and “endangered the financial system” chairman of ASIC has voiced concerns “that many people in finance have lost sight of the ultimate purpose of the financial system”.

James Shipton looked at the discussions of the royal commission around conflicts of interest and said that management not taking these dealings to heart was “verging on a systemic issue”.

Speaking at the Australian Council of Superannuation Investors Annual Conference in Sydney, Shipton said he was surprised that “there has been reluctance, and often resistance, to addressing conflicts, especially those embedded in remuneration – even when ASIC pointed them out”.

THE

APRA LICENCE PAVES WAY FOR ALT ADIS has granted the first restricted banking licence to start-up lender volt bank, which promises to be a “genuine alternative” to the major lenders.

The restricted authorised deposittaking institution (RADI) licence is hoped to increase competition across the sector. It will also allow a new way for financial groups to become authorised ADIs. To date, volt, which operates a mobilebased service model, has raised $15.7m in equity capital via three funding rounds.

He singled out the report into mortgage broker remuneration and encouraged financial firms to look at their processes and manage or remove any possible conflicts.

He also suggested that many people in the industry had forgotten it was about managing other people’s money and instead focused on how they could maximise their own earnings.

Shipton said, “Too often, unacceptable conflicts were justified by firms on the basis that ‘everyone else is doing it’, even though it’s the right thing to do to end them. A business culture that is blind to conflicts of interest is a business culture that does not have the best interests of its customer in mind. Moreover, it is one that is

not observing the spirit as well as the letter of the law.”

Shipton also made reference to many of the other issues stemming from the royal commission, particularly where ASIC was misled in its own reviews of systems.

“Whilst we have been trying to do our job, unfortunately, all too often, the firms who have failed in their first-line responsibilities have made matters worse by not cooperating with us and, in some unacceptable cases, actually obstructed our work,” Shipton said.

“These firms have not just failed in their first-line compliance duty, they have jeopardised the entire regulatory structure. What’s more, they have endangered the financial system they are meant to support.”

ASIC is looking at reforms to allow stronger regulatory action against senior managers; new ways of supervising institutions; and encouraging the adoption of regulatory technology across the financial sector.

RISE OF THE ALTERNATIVE LENDER

APRA

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Source: Reserve Bank, CommSec

Loans and advances: Percent annual change 30% 25% 20% 15% 10% 5% 0% -5% -10% -15%

Jan-08

Jan-11 Banks

Other lenders

Jan-14

Jan-17

FE AT URES

SPECIAL REPORT

INNOVATION: THE AUSTRALIAN WAY NextGen.net sales director Tony Carn explains how the innovator’s made-in-Australia model for a digital lending landscape is paving the way for brokers to diversify their businesses

KEY BUSINESS METRICS

The first digital mortgage launched in

2004

97%

of brokers use ApplyOnline electronic lodgement today

60%

of all loans applications annually use ApplyOnline

20%

of NextGen.net’s annual revenue is reinvested in R&D

10%

of NextGen.net’s workforce is engaged in R&D

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terms of innovation there are a few things 2004 is remembered for, from the launch of Facebook to the debut of Foxtel Digital. It was also the year of the first digital residential mortgage as CBA, Westpac, Macquarie and ANZ, along with aggregators Aussie, AFG and Mortgage Choice, started the shift to electronic lodgement.

Powered by the introduction of ApplyOnline by NextGen.net, the move paved the way for seismic shifts in capability and demand on the part of both the lender and the borrower.

“Fifteen years ago, there were a lot of challenges regarding efficiency and customer experience, mainly around digitising applications.

The key objective of electronic lodgement was to ensure the quality of applications and also to standardise back channelling,” recalls NextGen.net sales director Tony Carn.

Two years after the launch of ApplyOnline for residential loans, usage rates lingered in the region of 40%. Then, accelerated buy-in across the industry saw adoption reach a level of critical mass and the financial system changed dramatically. Today, ApplyOnline provides electronic lodgement solutions to 97% of Australian mortgage brokers and more than 60 Australian lenders, facilitating approximately 60% of all loan applications lodged annually.

“It’s human nature that in many ways people can be impervious to change. When the first lender said they would only accept electronic applications things really gained pace, and within a year take-up IN

was 95%, then a year later 99.9%,” says Carn.

“Buy-in is important and there was a lot of leadership involved at the time from various institutions, as well as a lot of collaboration and anticipation.”

The innovations continue. In 2017, NextGen.net’s ongoing digitisation of the lending landscape reached commercial loans, with early adopters including Suncorp, NAB and Pepper Money.

Supporting diversification at a

solutions to clients. For example, ApplyOnline was originally intended to enhance the quality and speed of home loan applications by preventing revisions and delays.

Continued development has meant that today brokers can lodge both small business and residential loans online together, making the process simpler, faster and more consistent for all concerned. As Carn explains, it’s about innovations in the process, rather than efficiency itself.

“If you’re speeding up the process and ensuring quality, ultimately you’re giving a better broker experience, a superior customer experience, and, more importantly, you’re reducing costs. We’ve seen thousands of dollars cut out of the cost of processing a loan application over the last decade – literally thousands of dollars per loan,” says Carn.

“A key part of our philosophy is: ‘Don’t get distracted by dogs with fluffy tails – or random ideas’” broker and lender level, Carn predicts electronic lodgement for commercial loan applications will become an industry norm over the next 12 to 18 months.

In February, eSign debuted as part of the ApplyOnline Supporting Documents service. Described as a milestone in the evolution of the loan application, it eliminates duplication and error as well as saving time.

Last month, NextGen.net’s Serviceability Calculator, a new capability within ApplyOnline, underwent enhancements designed to streamline information flows and create labour-saving efficiencies.

