Australian Broker 15.16

AUGUST 2018 ISSUE 15.16

Back in business The latest developments in commercial lending /16

Addressing the perception gap Looking at equality and inclusion in broking /20

MARK VILO Suncorp head of bank intermediaries Mark Vilo explains the group’s new strategy for broker partnerships /14

Ladies who lunch All the action from FAST’s Women in Business event /24

ALSO IN THIS ISSUE… Opinion China’s financial new year and what it means for Aussie property /22 Housing market data Sydney’s delivery phase boosts supply – and affordability /26 In the hot seat A broker explains how he went from pro cyclist to Finance Detective /30

NEWS

IN THIS SECTION

Lenders Banks report increased borrowing activity /04

Aggregators Leading aggregator appoints neo-lender /06

Technology World’s first blockchain bond announced /10

Regulators “Disappointed, although not surprised” /12

Market Marginal increase in new home sales /08

www.brokernews.com.au AUGUST 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

28 AUGUST

5 SEPTEMBER

5 SEPTEMBER

Mortgage broking information evening, Melbourne

Northern Property Summit

Deposit bonds PD webinar

Featuring input from Yellow Brick Road’s Andrew Fortelney, this evening seminar in Preston, Melbourne, covers smart purchasing, finance and legal advice and can provide brokers with access to established and aspiring investors, as well as first home buyers and those looking to upgrade their properties.

Presented by Deposit Assure’s Peter Mason, this one-hour webinar provides brokers with key information, practical tips and real-life examples of how deposit bonds can add value for clients and why they are an important part of the broker’s toolkit.

Produced by Loanworx, sponsored by AFG and supported by the MFAA, this event covers everything a new-to-market entrant needs to know about mortgage broking, including how to get started, mentorship, aggregation and business management. The session starts at 6.15pm on Melbourne’s Jeffcott Street.

Production Manager Alicia Chin 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

EDITORIAL ENQUIRIES

Rebecca Pike +61 2 8437 4784 Rebecca.Pike@keymedia.com

SUBSCRIPTION ENQUIRIES

5 – 27 SEPTEMBER

13 SEPTEMBER

30 SEPTEMBER

Connective Excellence Awards

R U OK? Day

Connective will tour Australia throughout September, celebrating the best of the broker channel. With 16 award categories and five different state ceremonies, the aggregator will visit Perth (5 Sept), Sydney (6 Sept), Melbourne and Brisbane (20 Sept) and Adelaide (27 Sept). Finalists were announced on 7 August.

As part of its commitment to improving mental health, the FBAA is urging brokers to ask their peers, “Are you OK?” on 13 September. The aim is to encourage people to connect, share stories and support each other to create better recognition and understanding of mental health issues.

Royal commission interim report due Commissioner Hayne is due to deliver his interim report by 30 September following four rounds of public hearings that focused on farming finance, SME and consumer lending, and financial advice.

Almost 7,000 submissions have been received, and the final report is due by 1 February 2019.

tel: +61 2 8O11 4992 fax: +61 2 9439 4599 subscriptions@keymedia.com.au

ADVERTISING ENQUIRIES

Simon Kerslake +61 2 8437 4786 simon.kerslake@keymedia.com.au 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

19 OCTOBER

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26 OCTOBER

16 NOVEMBER

Australian Mortgage Awards

MFAA Golf Day

The leading independent awards event for the mortgage industry highlights the outstanding achievement of Australia’s leading mortgage brokers, lenders, aggregators and advisers. The 2018 AMAs will be hosted by Lawrence Mooney, with entertainment by Furnace and the Fundamentals and Linden Furnell.

Taking place at the Adelaide Hills Mount Osmond Golf Course, the game tees off at 8am and is followed by lunch and prize presentations, including team prizes and competition holes for longest drive and nearest the pin. Fees range from $120 for single members to $720 for a four-person, non-member team.

FBAA 2018 National Industry Conference

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The FBAA’s annual conference and awards will be held at Sea World on the Gold Coast.

Under the theme ‘Evolution’, the conference will support brokers in navigating recent industry changes, while the evening’s Awards of Supremacy will see 500 guests gather to recognise leading industry personalities.

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.

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NEWS

LENDERS ANZ CUTS HOME LOAN INTEREST RATES has responded to industry competition by cutting owner-occupier principal and interest (P&I) rates on its basic home loan, pushing the rate down by 34 basis points to 3.65%.

The move makes this the lowest ongoing variable rate offered by a big four bank. ANZ has also cut some of its fixed home loan rates by up to 24 basis points for owneroccupier P&I loans, and up to 13 basis points for investor P&I loans.

ANZ

AMP’S $2.3M EXECUTIVE PACKAGES newly appointed chairman and chief executive will share a $2.3m remuneration package. Chairman David Murray will receive an annual fee of $850,000, inclusive of superannuation, and will receive no additional fees for his participation in board committees or subsidiary company boards. Chief executive Mike Wilkins, who was appointed on 20 April, will receive fixed remuneration of $1.46m, including superannuation, to 31 December, and a fee of $70,100 for additional responsibilities assumed as acting executive chairman.

AMP’S

“It’s worrying that first home buyers feel confident signing on the dotted line with a low understanding of financial literacy behind them” Don Crellin Managing director, Resolve Finance

4

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BANKS REPORT INCREASED BORROWING ACTIVITY Financial results show overall profit decline, while mortgages and lending grow financial results issued by Australian banks highlight a negative trend for profits but a positive trend for loan books as data confirms renewed activity in the housing market.

Releasing its financial results on 8 August, AMP reported underlying profit of $495m in H1 2018, compared to $533m in H1 2017.

Meanwhile, overall net profit reached $115m, compared to $445m last year, reflecting the “advice remediation provision” announced on 27 July.

However, AMP Bank grew its operating earnings by 20% due to mortgage activity. Although profits all but collapsed after a series of scandals were exposed during the banking royal commission, chief THE

executive Mike Wilkins said the results demonstrated “resilience through a difficult period”.

Suncorp, which registered net profit after tax of $389m in its banking and wealth division, saw total lending increase 6.1% in June 2018, compared to the same period in 2017. Total customer deposits increased 4.7%.

CEO and managing director Michael Cameron said, “Deposit and lending growth were both strong, with new offers, digital functionality and a simplification of our processes driving good customer experience. We continue to achieve above system growth.”

Meanwhile, CBA – which posted its first profit decline in nine years – reported a 4.8% fall in net profit

after tax. One-off items alone totalled $778m, of which $700m was paid in settlement to AUSTRAC to resolve “serious breaches of anti-money laundering and counter-terrorism financing laws”, according to the body.

Despite this, CBA posted operating income growth of 2.6%.

The bank says this was “primarily driven by a 4.5% increase in net interest income, with average interest earning assets increasing 2.3% from growth in home loans and business loans, and net interest margin increasing 2.2%, largely from the repricing of interest-only and investor home loans in order to manage regulatory requirements”.

The news comes as sales of new homes inched up by 2% overall in June, the first increase this year, according to the Housing Industry Association. First home buyers’ share of owner-occupier loans reached its highest point since late 2012. Building approvals remain strong, rising 4% in June 2018 to 1.6% higher than in June last year.

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NEWS

A G G R E G AT O R S AGGREGATOR OWNERSHIP Source: Productivity Commission

Bank ownership of mortgage aggregators and market share

THREE AGGREGATOR DEMANDS FROM BROKERS three things brokers want from their aggregator partners are industry-leading technology, strong compliance processes and appropriate education and training, according to managing director of Liberty Network Services Brendan O’Donnell. Speaking to Australian Broker, O’Donnell said brokers were also looking for longevity and partners they know will “remain in the business for the long haul”. He added, “It’s not just about focusing on the home loan … There’s a better chance of success if you find the right partnership.”

THE

40% 35% 30% 25% 20% 15% 10% 5%

NAB – Plan

NAB – Fast

NAB – Choice

NAB

Macquarie – Yellow Brick Road

Macquarie – Vow

Macquarie – Connective

Macquarie – AFG

Macquarie

CBA – Mortgage Choice

CBA – Aussie

CBA

0%

CONNECTIVE PARTNERS WITH RATESETTER

Lender’s market share across the entire broker channel (by value) Lender’s market share within own aggregator, including own white label loans (by value)

lender RateSetter now provides Connective’s member brokers with a consumer car loan designed specifically for the broker channel.

It is the first fully digital consumer car loan of its kind, providing an online application-to-settlement journey and a 4.95% per annum fixed interest rate (6.55% comparison rate) to prime customers. Head of Connective Asset Finance Brent Starrenburg said, “We felt it necessary to work with our partners to create alternative products to ensure our broker network continues to have viable choices.”

P2P

LEADING AGGREGATOR APPOINTS NEO-LENDER TO PANEL News follows a 136% increase in lender’s loan values during the second half of the last financial year and an 118% increase in customers a 136% increase in originations in the second half of the last financial year, Wisr has been appointed to Connective’s panel of more than 40 lenders. The appointment means that more than half of all brokers in Australia can now offer Wisr loans to their customers, providing a continued boost to the lender’s personal loan originations.

Wisr CEO Anthony Nantes said, “The broker channel is an important part of the Wisr growth strategy, and we are delighted to be working with Connective, home to some of Australia’s leading brokers. The appointment further strengthens our aim of becoming a true alternative in the Australian lending industry, and RECORDING

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we look forward to introducing the Wisr brand to thousands of new brokers in the coming months.”

Wisr describes itself as “committed to developing strong and sustainable relationships with its broker partners” and has introduced new tech-enabled approaches to loan applications, digital document processing, streamlined loan approval and API integration.

Connective’s near-3,000 accredited brokers will be supported

by Wisr’s BDM and broker support team, as well as the lender’s high-touch tech platforms, including the Wisr Broker Portal.

Brent Starrenberg, Connective’s head of asset finance, said, “We are very pleased to welcome Wisr to the

Connective platform. This is another example of how Connective offers its broker network access to industryleading lenders such as Wisr.”

More than 20% of brokers in Australia aggregate through Connective, which achieved loan settlement values in excess of $41.5bn in FY2017.

Wisr reported that its loan origination value in the second half of the last financial year rose by 136% on the previous six months, while the number of new customers climbed 118% during the same period.

The result followed Wisr’s largest single quarter of loan growth, with a 66% increase in loan origination value and 40% growth in loan origination volume during Q4 compared to Q3 of FY18. It was the second successive quarter in which Wisr achieved record loan origination growth.

Nantes said, “We are writing more loans, and higher-quality loans, than ever before as more Australians look for choice when accessing consumer finance.”

“While a low-for-long scenario presents considerable solvency risk for insurance companies and limited risk for banks, a snapback would alter the balance of vulnerabilities” Philip Lowe Governor, Reserve Bank of Australia

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NEWS

MARKET GREENS CALL FOR MAJOR BANK REFORMS Productivity Commission’s report on competition in the Australian financial system has inspired the Greens to call for a break-up of the country’s banks and a ban on bank-owned wealth management businesses.

A statement from the party read, “Everyone knows that this leads to conflicts of interest that are bad for our economy, but it also leads to mega-profits that become big political donations, so neither of the two old parties want to do anything about it.”

THE

HOMEOWNERSHIP DREAM ALIVE AND WELL 42% of Australians aged 18 to 29 still live with their parents, yet 79% believe they will move into their own home one day, according to data from property co-ownership platform Kohab. However, while they still dream of homeownership, more than half of young Australians have less than $5,000 in the bank. In fact, 28% are buried in more than $5,000 worth of debt, despite only 46% having full-time jobs.

APPROXIMATELY

“Technology has really opened up the mortgage market to smaller banks in recent years, and lenders like MyState Bank do not need a large bricks-andmortar network” Huw Bough Group executive broker distribution, MyState Bank

NEW HOME SALES SHOW MARGINAL INCREASE Market’s first increase of 2018 was reported in June, but annual data shows 5.3% decline of new homes increased marginally by 2% in June, marking the first increase of the year to date, according to data published by the Housing Industry Association. However, further figures show that sales for the entire 2017/18 fiscal year were 5.3% lower than in the previous year.

Explaining the figures, HIA principal economist Tim Reardon said the June increase was small compared to the drop in sales that occurred throughout 2018.

New home sales for the first six months of 2018 were down by 2.9% compared to the last six months of 2017.

Reardon said the fiscal year’s sales decline reflected the shift in SALES

housing market conditions.

Credit availability has tightened as banks have responded to the house price decline and the royal commission.

But even after the slowdown, overall building activity has remained high compared to the past decade. New homes sales increased in all states other than Victoria, which has been in decline since February 2018. The decline is “well overdue”, Reardon said, because the state’s market activity has remained far in excess of growth over recent years.

New home sales in other states, particularly NSW, are a welcome reprieve, according to Reardon.

New home sales in NSW were lower by 13.3% in 2017/18 than in

the previous year. Sales picked up in June 2018 by 8.3% compared with the previous month. Home sales in Queensland rose by 2.7%, Western Australia by 1.5%, and South Australia by 0.2%.

“ABS data shows approvals for private sector detached houses fell dramatically in May 2018.

Approvals data typically trails the new home sales data by three to six months, and the dramatic fall in approvals in May is likely to be reflected in the June data,” Reardon said.

The June sales figures followed the eighth consecutive month of housing commitment declines, which also saw investor loans reach a five-year low. Since the start of 2017, investor loan commitments have declined by a significant 22.4% due to “recent policy and regulatory changes”.

HIA’s Shane Garrett said, “Investment participation plays a key role in delivering new supply and is vital to the healthy functioning of rental markets.”

RBA ECONOMIC GROWTH AND INFLATION FORECASTS

Source: Reserve Bank, CommSec.

June 2019

December 2018

June 2019

December 2019

June 2020

December 2020

GDP – February 2018

2.75%

3.25%

3.50%

3.25%

3.00%

-

GDP – May 2018

2.75%

3.25%

3.50%

3.25%

3.00%

-

GDP – August 2018

3.00%

3.25%

3.25%

3.25%

3.00%

3.00%

Underlying CPI – February 2018

1.75%

1.75%

2.00%

2.00%

2.25%

-

Underlying CPI – May 2018

2.00%

2.00%

2.00%

2.00%

2.25%

-

Underlying CPI – August 2018

2.00%

1.75%

2.00%

2.00%

2.25%

2.25%

8

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TECHNOLOGY UPDATE

FIRST HOME BUYERS MORE ACTIVE Sources: ABS; CommSec

First home buyers’ share of all housing loans

EDUCATION, LISTENING AND APPLYONLINE HELP IMPROVE CUSTOMER OUTCOMES

22%

20%

6-year high 18%

Simone Tilley

General Manager Retail Broker Distribution, Simone Tilley, says over the past 12 months ANZ’s broker training and education program has been enhanced to improve outcomes for customers.

“Our ANZ team deliver targeted training which we provide to brokers based on feedback from file sampling from Qualitative File Reviews (QFRs).

“Many brokers have included our feedback into their own business practices, which reflects their openness to implement new initiatives to drive better customer outcomes.

“We’ve created online modules, webinars and podcasts, amongst other training tools, so we can share knowledge with brokers. Our webinars generally attract more than a thousand attendees.”

In addition to education, Tilley says broker feedback (“we encapsulated their voices first”) has been incorporated into ANZ initiatives to ensure a smoother transition from an execution perspective.

This was also the case when implementing the Broker Interview Guide.