The innovations are not just about the experience of lenders and customers but of the brokers who assist them. As the process is simplified, so too is the broker’s ability to bring a wider range of

Foundations for change The modern world is built on hidden tech. From RFID radar tolls to Internet of Things connectivity and electromagnetic fields in mobile phone screens, these advances work collaboratively with other tech to meet the ongoing evolution of customer demand: efficient, hand-held and as close to instant as possible.

These demands have converged to change everything from grocery shopping to real-time financial management. A survey conducted

by Oracle concludes that 69% of 5,200 respondents across 13 countries prefer their entire financial life cycle to be on digital channels, while 81% already use digital channels to engage with their banks. Further, research from KPMG indicates that digital

In partnership with

have that connectivity with third party platforms,” Carn explains.

NextGen.net sales director Tony Carn

channels are the preferred choice for 87% of people researching and servicing a home loan.

To remain ahead of the curve, around 20% of NextGen.net’s annual revenues are ploughed back into research and development, with 10% of the workforce invested specifically in R&D. Outside the labs NextGen.net has taken a leadership position in the industry to drive collaboration, compliance and, crucially, security.

On the formula for success, Carn says, “R&D is critical. We always remember that it’s one thing to innovate; however, if there is no need for that innovation, what’s the point? You have to have a strong

road map around what you are developing. Then you have to ask, does it meet a high priority need in the industry and how do we then move forward with that?”

The R&D team is located in Newcastle, with all development, personnel, data hosting and maintenance also retained on shore in Australia. It’s a strategy that’s designed to boost customer confidence, specifically around data security, as more functionalities are integrated throughout the banking ecosystem.

“Our focus is here, in Australia, and doing what we do well. A key part of our philosophy is: ‘Don’t get distracted by dogs with fluffy

tails – or random ideas’. If they’re not on your road map, they have to be pretty good to take precedence,” he says.

In Carn’s own words, NextGen.net operates a “mature SaaS model”, enabling banks to provide fintechstyle solutions, fully integrated with established banking models and delivered under brands that customers recognise.

“The core component of a mature model is understanding the complexity of how products work in an integrated manner. There are a lot of fintechs out there with good ideas, but what you have to do is create something that integrates with other things. It’s important to

The digital broker While the industry’s digitisation has come a long way, there is further to go, and although NextGen.net’s teams are hard at work on the software that will drive it, Carn remains tight-lipped about the nature of that work.

What he does disclose is that brokers can expect further empowerment to broaden their portfolios through the continued integration of processes and auxiliary services across all lending.

Functionality across these new tools will encompass secure data sharing to support the identification of relevant products, as well as streamlining applications to ensure the highest level of compliance with whatever reforms emerge over the coming months and years.

“Lenders can see now that digitisation of other product types is what brokers want and need in order to offer holistic solutions and really look at a borrower’s full financial picture. This ties into customer outcomes, and regulation is very important. APRA’s review of the banks made them recognise the need to change processes to ensure greater responsibility around lending, for them and brokers,” Carn says.

The road ahead may be long, but Carn has a firm focus on where NextGen.net – and the wider industry – is destined to go.

Brokers will have a leading role to play as technology is used to build confidence around diversification, to adopt better processes and standardise outcomes.

As Carn concludes, “Driving standards is important, and it’s necessary, around regulation, new product types and the way we calculate serviceability.

Brokers are now part of a holistic approach where technology enables the end position of a better consumer outcome.” AB www.brokernews.com.au

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FE AT URES

BUSINESS PROFILE

TIME IS RIGHT FOR THE SMALL BUSINESS BROKER

With business confidence at its highest level since before the GFC, more and more small business owners are looking for capital. Australian Broker hears from the lenders innovating small business finance to help brokers embrace commercial THE BROKER SHARE

he broker channel is an important and growing channel for us and currently 70% of the small business lending flows we receive from brokers are new to NAB. We expect to continue seeing that growth moving forwards and we also see the commercial broking market as the most rapidly growing sector of the broker market currently. In response, we will soon follow the launch of QuickBiz with an equipment finance option. It’s interesting how the loan book of any one of our residential brokers is comprised of around 30% SME owners and we see a lot of residential brokers diversifying their business by building strategies around supporting SME customers. While they have borrowing needs for their home, there is a market there for the brokers who have yet to ask that extra question, ‘how’s business?’

T

Chris Thomas GM commercial broker, NAB

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Chris Thomas, GM commercial broker, NAB

Q

WHAT ARE SOME OF THE MOST COMMON REASONS FOR SMALL BUSINESSES SEEKING FINANCE?

the economy grows you will find there is a need to fund working capital, and we see that as a growing part of the finance industry.

The results of OnDeck’s Small Business Owners Survey in April 2018 showed the top three reasons small business owners seek out loans are to fund equipment purchases, manage cash flow (36%), and purchase inventory (32%).

Demand is also increasing overall, with 25% of the small business owners we questioned confirming that they planned to seek additional finance over the next 12 months, and 33% planning to look to online lenders for that finance.

MICHAEL BURKE:

Small businesses need finance for a whole range of reasons: from managing cash flow because customers are slow to pay their invoices, to borrowing for expansion or taking advantage of seasonal discounts from suppliers. The one thing small businesses all have in common is that accessing funding from their banks can be difficult or even impossible.

MATT BAULD:

The headline reason is that the growth mindset we see in the current environment results in strategies that are all about expansion. If you get into the detail of that, you have finance requirements to purchase assets, whether they are buildings or machinery, that generate revenue for business owners. Equally, you have business owners looking to support their cash flow needs. As CHRIS THOMAS:

THE BROKER SHARE

W

Matt Bauld, GM sales and business development, Prospa

Q

FROM YOUR PERSPECTIVE AS A LENDER, WHAT ARE THE KEY TRENDS IN SMALL BUSINESS FINANCE THAT CURRENTLY DRIVE YOUR PRODUCT DEVELOPMENT AND INNOVATION?

Given that the MATT BAULD: ongoing nature of the role of mortgage brokers is being questioned at the moment, it makes sense to consider spreading your risk by diversifying. The Prospa team spends a great deal of time and effort working directly with partners in a collaborative way, which heavily influences the products and tools we build. By asking questions and really listening to our active partners, we can be confident we offer genuine value for them and their customers who are small business owners.

For example, in direct response to requests from our channel partners, we’re currently creating a tool to support and guide brokers through the process of helping clients secure bigger-ticket loans that require a different application and approval process.

We’re also working continuously to reduce our cost of funds. Prospa has

reduced its rate cards twice in the past two years. This was made possible by the cost-of-funds and operating leverage improvements achieved by the business as it has scaled. These price reductions have been strategic to increase the reach of the small business loan product and drive greater volume through the platform. Prospa will continue with this strategy of optimising funding and operations and investing in price for as long as it makes economic sense to do so. Lastly, we are conducting an IPO to raise money to further develop our products, geographies and reach so we can further enhance our market leadership and drive even more value to our partner network.

The key trends are CHRIS THOMAS: around speed and access to capital. With QuickBiz NAB is providing brokers with an online

e typically see around 65% of loans derived

from brokers and our strategic partners.

Working with a partner like Prospa can help brokers quickly diversify into commercial credit.

Leveraging our expertise, brokers can solve problems for their small business clients, work with their customers end-to-end through the transactions, or, alternatively, they can spot and refer a customer to us. We can then look after that relationship for the broker, while keeping them completely in the loop via our online portal.

We also provide marketing tools that ultimately help our partners build up their own businesses.”

Matt Bauld GM sales and business development, Prospa

decision instantly so they can provide clarity for their customers around the application progress and outcome.

Equally, upon execution of the loan it will provide funds to the business owner within one business day. So it’s about providing working capital and business funding and rapid relief to support business owners. They are time-poor and they work with brokers to find solutions more quickly than they have ever needed them.

There are two primary trends: marketplace partnerships and industry transparency and regulation.

OnDeck’s marketplace partnerships MICHAEL BURKE:

are forged only with the best players, and this is critical in the alternative finance space. We have active partnerships with Chase, MYOB and Connective. This allows us to leverage our reach and expertise to deliver competitive and market-leading solutions for small businesses, powered by the agility and speed that online lending supports. It’s the best of both worlds.

The government is driving transparency by opening dialogue on areas like open banking and the enforcement of mandatory comprehensive credit reporting, taking the first steps towards creating a more competitive, sophisticated Australian financial services system. www.brokernews.com.au

17

FE AT URES

Q

WHAT ARE THE GREATEST INFLUENCES ON THE SMALL BUSINESS SPACE CURRENTLY?

There’s still a lack of awareness of how big the SME commercial finance opportunity is. Small businesses are the engine of the Australian economy; they represent 97% of business, around 35% of GDP, and employ 44% of Australia’s workforce. Yet it’s often impossible for these businesses to access the capital they need in order to grow and, ultimately, create more jobs and wealth for the whole country.

Around a third of small business owners say they have missed opportunities due to a lack of credit.

This, more than anything else, is the number one issue affecting small businesses across Australia.

Thanks to the royal commission, we’re seeing an increase in awareness by small businesses that there are finance options available to them that are not banks – which they weren’t previously aware of.

MATT BAULD:

NAB does a lot of research with its customer base to understand how they are feeling about business conditions and confidence. What we see currently is that businesses have a real spring in their step at the moment and rate business conditions as the best they have been since before the GFC. We believe that is for a number of reasons. Firstly, we are seeing a huge amount of infrastructure spending both at federal and state government levels, which means a lot of business activity, and we see that really flowing down through the business chain.

Secondly, we are seeing some really positive activity in the mining states, particularly Western Australia and Queensland.

That provides a really positive backdrop for business owners. We know that there are 2.2 million small businesses in Australia and they are in a growth mindset. We have got further analysis that confirms 73% of businesses are feeling quite successful CHRIS THOMAS:

18

www.brokernews.com.au

and businesses are really seeing that the road ahead is positive and they want to continue to remain in a growth mindset.

Timely access to capital for small business owners is always challenging.

Research from Scottish Pacific shows that one in five SMEs are unable to take on new work as a result of cash flow restrictions, and nine out of 10 say increased capital could improve their revenue by 11.7%. When you multiply that by the number of small businesses in the market, there is a huge opportunity to grow the economy just by simply providing better access to capital.

Since 2013 KMPG has recorded a CAGR [compound actual growth rate] of 79% in the online small business lending space and anticipates a CAGR of 151% through to 2020 as awareness of alternative financial product offerings continues to grow.

MICHAEL BURKE:

Q

Michael Burke, head of sales, OnDeck Australia

WHAT ARE THE GREATEST INFLUENCES ON THE SMALL BUSINESS SPACE CURRENTLY?

Prospa has always had the vision of transforming the way small businesses experience finance. Our proprietary technology has enabled us to provide customers with fast, easy access to capital, often within 24 hours.

We invest a lot of money to try to provide fast turnarounds – for example, our proprietary credit decision engine can assess the majority of applications in an average of just 15 seconds. So even if we can’t help, our customers tell us a quick no is better than a long, drawn-out no.