ANZ worked with a number of other major lenders to develop an industrystandard Broker Interview Guide for use by brokers when introducing loans to participating lenders. The Interview Guide is designed to clarify the minimum level of enquiries participating lenders require brokers to make on their behalf.

It also provides a consistent means for brokers to record the result of those enquiries and provide them to the relevant lender. The Interview Guide aims to encourage more consistency in the collection of this information across the industry, while also maintaining simplicity in broker businesses.

In response to the Broker Interview Guide, the NextGen.Net ApplyOnline ‘compliance tab’ was developed, enabling brokers to capture all relevant data from loan applications. ANZ was very appreciative of the way NextGen.Net delivered this solution and assisted in the deployment to market.

In regard to the compliance tab, “it’s far more efficient to create one solution, ANZ’S

16%

14%

12%

Jan 2012

Jan 2014

Jan 2016

Jan 2018

FHBS LEADING LOAN GROWTH IN JUNE first home buyer share of owner-occupier housing loans has reached its highest point since late 2012. FHBs accounted for 18.1% of owner-occupier home loans in June 2018, an annualised increase of 11.4%. Housing Industry Assocation senior economist Shane Garrett said, “The slowdown in dwelling price growth over the past year and ongoing low interest rates have also been favourable for those seeking to access the market for the first time.”

THE

Tony Carn

rather than 40 different solutions for 40 different lenders,” says NextGen.Net Sales Director Tony Carn.

Carn explains that when designing the ApplyOnline compliance tab, NextGen.Net objectives were to “provide brokers with a consistent process that would have a minimal operational impact, reduce the risk of data input errors, and minimise the rekeying of information and the overall changeover costs to lenders and brokers on an ongoing basis”.

He says, “Design wise it had to be simple and intuitive. This meant incorporating a number of key software design principles into the creation of the new compliance tab. For instance, having a consistent flow of data capture, implementing a dynamic rule base so it only requests relevant information, capturing data in a consistent format using simple options, and allowing borrowers’ requirements and objectives to be retained even when applications are resubmitted.”

Tilley acknowledges the worth of the ApplyOnline compliance tab, pointing out that it kicked off in April and to date there’s been no broker feedback on the additional requirement.

“That’s a great litmus test to the fact it’s working,” she says.

She sums up the success of the compliance tab from a big-picture perspective.

“We’ve worked with NextGen.Net for more than 20 years, and we value our strong relationship,” Tilley says.

“From a data perspective there is validation of up-data via the user interface.

The other part is documentation. We offer the ability for brokers to utilise the ApplyOnline Supporting Documents functionality to meet our document requirements, resulting in a seamless provision of documents. We are delighted with the way it has worked.”

In summary, Tilley notes that fundamental to any change is open and transparent dialogue with everyone concerned. “For us that’s been the key to success,” she says.

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NEWS

TECHNOLOGY

ONLINE LENDER BREAKS $9BN MILESTONE OnDeck Group has loaned more than $9bn to more than 80,000 small to medium-sized businesses across the United States, Canada and Australia in just over 10 years, according to figures released by the company. OnDeck Australia’s CEO, Cameron Poolman, said, “Australia is now the secondlargest alternative finance market in the APAC region, growing at 37% annually, and the total size of the market in Australia is now 25 times the size it was in 2013.”

THE

WORLD’S FIRST BLOCKCHAIN BOND ANNOUNCED Major Australian bank to head arrangement of bond-i, a global blockchain first from Sydney innovation lab

World Bank has mandated that CBA is to be the sole arranger of the first bond globally to be created, allocated, transferred and managed using blockchain technology. The AUD kangaroo bond, Blockchain Offered New Debt Instrument – nicknamed ‘bond-i’ – was developed in collaboration with Northern Trust, QBE and Treasury Corporation of Victoria.

According to a statement from CBA, the bond will be issued and distributed on a blockchain platform operated by the World Bank and CBA in Washington and Sydney, respectively.

Sophie Gilder, head of blockchain at CBA’s Innovation Labs, said, “We know blockchain has the potential to revolutionise financial services and THE

markets, and this transaction is a significant step towards that future state. By working collaboratively with the World Bank, we were able to find solutions to technical and legal considerations to make this groundbreaking transaction a reality. This project further solidifies CBA’s position at the forefront of blockchain technology, and we are excited to build on this in partnership with our clients.”

The blockchain platform was designed and developed by CBA’s Blockchain Centre of Excellence at the Sydney Innovation Labs.

As part of its mandate to reduce poverty and promote lasting development, the World Bank issues between US$50bn and US$60bn annually in bonds for

sustainable development. It is increasing its focus on helping countries transition to sustainable economies that are technology-led, while exploring the benefits of disruptive technologies, such as blockchain, across all its operations.

CBA’s Blockchain Centre of Excellence has taken a lead role in applying blockchain technology to capital markets, partnering with the Queensland Treasury Corp to test a prototype bond on blockchain in the first blockchain bond issuance by a government entity.

James Wall, CBA’s executive general manager of institutional banking and international markets, said, “We take a collaborative approach to innovating and have a track record of partnering with other leading financial institutions, government bodies and corporates to innovate through blockchain. We believe that this transaction will be groundbreaking as a demonstration of how blockchain technology can act as a facilitating platform for different participants.”

BLOCKCHAIN IN NUMBERS Sources: Enterprise projects, Reportbuyer, Accenture

10

$8BN–$12BN

US$2.1BN

79.6%

US$16BN -> US$600BN

Potential reduction in a bank’s annual operational costs following blockchain implementation

Projected global spending on blockchain solutions in 2018

Projected CAGR of blockchain space to 2022

Value of global cryptocurrency market at start of 2017, compared to the end

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MORRISON PRAISES AUSTRALIAN FINTECHS Scott Morrison addressed delegates at the third annual FinTech Australia awards in Sydney on 1 August, saying the Australian economy was “counting on fintech” to pioneer new developments and bring economic benefits to consumers and banks. “We understand how what you do, as interesting and fascinating as it is in its micro operations, is far more important to us in terms of how it’s changing the rest of the economy,” Morrison told attendees.

TREASURER

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NEWS

R E G U L AT O R S

‘FEES FOR NO SERVICE’ BILL COULD TOP $850M fees-for-no-service scandal that emerged during the royal commission has landed Australia’s banks with a multimillion-dollar bill that could exceed $850m. According to ASIC figures, Westpac, AMP, ANZ, CBA and NAB have paid or offered customers $222.3m in refunds and interest to date for failing to provide advice to customers while charging ongoing advice fees; $6.4m of this has been paid since December 2017.

A further five licensees have made provisions for future payments, and, if these are made in full, remediation may exceed $850m.

THE

‘DISAPPOINTED, ALTHOUGH NOT SURPRISED’ Industry reacts to Productivity Commission’s final report, reopening the debate on broker commission, clawbacks and customer outcomes Productivity Commission’s 686-page final report, released on 3 August, has called for trail commissions to be abolished, spurring the industry to respond.

The report dedicates an entire chapter to mortgage brokers and their ability to enhance market competition, the first page of which reads, “Trail commissions should be abolished”.

Further, the report says commission clawbacks “should not be allowed beyond two years”, and passing clawbacks on to the borrower “should be banned”.

In response to the report, MFAA CEO Mike Felton said, “Trail is an important control mechanism.

It discourages excessive churn, incentivises quality, aligns the THE

ABA CODE OF PRACTICE APPROVED has approved the Australian ASIC Banking Association’s new Banking Code of Practice, which is due to apply from 1 July 2019. The new code provides improved protection for small business borrowers, as it expands the reach of legal protections from unfair contract terms. The code also covers protections relating to the sale of consumer credit insurance, and enhanced processes for assisting customers in financial difficulty as well as those with complaints to resolve.

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interests of all stakeholders in the value chain with those of the customer, and also allows the broker to continue to provide service over the life of the loan.

“If trail were to be abolished, upfront commissions would need to increase substantially. This would equate to the Canadian model that, for example, pays an average upfront of 1.1%.”

Speaking to Australian Broker, head of Trail Homes Nick Young said, “I’m disappointed, although not surprised. This is in distinct contrast to ASIC and the Treasury’s findings, and those findings were made – particularly in regard to ASIC – after very extensive research.

“By effectively cutting trail commissions very significantly in the

remuneration of brokers, the whole industry will be under immense pressure. As a consequence we will see a very significant decline in competition, and that is not in the interests of anybody.

“The other issue is that they are suggesting perhaps increasing upfront commissions to potentially cover this, which again is not in the consumer’s interests. The final thing is there will also be no incentive to provide ongoing service to clients,” Young said.

“As I say, I’m disappointed.

I thought the conversation had moved beyond this, and it’s a shame to see this sort of thing being rehashed.”

David Bailey, CEO of AFG, said major banks would be the “unintended beneficiaries” of any move to ban trailing commissions for mortgage products. “Mortgage brokers are encouraged through trailing commission to stay with customers for the life of their loan, to review products and add value,” he said.

ASIC ENFORCEMENT OUTCOMES, H1 2018 Source: Housing Industry Association

Investigations 67 investigations commenced

Prosecutions 73 investigations completed

13 people charged in criminal proceedings

210 criminal charges laid

176 people charged in summary prosecutions for strict liability offences

342 criminal charges laid in summary prosecutions for strict liability offences

Bannings and disqualifications 68 people or companies removed or restricted from providing financial services or credit

20 people disqualified or removed from directing companies

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FE AT URES

SPECIAL REPORT

THE NEXT FRONTIER Suncorp’s head of bank intermediaries, Mark Vilo, explains the three-point strategy that will redefine the group’s broker partnerships at a critical time for the industry

KEY BUSINESS METRICS

$14.1BN

in revenue recorded for FY2017/8

13,300

people employed by Suncorp Group

$99BN

held in assets by the group

51%

of leadership positions filled by women

87%

of total assets under management covered by responsible investment policy

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worlds of business and finance are not without their challenges. At the mercy of global markets, political point scoring and regulatory scrutiny, the industry – as well as the brokers who keep it alive – have had a tough few years.

Unfortunately, things are unlikely to improve any time soon.

For Mark Vilo, head of bank intermediaries at Suncorp, the challenges presented by the current climate range from more rigorous application processes to ongoing threats to remuneration and, one of the greatest concerns of all, the unknowns that lie ahead.

Helping brokers to not only weather the ongoing storm but thrive despite it, Suncorp is executing a three-point strategy that spans partnerships, diversification and education.

“We have reflected as an organisation and seen that education is the next frontier for broker businesses. We have the capability within Suncorp to reach and utilise the talent we have in-house to help brokers,” says Vilo.

“We are using education as a key strategic approach, and it’s not just around learning but how we engage with our associations. It’s almost like a multipronged focus we have.”

The first step towards boosting professional development is to build on the power of partnerships by focusing on aggregator and broker partners and restructuring the BDM teams that support them. For example, phone-based BDM support now dovetails with traditional face-to-face interactions to keep Suncorp front of mind.

To encourage diversification, THE

brokers are supported in their transition into commercial, small business and even insurance broking. Finally, education ties all three avenues together.

Suncorp’s Learning Campus is the product of examining existing vendor relationships within the group and leveraging those to pull together the hundreds of broker professional development opportunities in the marketplace. To date, Suncorp has identified seven vendors with 25 different learning opportunities and more than 450 different modules.

It is now working with each to fill the

supported by further partnerships with the Australian Institute of Management and ongoing work with Kaplan, as well as a subsidy scheme for brokers wishing to complete their Certificate IV, and initiatives such as online courses in business and leadership skills.

“We are really advocating this opportunity. We know that, as Suncorp, we have a really important role to play, and we are making headway in that,” Vilo says.

“Naturally, as we progress over the next few years, it will be great to have a focus on additional education, as we have already seen in the financial planning space.”

Creative synergy The mission to address gaps across multiple learning platforms and programs is one that few in the industry are positioned to take on, and for Suncorp to champion the cause marks a fresh approach to the

“We are really advocating this opportunity. We know that, as Suncorp, we have a really important role to play” Mark Vilo, head of bank intermediaries, Suncorp educational gaps that naturally occur in a free and competitive market, with a focus on building brokers’ core, soft and auxiliary skills.

“We have structured it from a bank point of view to be really focused at the aggregator level.

As a partner we are not so obtuse as to think we know everything; we want them to work with us in partnership and for them to tell us what they think they need and we will look for a solution for them,” Vilo explains.

Recently, Suncorp collaborated with Aussie Home Loans, touring Australia to meet their new brokers and talk about good customer conversations. This work is

lender’s role in the marketplace.

Continuing this message, Suncorp’s Sunrise Series of national PD events is fully focused on what brokers want and need to know, rather than taking the opportunity to push a corporate message.

Each event delivers essential skills and knowledge, with hightouch interactivity as opposed to traditional learning techniques.

For example, the most recent event – held in Sydney in August – starred award-winning documentary maker and Body Hack creator Todd Sampson, who inspired the audience with stories of how he has worked to overcome challenges.

In partnership with

Whether that’s through retention initiatives or new processes, we always look for new ideas and we will continue to do that.”

Mark Vilo, head of bank intermediaries, Suncorp

The rest of the event saw three Suncorp CEOs, from lending, marketplace and insurance, debate their market observations, as well as a session, ‘Innovation in Action’, that was developed in direct response to feedback from previous events and took a speed-learning approach, with 12 speakers on 12 tables, each tackling a different topic.

“Brokers need to have skills around good client conversations, and even though most think they do, they should and can always continue to learn. I find that when I attend these programs, I’m always learning myself,” Vilo says.

“Brokers should also be aware of their obligations around

responsible lending and making sure they understand the additional information on living expenses.

There is more rigour involved now, and I think the expectation is that we are looking at brokers to be more involved and integrated in the process.”

Smaller events are held in Suncorp’s Discovery Store on Sydney’s Pitt Street. A space for partners and customers alike, the store has been used to host client meetings, broker training and aggregator events, and even events involving reality TV contestants.

“We ran an event called Option Advantage featuring contestants from The Block. We had a buyer’s

advocate and a real estate agent and we got brokers to bring their clients in so they could actually understand the buying process,” Vilo says.

Suncorp’s approach has provided a boost to its loan book as well as the number of brokers the lender works with. Just under 70% of business is derived from the broker channel. “We have had a very good year in terms of growth in our business, and the model we have in place has helped to drive greater impact,” Vilo says.

“We have done a lot more campaign work, not just rate campaigns but different ideas to bring to brokers to get them interested in talking to Suncorp.

Looking ahead For Vilo there are three things that will define the rest of 2018.

Firstly, he says aggregator and broker technology will support greater efficiency and connectivity.

Secondly, he believes responsible lending will continue to define the space.

“It’s not about being tough; it’s about being appropriate for what the industry requires,” Vilo says.

“Brokers need to ask customers for more comprehensive information – that will become the new norm. Brokers will have to fully understand the facts around the customer and their credit situation, have conviction when lodging their application, and be prepared to support it and discuss it with the lender.”

The final piece of the puzzle is collaboration.

Praising recent initiatives of the MFAA and FBAA, Vilo says their work over the last year has been “outstanding”, with specific reference to the FBAA’s training around small business lending and the MFAA’s ‘Your Broker Behind You’ campaign.

“There is a strong advocacy for brokers, and I think from a collaboration point of view the CIF has also done some really good work to set our future direction and self-regulate. That takes us to a place where we are really striving towards better customer outcomes.”

Vilo sees a strong future ahead for brokers, who he advises to focus on “practices, policies and processes”.