We were also the first to create online tools and platforms for our MATT BAULD:

referral partners, and this combination of first-to-market technology alongside a dedicated partner-facing team across Australia has enabled us to build an incredibly strong channel network.

Brokers play a lead role in supporting their customers in accessing finance, and because brokers spend a lot of time helping their customers access capital, NAB is looking at how it can support them in better assisting those customers.

A huge part of this has seen us focus on digital innovation, and there are two distinct components to that. The first is ApplyOnline CHRIS THOMAS:

commercial lodgement. We have a digital platform linked through this software, where they can lodge business applications for up to $1m and even combine that with a residential loan to meet commercial and business needs. That digital innovation is a real step forward in becoming more flexible for our brokers.

Our second exciting initiative is QuickBiz, where we are providing a working capital solution for when traditional security may not be available but there is a cash flow need, and we can loan up to $100,000.

We see QuickBiz as going head to head with the fintechs to provide sensible lending solutions in a rapid fashion with fair and reasonable interest rates.

MICHAEL BURKE:

The first step is understanding

THE BROKER SHARE

e understand that approximately 70% of Australian small business owners access capital via brokers or intermediaries. This is mutually beneficial for brokers and borrowers.

The second Asia Pacific Alternative Finance Industry Report by KPMG, which is based on historic trends and business sentiment, confirms there is potential for $2bn in loan originations just here in the Australian market to 2020. This will provide significant opportunity for brokers to build their small business portfolios and diversify their businesses at a time when the SME space in Australia is thriving.

W

the financial health of your business. We have found that 90% of businesses do not know their credit score. This means that many small companies are essentially flying blind and not getting a true picture of the health of their business.

OnDeck’s KnowYourScore is a business-only platform that provides the business owner with an up-to-date credit score in seconds. The service is safe, free and doesn’t leave a footprint, unlike a credit report pulled during a lending application. Powered by Equifax, it helps SMEs and their brokers make informed decisions about their financing options and determine whether they will receive favourable terms from financiers and suppliers.

The typical credit score is 769, and 80% of businesses score good, very good or excellent. AB

Michael Burke Head of sales, OnDeck Australia

www.brokernews.com.au

19

PEOPLE

Have an interesting deal?

Had a particularly difficult or interesting deal? Why not share it with us? Email:

rebecca.pike@keymedia.com

A BIG DEAL

A couple short on space but big on ambition turned to franchise owner Liam O’Donnell to broker the deal that would allow them to launch two enterprises while starting a family, all from the comfort of their home THE FACTS

Loan size and term $600,000 for 30 years

Client Couple in their 30s with one child

Goal To refinance and upgrade home to create space for business

Location Baldivis, Perth, WA

20

www.brokernews.com.au

Aggregator Specialist Finance Group

We therefore outlined a plan for the next 12 to 24 months, which focused on how we were going to secure that all-important extra space.

To do this we assessed the business plan for the immediate and mid-term future, and in doing so we realised that

THE SCENARIO

Around a year before this deal, I wrote a loan for a young couple who were paying just over 7% interest with a non-conforming lender. The wife had recently launched a new business venture, which meant her income was low at the time the loan was taken out, and this had reduced their options.

However, with her business now gaining traction and income increasing exponentially, the couple were looking to secure the space they needed to increase their quality of life, both professionally and personally. They were looking to refinance and move to a mainstream lender; however, they had been turned down by their own bank and another broker. I was passed the client’s details by my referral partner and started to assess their options.

A year after the business was launched, the couple’s household income was significantly higher than it had been when the first loan was approved.

However, their deposit remained an issue as it was derived from funds retained throughout the year to cover the next year’s tax bill. We needed to use their current income to apply for the loan; however, once the tax returns were lodged there would be no deposit remaining.

Furthermore, after lengthy discussions, I knew that their aim to move to a mainstream lender wasn’t going to be financially feasible at that point in time.

Lender Bluebay Home Loans

access to funds, we were able to devise a plan to reduce the loan from 85% to 80% LVR, and this alone saved just over $20,000 in interest per year without paying lenders mortgage insurance.

We also managed to secure a 100% offset account to assist with interest reduction throughout the year by saving the tax funds in the account.

While it was a long process, once the deal had been approved the clients were obviously over the moon. Their new house has become the perfect place for the wife’s enterprise to flourish, while providing much-needed room for the family to grow.

Adding to their success, the husband has also now started his own business from home, making even more use of the additional space.

THE TAKEAWAY

Just because a lender has declined an application doesn’t mean there is no solution in the marketplace. Always exhaust every option. It may not be the short-term solution the client was looking for, but if you can provide a medium- to long-term outlook there is almost always a way for everybody to come out the other side with a smile on their face.

I truly believe this enterprising husband and wife duo will be clients for

Fast-forward 12 months and we are now looking to move away from the non-conforming lender to a more mainstream lender once the necessary boxes were ticked for a more mainstream lender we could look at refinancing to a cheaper product with an offset account.

THE SOLUTION

Liam O’Donnell Franchise owner and broker at Resolve Finance Rockingham

I managed to have the deal approved based on the couple’s current BAS and a letter from their accountant. After discussions with both the accountant and the client we agreed that sufficient funds would be generated by the business over the coming months to cover the next year’s tax bill, thus freeing up funds for the deposit.

Fast-forward 12 months and we are now looking to move away from the nonconforming lender to a more mainstream lender, on a far more competitive rate.

Given their current interest rate and

life – they could not thank me enough for not giving up when others had thrown in the towel. They were always big believers in going with a bank, but after both of these experiences with me they now understand the valuable role that non-conforming and alternative lenders play in the finance game.