“We are seeing brokers and their businesses going from strength to strength,” he says. “There is a real resilience and can-do attitude in the market, and there is a real optimism that I have seen in the last few months, despite the challenges.” AB www.brokernews.com.au

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BUSINESS PROFILE

BACK IN BUSINESS

New commercial lending products offer increasingly attractive opportunities for Australian borrowers in the business and investment space. Four business and commercial lenders tell Australian Broker about the unique solutions they have pioneered in the market it comes to self-managed super funds, one area that is often overlooked is limited recourse borrowing arrangements (LRBAs).

Often mentioned in analysis of SMSF investment portfolios is the growth in LRBAs over recent years – from a modest $2.5bn in June 2012 to $31.4bn as at December 2017.

A number of years ago, Thinktank identified an emerging need in the commercial lending market for LRBAs to be used by SMSFs looking to purchase property or refinance existing commercial SMSF loans.

“The rate of growth in LRBAs attracted attention in the Murray Financial System Inquiry, yet it largely set to one side the small percentage that it represents of total assets. These LRBAs are secured mostly by direct property, WHEN

long-term investment strategies and securing tenure through indirect ownership. While lenders report an extremely low rate of arrears due to the strong performance of these loans, the protection provided to borrowers if things do go wrong is considerable as the equity acquired in owner-occupied premises is protected from creditors and/or administrators.

A number of financial institutions have recently withdrawn from providing financial accommodation under LRBAs. However, Thinktank not only remains active in this area but, after three years in the commercial SMSF loan space, has market-leading products, services and expertise to support the financing objectives of brokers and their clients.

Thinktank also provides educational support to brokers, conducting regular SMSF training

“The potential advantages of such an investment for retirement planning are significant in the current low-growth environment” Peter Vala, head of sales and distribution, Thinktank both residential and commercial, and, of these assets, it represents just 19.2%,” says Peter Vala, head of sales and distribution at Thinktank.

“It is widely expected that this number will continue to grow in large part as a result of the attraction of tax-effective, long-term owneroccupied investment in ‘business real property’. The potential advantages of such an investment for retirement planning are significant in the current low-growth environment,” Vala says.

Accordingly, Thinktank believes the greatest area of growth is in the commercial property asset class, with owner-occupiers looking at 16

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sessions in collaboration with major aggregator groups.

“For those that have compliant LRBAs secured by business freehold assets and believe that their lender may not be motivated to continue their current facilities, the option remains open to refinance existing facilities, including the cost of the exercise,” Vala explains.

“The cash flow shock from rolling over from an interest-only to a short-term P&I facility, or reduced concessional contributions, can be substantially alleviated by extending the loan term. Some lenders will provide up to 30 years to amortise a loan facility, thus reducing monthly

Peter Vala, head of sales and distribution, Thinktank

THINKTANK: KEY BROKER TAKEAWAYS

Thinktank can consider commercial SMSF LRBAs with LVRs of up to 75%.

The loan terms can extend to as much as 30 years, and there is no post-settlement minimum liquidity requirement.

The facility is suitable for newly established funds using projected contributions, subject to a statement of advice and confirmation of ability to make contributions.

repayments and allowing the fund to build a higher level of liquidity for further investments.”

Set and forget Commercial lending activity increased 7.2% in seasonally adjusted terms between May and June this year, but the mainstream banks’ appetite for commercial business remains subdued. Further, investors holding commercial security can face long approval times and extensive document verification requirements when seeking new finance.

Recognising these barriers, five years ago La Trobe Financial set out to tackle the challenges borrowers face by introducing the commercial Lease Doc loan, a facility that offers fast approvals and can be used for purchase, refinance and debt consolidation.

La Trobe Financial recently reduced its commercial Lease Doc interest rates. “Therefore, we expect to see a significant uplift in activity in the coming 12 months,” Lawrence says.

The practical advantages continue.

In November 2016, the unfair contract term provisions in the ACL and ASIC Act were extended to cover the terms of standard-form contracts for small businesses.

“ASIC conducted a review of contracts offered by banks and found that in some cases the contracts potentially breached the unfair term provisions in part because they included financial indicator covenants that could trigger an event of default based on items that do not represent a material credit risk to the lender,” Lawrence says. “This is where a set-and-forget approach appeals to

“We are receiving strong demand for this product as borrowers look to exit lenders with ongoing performance hurdles” Steve Lawrence, VP head of major commercial clients, La Trobe Financial As an added bonus, La Trobe Financial has since eliminated annual reviews of its commercial loan facilities, allowing investors to ‘set and forget’. This means borrowers are not required to send updated information in order to meet ongoing performance metrics.

Steve Lawrence, VP head of major commercial clients at La Trobe Financial, says, “We are receiving strong demand for this product as borrowers look to exit lenders with ongoing performance hurdles, in order to achieve certainty of their funding future.”

In response to the “very strong performance” reported by Lawrence,

borrowers, and we expect this to be a driver of business for us.”

Supporting brokers by offering the Lease Doc product as a solution for their clients, La Trobe Financial provides direct access to its creditskilled senior manager client partnerships as well as its credit analysts, who can assist at any point in the application process.

Lawrence says, “We are experiencing great success with our broker engagement strategy where we demonstrate to brokers personally, through tailored presentations, the capability of our broad product suite, which incorporates our easy-to-use commercial products.”

Steve Lawrence, VP head of major commercial clients, La Trobe Financial

LA TROBE FINANCIAL: KEY BROKER TAKEAWAYS

No annual reviews are undertaken; it is a set-and-forget type of commercial product.

Interest-only is offered; however, P&I repayments are also available if required.

The Lease Doc product has simple servicing requirements of only 1.2 times cover on the rental income derived from the commercial security property.

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Loaded, not locked Short-term commercial loans are expensive, but for those who need a funding boost every cent counts.

Meeting the market’s demands, Equity One provides interest-only loans for commercial borrowers, with payment terms of one to two years and the ability to pay back early without penalty.

“The real hero of our loans is the fact they provide a solution for commercial borrowers who aren’t being accommodated right now, without them being locked in,” says Equity One managing director Dean Koutsoumidis.

“More importantly, if somebody wants a commercial loan with only a 90-day term, unfortunately they are looking at the market’s more expensive short-term solutions.

This option gives the comfort of a 12- or 24-month solution with the appropriate pricing and the benefit of getting out without paying short-term premiums.”

What’s more, the single-loan structure is available across all Equity One transactions.

Ensuring that borrowers are loaded with cash rather than locked into prohibitive terms, the loans can be leveraged in a number of ways. From helping to improve financial fitness

The growing popularity of the products has seen multiple broker groups secure funding for their clients, and more of those borrowers are located outside of Equity One’s native market of Victoria.

“With the growth of our investor pool we have been able to do more diverse loan applications not only for Melbourne, where we originate from, but all up the east coast and in all capital cities,” Koutsoumidis says.

As Australia awaits the royal commission’s final report, some are hopeful its clarifications will reverse the trends that have recently caused lending conditions to tighten.

However, Koutsoumidis isn’t so confident. He predicts current trends will actually pave the way for unscrupulous lenders to further squeeze commercial borrowers, exacerbating the problem.

“I can’t see in the short- to medium-term horizon that the majors will free up their credit policy; in fact probably the opposite. Whilst things are getting a little tougher out there on the major side of things, we will see a proliferation of smaller lenders, and the challenge is to find the one that suits the client while avoiding some of the more opportunistic lenders out there,” Koutsoumidis says.

Reporting that loan book growth

“If their loan is 12 months fixed, they can break it early after three months with no interest break-off. That’s an important feature of the product” Dean Koutsoumidis, managing director, Equity One before returning to a mainstream bank, to simply providing a cash boost, Equity One’s solutions keep things deliberately simple.

“That’s a really important part.

Even though someone may think that a 12-month term is fine, if they can get their ducks in a row and go back to a mainstream institution, that’s the ideal situation, and we understand that. So if their loan is 12 months fixed, they can break it early after three months with no interest break-off. That’s an important feature of the product,” Koutsoumidis says.

The lender has been providing such loans for more than a decade and today can offer a maximum of $7m.

18

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has exceeded expectations for the last two years, Equity One is now looking to increase its reach beyond its primary market. There is “great opportunity” in Sydney and Adelaide and potential to add Perth to the mix, Koutsoumidis says.

Anticipating a minimum 30% rise in the number of Equity One loans over the next 12 months, he says, “We simply encourage introducers to contact us, and we work one on one with the brokers to go over the product. A lot of scenarios have their own nuances, so if they want to go over a scenario with us, they can call us, workshop it, and just build relationships from there.”

Dean Koutsoumidis, managing director, Equity One

EQUITY ONE: KEY BROKER TAKEAWAYS

Equity One loans have a place in the cache of client solutions that a broker has.

Loans are designed to provide a shortterm solution without short-term pricing

Most client scenarios will fit the criteria.

Up and away Sometimes businesses need capital for the basics. Research conducted by NAB shows that 73% of SMEs in Australia feel successful and 44% plan to expand over the next three years. To do so they need cash, and the majority of small and micro businesses don’t have major assets to secure lending against.

General manager of NAB commercial broker Chris Thomas says, “Australian small business owners want support, guidance and access to capital, but some face challenges in doing so. One reason for this is the challenge some SMEs face in being able to provide sufficient tangible security for a loan.”

To help business owners overcome these challenges NAB introduced QuickBiz, offering unsecured business finance of up to $100,000 to small business clients.

The QuickBiz product suite also includes an overdraft facility of up to $50,000, which is tied to a business transaction account to provide flexibility in managing cash flow and unexpected costs.

QuickBiz was an instant success with the retail channel, accounting for more than one third of the bank’s new small business loans. Building on that, QuickBiz was launched to

While far from the only SME loan product on the market, QuickBiz has several unique selling points for borrowers, including loan terms of up to three years and a competitive fixed interest rate of 12.95% per annum.

For brokers, ApplyOnline fully digitises the application process, and a suite of learning resources is available to help build confidence for those brokers who are new to business lending. A team of 60 support staff, as well as office-based BDMs and a broker response centre staffed by skilled reps, are available to assist with everything from loan queries to technical support.

“At its core, by providing NAB QuickBiz to the broker channel, brokers can assist small business customers in accessing an unsecured loan, often as part of a broader financing relationship with that customer,” Thomas says. “As most brokers will understand, long-term relationships with customers win out over taking a transactional approach every time.”

Further boosting confidence, NAB’s ‘How’s business?’ campaign provides resources and prompts for brokers to maximise positive outcomes. Resources include a

“We’re giving brokers the opportunity to extend customer conversations and meet a broader range of customer financing needs” Chris Thomas, general manager, commercial broker, NAB the broker channel in May 2018 to “overwhelmingly positive” feedback.

It is supported by ApplyOnline for small business lending, which enables brokers to lodge both small business and residential loans online together on one form through their aggregator software.

“We have great aspirations for the product going forward,” Thomas says. “What I’m hearing from brokers is that NAB QuickBiz has given them the ability to offer small business customers a quality, competitively priced lending product.

For many, it’s a product they can be confident in recommending to long-time customers.”

pre-qualifying tool, a guide to customer conversations, and an overview of NAB’s simplified credit criteria.

Thomas says, “As Australia’s leading business bank, NAB is continuously investing in smart technology, and we remain focused on supporting brokers to deliver the best for customers. Our research shows that around a quarter of a broker’s residential customers are also business owners, and with our new online lodgment capability we’re giving brokers the opportunity to extend customer conversations and meet a broader range of customer financing needs.” AB

Chris Thomas, general manager, commercial broker, NAB

NAB: KEY BROKER TAKEAWAYS

NAB QuickBiz provides access to $5,000–$100,000 in unsecured finance for small business customers by way of a term loan or overdraft facility.

NAB QuickBiz offers a competitive fixed interest rate of 12.95% per annum with no upfront or ongoing fees. Customers can choose 12-, 24- or 36-month loan terms.

Brokers can apply for an NAB QuickBiz loan for customers within 15 minutes, and obtain an instant online decision on whether the loan has been approved.

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IN THE NE WS

THE PERCEPTION GAP

Despite years of work to reverse them, gender and pay gaps persist in most workplaces and industries. Unpicking the dynamics of equality and inclusion in broking, new research from the MFAA confirms that perception is just as important as participation “If you want to drive cultural change it needs to happen across the industry as a whole, as well as within individual businesses. It isn’t just about identifying these things, but how we bring the necessary changes to life within each organisation,” she says.

Despite the perception gaps, there are areas where both genders agree, specifically around flexible working and self-employment, with flexibility and autonomy at work named as the key benefits of broking.

“That was a real positive. One thing that is a great enabler of diverse working environments and industries is flexibility, because it recognises the uniqueness of how people work,” Counsel explains.

Jane Counsel, executive coach and consultant, Executive Central Group

gender pay gap currently stands at 15.3%, with ATO figures confirming that women out-earn their male peers in fewer than 100 jobs.

In broking, commission-based salaries help level the playing field.

However, recent MFAA research doesn’t just confirm gender gaps exist; it also shows that they vary drastically depending on who observes them.

According to the survey of almost 700 brokers and finance professionals, 57.27% of women believe they are under-represented in the industry, while only 22.15% of males agree.

“There are a number of perception gaps between men and women, and there is a big opportunity for us to address those,” says Executive Central Group’s principal consultant and coach, Jane Counsel, who led the research and working groups on behalf of the MFAA. When it comes to the industry’s barriers to entry, 71.61% of male respondents do not perceive women to be facing barriers; however, among AUSTRALIA’S

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female respondents that figure dropped to 39.55% (see graph below).

The research forms the backbone of the MFAA’s work to drive greater diversity and opportunities in broking for people of all ages and backgrounds.

Unpicking the results, Counsel facilitated a group of more than 20 male and female professionals who shared their thoughts at a day-long seminar in May.

Working together for change Perception gaps between men and women are only half the story. In addressing the core issues highlighted by the research, Counsel says there is an opportunity for industry leaders to step up and spearhead work on diversity and inclusion.

Reaching far beyond the gender debate, D&I initiatives aim to increase representation of all members of society, from indigenous to LGBTQI, male and female. Figures from the Diversity Council of Australia show that members of diverse teams are nine times more likely to innovate

and 10 times more likely to be “highly effective” in their role.

When questioned on diversity, 50% of men believe the industry fully leverages the diversity of members to address customer needs, compared to 46% of women. However, 43% of men and 42% of women answered ‘unsure’.

Urging the industry to prioritise D&I, Counsel says, “I think there is a piece here on leadership capability, which is linked to training and communication. It’s not just about providing a space where people feel comfortable talking about diversity.

How do we shine a light on the issues people say are getting in the way?”

Counsel’s research continues, and the data will form a blueprint for future work. Further initiatives will focus on mentoring and networks, P2P support, training and structured career path opportunities.

“To be reflective of the community we need to speed up the diversity of people in the industry,” Counsel says.

“We’re not starting from zero. Yes, there is a lot of work to be done, but we have a solid foundation in terms of the work that is already happening, the role models we have and the really capable and influential people in this industry who genuinely want to make a difference. There are good pockets of work, inclusive behaviours and leadership; now we have to learn from the positive experiences we see.” AB

BREAKING INTO BROKING: WOMEN IN INDUSTRY Do women face barriers to entry in the broking industry?