Personally, I could not be happier that I offered a solution to a client who had almost lost hope. It may have cost them a bit more in the short term, but having them look beyond the numbers and showing them the benefits to their professional and family life, in my opinion, really reinforced the value of a genuine mortgage professional. I got to know my clients, their passion and their motivations, which gave me the drive I needed to find them a solution. AB

www.brokernews.com.au

21

FE AT URES

OPINION

THE DIGITAL MORTGAGE SHIFT Influenced by the drive for greater efficiency and the changing habits of millennial borrowers, brokers and lenders are in a unique position to transform – and capitalise on – the post-approval process. Edward Kerr, BDM at Lextech, explains

loan approvals are the end game for mortgage brokers.

The stressful process of satisfying requests for information and getting credit approval in a competitive market leads to deals that at times may take months.

One problem for brokers is that borrowers typically see loan approval as their golden ticket, with little guidance as to why mortgage settlement can take as long as it sometimes does.

Recently, we have seen an emergence of digital loan approval technologies that automated the clunky, paper-based application and approval process.

But why stop there? It is the stages after loan approval that tend to drag on for weeks, if not months. For this reason, leveraging digital technologies throughout the post-approval process must be a key priority for mortgage brokers and the lenders they refer business to.

Whether the settlement function is outsourced by a lender or provided

in-house, streamlined and robust technology systems are the key to enabling a transparent, collaborative settlement process with faster turnaround times. Brokers, as introducers of new loans, have an opportunity to work with

SPEEDY

22

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client: this is based on the significant amount of trust the borrower places in the broker to assist with what is typically a milestone event in their life. For this reason, real-time updates and open communication channels are paramount to enable a broker to provide their client with a first-class service. Brokers must recognise the power they hold in a transaction and break the age-old tradition of a file going down a rabbit hole once a solicitor or mortgage processer has been in instructed.

As a broker is seen as the face of the loan, providing settlement status updates in a timely fashion will ensure the reputation of both the lender and broker are upheld.

The digital technology being used to monitor documents, milestones, correspondence and settlement bookings or advice must be at the forefront of the minds of both lender and broker. It is crucial in today’s digital economy that parties can correspond using Software as a Service platforms or smartphone applications, to ensure there is no misinformation and no documents are lost along the way.

The use of web-based applications and milestone reporting by lenders is what assists brokers in delivering the updates their clients need. Updates should take the form of automated SMS correspondence or automated emails generated in real time to avoid excessive time delays or last-minute settlement reminders.

As millennials look towards entering the property market, they expect to transact their mortgages in the same way they pay for coffee – completely digitally.

Technologies like Apple Pay and Android Pay, as well as the New Payments Platform, all help us achieve faster payment solutions to create a more versatile digital economy for settlements. On the documentation side, we have seen innovators like DocuSign and ZipID introduce ways to automate the mortgage process and remove the need for multiple face-to-face

Brokers must recognise the power they hold in a transaction and break the age-old tradition of a file going down a rabbit hole once a solicitor ... has been instructed

Edward Kerr Business development manager, Lextech

their respective lenders to ensure digital solutions are being considered, or have been put in place, in order to further automate the post-approval mortgage process.

Let’s take a step back and consider the relationship that a broker has with their

meetings. It is these companies and their competitors that brokers must closely analyse to ensure they can deliver the most digitally savvy service to their clients.

For this reason, brokers must constantly work towards using technology in collaboration with their lenders. AB

PEOPLE

MOVERS AND SHAKERS

NEW COO NAMED

Former COO Kevin Potter moves into chief customer officer role, paving the way for digital banking specialist Arjan Bloemer

Arjan Bloemer

has appointed Dutch banking executive and digital specialist Arjan Bloemer to the role of COO following Kevin Potter’s transition to chief customer officer.

Bloemer, an internationally experienced senior executive, began his career at Dutch bank MeesPierson before becoming head of operations at Europe’s first 100% digital bank, Alex Vermogensbank.

He then moved into consulting in the Netherlands and later to executive roles at the Royal Bank of Scotland in London and EY in Australia. Most recently, he held the position of MD at Accenture Australia.

Over the course of his career, Bloemer has led major transformation programs at several large financial organisations, implementing such technology as robotics, artificial intelligence tools and chatbots. His appointment

by Heritage Bank has paved the way for a digital transformation across its products and processes.

“Arjan brings a wealth of experience to the COO role, particularly in digital banking and in retail banking transformation projects. He is a welcome addition to our senior executive group,” said Heritage Bank CEO Peter Lock.

Originally from Amsterdam, Bloemer will be based at the Heritage head office in Toowoomba.

“My career focus has been on major retail banking transformation projects. This has included implementing robotics, artificial intelligence tools, chatbots and Six Sigma Process optimisation,” he said.

“There are real opportunities to use my expertise to help deliver a better experience for customers at Heritage …

Everyone [at the bank] is absolutely committed to the best interests of the customers, and willing to do things differently to deliver a better outcome.” AB HERITAGE BANK

www.brokernews.com.au

23

PEOPLE

CAUGHT ON CAMERA Bluestone Mortgages marked its expansion into the near-prime space at two Sydney events last month.

The near-prime products feature rate reductions of up to 225 basis points and the potential for alt-doc approval and unlimited debt consolidation. They are being launched at a time when PAYG and credit-impaired customers are affected by the tightening criteria of traditional lenders, according to head of sales and marketing Royden D’Vaz. He said, “The rate reductions have significant strategic implications as they place the company in a position to expand its operations into the near-prime space as a natural extension of its specialist lending focus.” The move follows Bluestone’s acquisition by Cerberus Capital Management.