Male respondents

Female respondents

71.61%

39.55%

Barriers to industry entry: Top female perspectives 26.36% cite unconscious beliefs about gender roles in the workplace 25.45% observe an industry culture that is not inclusive for women 12.27% are concerned about sexual harassment and personal safety Barriers to industry entry: Top male perspectives 12.04% cite unconscious beliefs about gender roles in the workplace 9.68% observe an industry culture that is not inclusive for women

No

No

7.31% say lack of experience and expertise is the key

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OPINION

CHINA’S NEW (FINANCIAL) YEAR

Chinese buying enquiries for Australian property increased 5.7% in March and 22.3% in April. According to Juwai.com CEO and director Carrie Law, this financial year could see the start of a new era for foreign investors

June, the Foreign Investment Review Board (FIRB) released its most recent report on foreign investment in Australia. The most interesting data in this document covered foreign investment in residential property.

The report ranks China as the fastestgrowing and biggest source of investment in the 2016/17 financial year. China accounted for more than double the value of any other country’s approved real estate investments in Australia. With the highest approved expenditure of all countries, it also accounted for more than the combined value of the second- and third-ranking countries. The top three were China at $15.3m, Canada at $7.3m, and the US at $6.8m.

Victoria is the most popular state for residential real estate approvals, followed by NSW. These two states account for 73% of all foreign acquisitions of residential real estate, according to the FIRB report.

Queensland accounts for 18%, WA for 5%, SA for 3%, and the ACT for 1%.

Juwai.com’s data shows something similar: the top five cities for Chinese buyers are Melbourne, Sydney, Brisbane, Adelaide and Canberra – with the Gold Coast and Perth also putting in a strong showing.

One key FIRB finding was that the introduction of application fees in December 2015 changed investor behaviour.

The fees can be more than $100,000 for a single application for a luxury property, although for the least expensive homes the fees start at just $5,500.

IN

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The FIRB report covers the financial year ending 30 June 2017. It’s the most recent government data publicly available, but it’s still a year old. If you’re looking for some insight into what’s happening with Chinese investment today, here is the latest data from Juwai.com: Chinese buying enquiries for Australian property were 5.7% higher in March this year and 22.3% higher in April.

Those are the hard numbers. In terms of speculating about the future, the year 2018 could be the beginning of a new phase of Chinese investment. The environment is changing. Rather than threatening further capital controls, the Beijing government is hinting that it may unwind them. Chinese buyers are beginning to anticipate a time, perhaps this year, when investing overseas will become easier once again.

FT Confidential Research reports that a majority of Chinese households intend to increase their offshore investments in the coming two years. For brokers and mortgage originators, what this means is

Speculating about the future, the year 2018 could be the beginning of a new phase of Chinese investment

Carrie Law CEO and director, Juwai.com

Naturally, as soon as these steep fees were introduced, the number of applications plummeted and, naturally, investors began applying only for the properties they felt they had a true intention and opportunity to actually purchase.

Of all foreign investment approved by the FIRB across every sector of the economy, real estate accounted for more than one third: residential real estate comprised 13% of approvals and commercial 23%.

Eighty-eight per cent of approved residential investment was for new developments rather than existing property.

that Chinese buying has declined since the golden year of 2016 – when unsurpassed growth rates took it to record levels – but it is still significant. It’s quite possible to focus on just Chinese buyers and make good money.

When working with buyers from China, it is important to understand the special requirements lending institutions have when dealing with offshore income.

It is also useful to have relationships with non-bank lenders who can provide financing to foreign buyers of Australian property. AB

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23

PEOPLE

CAUGHT ON CAMERA FAST’s sixth annual Women in Business series attracted another strong turnout from brokers, lenders and industry representatives across the country. More than 250 people attended the events held in Sydney, Melbourne, Adelaide, Perth and Brisbane from 18 July to 2 August. Australian aerial skier Alisa Camplin shared insights from her own impressive journey of winning at the Olympics, addressing ways to transform challenges into opportunities and how female business owners and professionals could plan for achieving their goals. FAST CEO Brendan Wright said the event series reinforced FAST’s commitment to diversity, looking beyond gender to encompass thinking, leadership and culture. Wright gave the example of the Combined Industry Forum to highlight how diversity could be leveraged for the common good.

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

FORMER ACCC CHAIR BLASTS ASIC’S ‘INEFFECTIVENESS’ The former chairperson of the ACCC has lashed out against the “ineffectiveness” of ASIC as a financial watchdog, amid reports of misconduct and a lack of competition in the banking sector.

“This issue about ASIC ineffectiveness has been going for 25 years and it’s got no better over time, and the latest revelations just confirm that we have to do something more fundamental,” said former ACCC chair Allan Fels in an interview with ABC senior business correspondent Peter Ryan.

In the interview, aired on 9 August, Fels claimed that ASIC was “not feared” by banks as a corporate enforcer, unlike the ACCC. Classy response from ASIC. Seems every public servant entity wants to bag every other public servant entity to promote their own importance and existence.

Bottom Line on 10 Aug 2018 at 08:40 AM

Very disappointed, Fels. You should know better. It’s not just about ASIC at all. APRA is the independent statutory authority that supervises institutions across banking, insurance and superannuation and promotes financial system stability in Australia! (Straight off their website.) APRA needs to be roped over the coals over all this, more so than ASIC! Peter White FBAA on 10 Aug 2018 at 09:05AM

I watched the interview and have to say that Allan was looking every one of his 76 years. Not convinced that he still has a finger on the pulse of current happenings within the regulatory bodies. I find it disconcerting that public servants within APRA and ASIC, who likely have trouble balancing their own chequebooks, are dictating how everyday Australians must live in regard to their financial lives. Everyone has some degree of discretionary expenditure in their lives. If I had to choose between paying my mortgage or buying a morning coffee, like the majority of people, I’d make the responsible choice. The nanny state is well and truly alive.

Stephen Dinte on 10 Aug 2018 at 01:13 PM

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DATA

WESTERN AUSTRALIA

NSW SPOTLIGHT

Perth plateaus after spending years in mining freefall

LIFE AFTER THE PEAK

Perth is finally starting to find its footing after many years spent plummeting. “Supply and demand are in balance; there is a healthy count of properties for sale compared to the number of interested buyers, and there is a closely fought tug-o-war between buyers and sellers,” reports Jeremy Sheppard, director of research at Empower Wealth.

“Prices have corrected and the economy is back on its feet. But that doesn’t mean the city as a whole is set for growth – it has only just got back into a balanced position.”

With many having lost confidence in Perth’s ability to hold up economically, sustain a thriving job market and drive growth in the property market, the capital needs to do more to attract buyers.

“The data indicates that markets closer to the CBD with million-dollar price tags have the highest demand-to-supply ratios,” Sheppard says.

Area

Type Median value

The market is cooling and Sydney’s construction industry has entered a delivery phase, boosting supply while city residents continue to hunt out affordable properties

Quarterly

12-month

growth

growth

Perth

H

$510,000

0.0%

-1.5%

WA Country

H

$345,000

1.2%

-4.2%

Perth

U

$395,000

1.3%

-4.2%

WA Country

U

$249,000

-0.4%

-10.7%

QUEENSLAND

Rising demand and a limited pipeline buoy supply The wealth of projects in Cairns has created immense opportunities in this job market.

With demand rising, limited housing will keep competition hot. The state government has also been highlighting the city's tourism potential.

“After a decade of being in the property market doldrums, the broader outlook for Queensland property markets is one of the most positive of all Australian states right now,” says Propertyology managing director Simon Pressley.

Brisbane may be seeing good days, but not all pockets are feeling the positivity. “As always, the markets were fragmented – some areas underperformed. Sixty-eight suburbs far exceeded the average level of growth, and almost a dozen Brisbane suburbs had double-digit price growth over the last year,” reports Michael Yardney, CEO of Metropole Property Strategists.

Oversupply has been seen mainly in the CBD and inner ring. Completion of over 10,000 apartments in the next year may exacerbate the stock issues.

Area

Type Median value

housing market may have hit its ceiling, and things are slowing down in the capital.