24

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FROM THE FORUM Top comments from trending stories on brokernews.com.au

REVERSE MORTGAGES A ‘POSITIVE STEP’ Offering a reverse mortgage can help brokers grow and diversify, according to Andrew Ford, CEO of Heartland Seniors Finance. Ford says that although reverse mortgages are still a niche, any broker with the right training and skills can offer them. Following changes announced during the federal budget last month, anyone over the age of 65 will be able to take out a reverse mortgage worth up to $11,799 per year.

The reason that brokers are not doing reverse mortgages is that they have to pay an annual fee and do extra training for something they hardly ever see. We tend to find someone who is willing to do all that and just refer to them.

Don on 10/05/2018 at 8:44:35AM

I initially got accredited [and paid for all] training and then found the ridiculous red tape and approval process to help someone get 10k a year when they are 88 years old and sitting on a $2m house – I just gave up.

The banks make it very hard to get approval, and the amount of work involved and cost to offer such help is definitely not worth it. I was doing it as a community service because you wouldn’t do it for the remuneration, which barely exists on such products. A good budget measure but not one that’s really going to assist many brokers.

Matt Broker on 10/05/2018 at 9:11:37AM

Don and Matt, Heartland Seniors Finance has never required you to be a member of SEQUAL (which closed down last year). They have great products, simple processes and are a very friendly group to deal with (no, I don’t work for them). I have only written a couple of RMs, but each time they also had the best rate I could access (currently 6.29%).

For the right client, with the right need, at the right time of their life, I believe an RM can alleviate a lot of stress and discomfort in the lives of many people.

David N on 10/05/2018 at 11:47:16AM

www.brokernews.com.au

25

DATA

VICTORIA

NT SPOTLIGHT

Commuter towns enjoy first home buyer boost as investors drop out of market Although Melbourne has handled the loss of investor demand better than Sydney due to its stronger population growth, the effect on prices can be seen.

“While there’s still growth occurring in Melbourne, it’s not that strong any more. That’s partly why first-time buyers are taking the opportunity to buy some more affordable housing,” says Angie Zigomanis, senior manager of residential property at BIS Oxford Economics.

To find such low-priced dwellings, buyers are heading out to areas like Ballarat and Geelong, where they can capitalise on stamp duty concessions. As a result, these pockets are picking up.

“It’ll be mostly the regional areas that people can still commute to Melbourne from, because people from Melbourne want more affordable housing, and most of these people still have connections and jobs in Melbourne,” Zigomanis says.

The middle- and outer-ring suburbs of the city are capturing this spillover from the inner city, meaning these areas will have higher growth prospects.

Area

Type Median value

Quarterly

12-month

growth

growth

Melbourne

H

$735,000

-2.0%

14.1%

Vic country

H

$350,000

2.9%

6.3%

Melbourne

U

$530,500

-0.8%

6.1%

Vic country

U

$270,000

-3.6%

3.8%

QUEENSLAND

Would-be first-time buyers think twice in light of favourable rental conditions With the preference for coastal living, Brisbane’s growth has been mild in comparison to that of the Gold Coast and Sunshine Coast. Prices in the city increased only 2.6% at the end of December 2017.

“Brisbane’s doing fine. It’s kind of tracking the Australian average,” says REA Group chief economist Nerida Conisbee. “We’re seeing steady increases in demand for apartments. The inner north is doing the best, and the market itself is pretty stable.”

Nonetheless, there remains an oversupply of apartments, with many developers offering discounts to get buyers on board. The unit rental market has also been active, with landlords looking to make a return on their investments.

“Potential first-time buyers are being encouraged by their landlords to stay where they are, probably by offering rental discounts and other things,” says Angie Zigomanis, senior manager of residential property at BIS Oxford Economics. “People may be delaying their entry into the market because they find it effective to rent for longer.”

Area

Type Median value

Quarterly

12-month

growth

growth

BIG DREAMS FOR DARWIN Although Darwin won’t be setting the national property market on fire, it is expected to see a recovery this year, with pockets of above-average growth looks to be in a position to finally stabilise even as values continue to drop in the year ahead.

“Darwin’s doing OK – it’s a similar situation to what we’re seeing in Perth. Like Perth, the market’s not going to be on fire in terms of mining boom-type conditions. But it’s certainly a lot better than it’s been over the past three years,” says Nerida Conisbee, chief economist at REA Group.

“There are opportunities that seem to be good.

The uptick is not going to be strong – it’ll be related to jobs and [will happen] as the market starts to stabilise. So it’s not a market where you’re going to see 10–15% price growth over the next 12 months.”

Conisbee notes that the presence of the Charles Darwin University is a boost in this respect, as demand seems to be mainly for northern suburbs in its vicinity. Nonetheless, the southern part of the state is not slacking either – one area that’s heating up is the suburb of East Side, which is expected to record above-average price growth according to NAB Economics’ Q4 2017 Residential Property Survey.

“East Side has emerged as the NT’s highestperforming suburb. Properties are in high demand and among the fastest sellers anywhere in the NT,” says Gregg Harris, general manager of NAB Retail, NT. “Median house values dropped 1% during the past year in East Side; however, [they] are up 14% overall over the past five years.”

Despite the improvement in its condition, the Darwin market could still have a tough couple of years ahead.

“Resource mining – resource investment in gas – is still falling away, and that’s impacting population growth, vacancy rates, prices,” says Angie Zigomanis, senior manager of residential property at BIS Oxford Economics. AB DARWIN

H

$535,000

0.9%

2.9%

Median price (houses)

QLD country

H

$435,000

0.0%

1.9%

$550,546

Brisbane

U

$407,000

-1.9%

-2.1%

QLD country

U

$390,000

0.0%

3.7%

www.brokernews.com.au

New opportunities for first home buyers to get a foot on the housing ladder in Darwin Consumer confidence has dipped over the last couple of years in Darwin due to increased supply and distressed sales. However, there is stability on the horizon as demand starts to return.

There are also more options for first home buyers and investors following the release of more titled land in Zuccoli and North Crest, which is continuing to tempt both away from the unit and house markets.

However, the greatest impact comes from the HomeBuild Access loan, a specialist government facility available to any first home buyer constructing a home with a maximum value of $550,000. They can borrow 80% from the People’s Choice Credit Union and the other 17.5% from the government, with an additional grant of $26,000.

If you’re looking to get a foot on the housing ladder, and it’s a choice between saving a 10% deposit to buy a unit or using HomeBuild Access to build a new home, the latter presents an attractive route to ownership, which is negatively impacting prices in other parts of the market.

Carmine Rauseo Broker, Rauseo Group

SUBURB TO WATCH: ROSEBERY

Brisbane

26

BROKER PERSPECTIVE

Median price (units) $352,772

12-month growth

3-year growth

5-year growth

Indicative gross rental yield

-8.3%

-15.4%

-1.9%

5.8%

12-month growth

3-year growth

5-year growth

Indicative gross rental yield

-10.5%

-19.4%

-13.3%

6.5%

AUSTRALIAN CAPITAL TERRITORY

Stamp duty concessions in NSW result in an outflow of people from the ACT OPPORTUNITIES AND KEY INFRASTRUCTURE

Funding

Housing

Property value

Population

$250m in untied funding pledged to the Northern Territory

Commonwealth to contribute $500m for Indigenous remote housing

14% increase in house prices in East Side suburb since 2013

211,945 population, according to the 2016 census, up 10% in 10 years

HIGHEST-YIELD SUBURBS IN NORTHERN TERRITORY Suburb

Type

Median price

12-month growth

Gross rental yield

Tennant Creek

H

$220,000

-9%

10%

Sadadeen

U

$235,000

-18%

8%

Driver

U

$215,000

-26%

8%

Gray

U

$225,000

-28%

7%

Katherine

H

$325,000

-13%

7%

Canberra is generally considered to be doing well by most property market experts, but some recent developments could be causing demand to drop.

“Because NSW is offering concessions on stamp duty, there’s been a bit of an outflow of people in the ACT,” says Angie Zigomanis, senior manager of residential property at BIS Oxford Economics, basing this on recent migration data. “This may alleviate some of the demand for housing in Canberra.”

As a result of the NSW concessions, ACT residents may consider moving out to Queanbeyan, just across the border. “A first-time buyer can work in Canberra and commute while still getting a stamp duty concession and taking advantage of cheaper prices,” Zigomanis explains.

“At the end of the day, that sort of incentive is not going to be permanent, and eventually stamp duty will come back into play again, so it’s just going to be a temporary move in the short term.”

Area

Type Median value

Quarterly

12-month

growth

growth

Canberra

H

$700,000

3.7%

8.7%

Canberra

U

$434,750

-2.3%

0.0%

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27

DATA

NEW SOUTH WALES

H

$464,725

1.0%

7.0%

Sydney

U

$700,000

-2.4%

3.6%

NSW country

U

$387,500

-0.6%

5.4%

WESTERN AUSTRALIA

MEDIAN HOUSE AND UNIT PRICES

Positive news as vacancy rates plateau and demand levels increase

$1,000,000

After several years of struggling, positive signs are at last on the horizon for Perth. “We think it has hit the bottom of the market – demand is up year-on-year, rental demand is up year-onyear,” reports REA Group chief economist Nerida Conisbee. “The western suburbs and also the beach suburbs tend to be the best performers.

Housing is doing the best in Perth, and it’s looking to extend to other areas of the market.”

Despite being in the same boat as Darwin over the past few years, the outlook for Perth is more encouraging, given Perth’s size and general industrial flexibility.

“Perth’s slightly better [than Darwin] because it’s a bit more of a mixed economy.

We are hearing positive news about lithium mining … and there seems to be quite a bit of construction taking place,” Conisbee says.

Perth’s vacancy rate of 5.3% is the lowest since July 2015, according to the Real Estate Institute of WA.

$800,000

Area

Type Median value

Quarterly

12-month

growth

growth

Perth

H

$507,750

-0.4%

-1.9%

WA country

H

$347,000

1.2%

-4.2%

Perth

U

$390,000

-2.5%

-3.6%

WA country

U

$265,000

6.9%

-1.8%

28

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62.5%

PERTH Total auctions

40

Cleared

6

Uncleared

21

Clearance rate

22.2%

Houses

$300,000 $200,000 $100,000 $0

$550,000

$500,000 $400,000

$736,000

$600,000

$680,000

$700,000

$905,000

$900,000

Sydney Melbourne Brisbane Adelaide

Perth

Hobart

Darwin

Units

$411,600

NSW country

Clearance rate

$645,000

7.6%

24

$375,000

-6.5%

Uncleared

$567,500

$945,500

40

$380,000

growth

H

Cleared

$446,650

growth

Sydney

94

$395,000

12-month

Total auctions

$509,000

Quarterly

ADELAIDE

$321,200

Type Median value

There were 2,245 homes taken to auction across the combined capital cities this week, returning a preliminary auction clearance rate of 61%, while last week, 2,311 auctions were held and the final clearance rate came in at 62.1%.

Over the same week last year, auction volumes were higher, with 2,409 homes going under the hammer across the combined capital cities, and the clearance rate was a stronger 72.8%. In Melbourne, Australia’s largest auction market, a preliminary auction clearance rate of 61.2% was recorded across 1,090 auctions this week, down from 63.7% across 1,144 auctions in the previous week. One year ago, the clearance rate was a stronger 75% across 1,098 auctions.

There were 767 auctions held in Sydney this week, returning a preliminary auction clearance rate of 62.5%, compared to 63.1% across 797 the week before and 74.5% across 960 auctions one year prior. Once clearance rates are finalised early next week, it is highly likely they will be revised lower, with both Sydney and Melbourne clearance rates potentially falling below the 60% mark.

$445,000

Area

WEEK ENDING 13 MAY 2018

$385,000

The effect of Sydney’s struggling status since late 2017 is beginning to show as residential construction is slowing down. According to ABS data, housing approvals in NSW are lower than in Victoria, even though NSW has the larger population of the two states.

“The biggest drop has been in high-density apartments where in July 2016 there were 4,361 apartments approved but this dropped in January to 2,974,” reports the Urban Taskforce NSW. “Housing approvals in Victoria are now exceeding those in NSW, with 6,878 approvals in January 2018 compared to 5,410 approvals in NSW.” This fall is primarily centred in Sydney, where confidence in new housing projects is faltering as a result of uncertainty about levies, bank restrictions on loans for housing, and the slow process of obtaining approvals. This could put a damper on attempts to make housing more affordable by increasing supply.

CAPITAL CITY AUCTION CLEARANCE RATES

$535,000

Approvals for high-density apartments fall as residential construction slows

Canberra

CAPITAL CITY HOME VALUE CHANGES Capital city

Weekly change

Monthly change

Year-to-date change

12-month change

Sydney

0.0%

-0.2%

-2.2%

-3.8%

Melbourne

0.0%

-0.4%

-1.0%

3.3%

Brisbane

0.0%

-0.1%

-0.1%

0.7%

Adelaide

0.2%

0.2%

-0.2%

0.7%

Perth

-0.1%

-0.1%

-0.3%

-2.2%

0.0%

-0.2%

-1.3%

-0.7%

Combined 5 capitals

*The monthly change is the change over the past 28 days

BRISBANE CANBERRA Total auctions

80

Cleared

54

Uncleared

16

Clearance rate

Total auctions

164

Cleared

58

Uncleared

57

Clearance rate

50.4%

77.1%

SYDNEY Total auctions

767

Cleared

366

Uncleared

220

Clearance rate

TASMANIA

MELBOURNE Total auctions

62.5%

1,090

Total auctions

10

Cleared

550

Cleared

7

Uncleared

348

Uncleared

0

Clearance rate

Clearance rate

61.2%

TASMANIA

Area

With low supply driving demand, investor confidence peaks Although Hobart is racking up accolades in the national property market, Tasmania is facing a housing shortage that means more development and construction projects will be needed, especially with continued population growth.

“Development and new building opportunities in close proximity to Hobart and Launceston will provide consistent growth and yields in excess of 5% plus, as well as depreciation benefits,” says Josh Hart, director of OneAgency Launceston.

The state government could be looking to provide incentives to landlords by implementing rebates on land tax concessions. Yet the very issue of low supply is one of the drivers of interest in Hobart. “[There is a] significant housing shortage across the state for tenants, to a point where tenants are camping at the Hobart Showground and it is not uncommon to have five to eight rental applications on any one property,” says Hart.

N/A

Type

Median value

Quarterly growth

12-month growth

Hobart

H

$422,000

2.9%

6.9%

TAS country

H

$285,000

1.8%

5.0%

Hobart

U

$350,000

11.1%

3.3%

TAS country

U

$230,000

-6.1%

4.3%

All data sourced from CoreLogic.com.au

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29

PEOPLE

Aggregator Outsource Financial

IN THE HOT SEAT Business Initiatives MD Matthew White didn’t intend to become a broker, but seeing an opportunity to improve customer outcomes he followed the calling. Here he talks about the importance of client satisfaction – and a sense of humour What inspired you to start broking?

I started my own chartered accountancy in 1997 and we referred A loan business directly to banks and other brokers – client satisfaction was lukewarm at best. Then 10 years ago we referred one of our clients to a broker, who blackmailed them to change accountants to obtain a badly needed loan. This was the last straw, and we added loan broking to our suite of services. Both go hand in hand; it’s a holistic approach.

Q

What’s one recent career highlight?

Helping a client fund the purchase of a large-format aerial A camera from overseas. The client had a tight government contract deadline to get the camera financed, imported, tested and out in the field. The deal was tricky as negotiations were done in a foreign currency. We found the right bank, assisted with exchange risk and GST impact, and structured the facility to allow the import and subsequent conversion to a chattel mortgage. The deal was worth more than $1.5m. The camera came in on time and secured future work for the company.

Q

What’s the greatest challenge for brokers at this time?

There are many. Compliance is making the job tougher – not A only because of the need to set up and maintain your own systems, but the compliance burden on the banks is increasing and therefore we have to bear a part of that also. Complex deals including businesses, SMSFs and multiple entities are always interesting if you don’t have a bank that understands such things. The banks cutting services is always a challenge; they seem committed to doing more with less, and service levels suffer, which causes much frustration and angst at the broker level.

Q

What are your top survival tips for working in finance?

The cliché attributes include hard work, focus, systems, integrity A and good communication. In this social media age I also think you need to foster strong client relationships that can weather the disruptors of this world. Good relationships form the basis of your future income. As a trusted adviser, you cannot underestimate the importance to clients of a random phone call or a quick meeting to see how they are going. Also, go to work every day with a sense of humour – some days you really need it in this game! AB

Q

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