“The housing market, from a number of key indicator perspectives, has peaked,” says Leanne Pilkington, president of the Real Estate Institute of NSW (REINSW). “Prices are easing, clearance rates have dropped, and residential building approvals for April 2018 showed a 5% decline, which is more pronounced than most expected.

We’re seeing the market correct at the moment, but in a sustainable, soft-landing way.”

For this reason, Pilkington does not expect to see any changes in interest rates until 2019.

The rental market is also stabilising, as vacancy rates in Sydney are settling. According to the REINSW Vacancy Rate Survey conducted in May 2018, the average rate in the Sydney metro came in at 2.4%.

“We have seen a level of consistency for renters as we move into the cooler months,” says Peter Matthews, deputy president of REINSW. Rental availability increased in the inner city but fell in the middle- and outer-ring suburbs.

This suggests that people are moving out to where properties are more affordable.

Regional areas are maintaining tenant demand, and vacancies also tightened in the Hunter region, Newcastle and Wollongong. On the other hand, occupancies fell in Illawarra, Albury and the South Coast.

With demand from overseas investors declining, developers are focusing on the local owner-occupier market, and this may be giving unit stock a boost. More than 24,000 apartments are under construction as part of 123 projects currently on sale. Building approvals are now slowing and Sydney’s construction has entered the delivery phase; the city could therefore see a significant uptick in properties on the market. AB SYDNEY'S

Quarterly

12-month

growth

growth

H

$535,000

0.0%

2.6%

Median price (houses)

QLD Country

H

$435,000

-1.1%

1.6%

$279,412

Brisbane

U

$395,000

-2.5%

-1.8%

QLD Country

U

$385,000

-2.5%

1.8%

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Overall market is steady, with pockets of growth opportunity We are definitely at the end of the housing boom in Sydney, and, with expectations of a drop in prices, buyers are waiting for a bargain.

While the overall market remains steady, I see growth opportunities in the western city, the only metro area to have standalone dwellings under $650,000, which are appealing to first home buyers with 100% stamp duty concessions.

As we see tightening in borrowing capacities, these lower-priced areas are becoming more attractive to families forced to find affordable housing. The new airport, metro, M12 Motorway and other infrastructure projects out west will keep housing in demand, but I don't think it will boom.

For Sydney as a whole I don't think we will see the heavy decline we saw in the boom-to-bust of 2002, although we may see 10% declines in some areas. People are still buying, but they are looking for bargains, and the sense of urgency is gone. It’s a great time for buyers to build up their deposits to give them better opportunities, save on LMI, and be eligible for more competitive loan products with low interest rates.

Sofie Chapman Broker, Buyers Choice

SUBURB TO WATCH: LAVINGTON

Brisbane

26

BROKER PERSPECTIVE

Median price (units) $178,905

Source: CoreLogic

12-month growth

3-year growth

5-year growth

Indicative gross rental yield

2.4%

9.1%

22.5%

5.8%

12-month growth

3-year growth

5-year growth

Indicative gross rental yield

3.1%

4.1%

19.3%

5.8%

AUSTRALIAN CAPITAL TERRITORY

Population growth to support Canberra’s rise up the ranks OPPORTUNITIES AND KEY INFRASTRUCTURE

Investment

Population growth

Construction

Vacancy rates

Unprecedented investment in road, metro and light rail ahead

Current population of 4.6 million to swell by 900,000 by 2026

Building approvals down 5% in April 2018

Vacancies average 2.4% in Sydney metro area, May 2018

HIGHEST-YIELD SUBURBS IN NEW SOUTH WALES Suburb

Type

Median price

Quarterly growth

12-month growth

Broken Hill

H

$105,000

5%

0%

Dareton

H

$106,250

-10%

-11%

Sussex Inlet

H

$560,625

6%

37%

Malua Bay

H

$530,000

4%

10%

Coonamble

H

$105,000

-19%

-22%

The capital city of Canberra is standing out after a significant increase in population.

“The ACT government predicts ongoing strong population growth of 6% in Canberra by 2020.

Around 60% of this growth will be due to natural increase and about 40% through net overseas and interstate migration,” says Michael Yardney, CEO of Metropole Property Strategists.

The above-average rate of growth is part of the cycle driving Canberra’s overall success, along with the economy and an active job market.

“Canberra’s property market is a ‘quiet achiever’, having performed well over the last few years, and it is likely to continue to do so. House price growth has outpaced its flatter apartment market,” Yardney says. “Having said that, I don’t consider Canberra a good place to invest, as their horrendous land tax rates chew into your cash flow more than anywhere else in Australia.”

Area

Type Median value

Quarterly

12-month

growth

growth

Canberra

H

$698,000

0.4%

7.3%

Canberra

U

$433,200

-1.3%

0.5%

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27

DATA

VICTORIA

CAPITAL CITY AUCTION CLEARANCE RATES

Melbourne’s lasting potential sees mid-city take centre stage Given the lack of affordability in suburbs bordering the CBD, Melbourne’s middle ring is expected to take centre stage. “The more affluent middle-ring suburbs which are going through gentrification are likely to exhibit the best property price growth,” says Michael Yardney, CEO of Metropole Property Strategists.

“The ripple effect of house price growth caused significant gains in Melbourne’s outer suburbs over the last few years. As the city’s residents trade their backyards for balconies and courtyards, villa units with renovation potential and townhouses in the city’s middle-ring suburbs will make excellent investments.”

Property consultant firm Urbis also reports that the middle-ring suburbs of Melbourne have been performing admirably with the support of considerable infrastructure investment.

A statement read, “The future supply pipeline in the middle ring continued to grow; however, inner-city future development prospects slowed with the upcoming elections and competition from hotel and office development.”

Quarterly

12-month

growth

growth

Melbourne

H

$745,000

0.7%

10.9%

VIC Country

H

$353,000

-1.7%

6.8%

Melbourne

U

$540,000

1.9%

6.3%

VIC Country

U

$270,000

-1.6%

4.8%

Capital city

Total auctions

Cleared

Uncleared

Clearance rate

Adelaide

75

28

19

59.6%

Perth

34

10

10

50.0%

803

403

265

60.3%

Canberra

46

26

10

72.2%

Brisbane

111

32

35

47.8%

465

192

147

56.6%

0

0

0

N/A

Melbourne

Sydney Tasmania

CAPITAL CITY HOME VALUE CHANGES

1.2%

Adelaide

0.0%

-0.1%

0.4%

0.7%

-0.3%

-0.8%

-1.7%

-2.4%

-0.2%

-0.6%

-2.4%

-2.6%

$500,000

Perth Combined 5 capitals

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

28

www.brokernews.com.au

$400,000 $300,000 $200,000 $100,000 $0

Sydney Melbourne Brisbane Adelaide

Perth

Hobart

Darwin

$405,000

0.4%

Units

$636,000

0.1%

$350,000

0.1%

$510,000

Brisbane

$326,500

-0.4%

$440,000

-2.6%

$392,500

-0.8%

$490,000

-0.4%

$700,000 $600,000

Houses

$302,000

-5.4%

$800,000

$452,000

-3.2%

$900,000

$530,000

-0.6%

12-month change

$701,000

Melbourne

-0.2%

Monthly Year-to-date change change

$675,000

Sydney

Weekly change

$850,000

Capital city

MEDIAN HOUSE AND UNIT PRICES

$376,000

Type Median value

The final week of July saw 1,534 homes taken to auction across the combined capital cities, returning a preliminary auction clearance rate of 58.4%. Last week, the final auction clearance rate came in at 57% across 1,257 auctions, the highest clearance rate seen since the week ending 13 May, although volumes were much higher then. While auctions are slowly starting to pick up across the capital cities, current volumes remain lower than this time last year, when 1,987 auctions were held and a clearance rate of 68.7% was recorded. There were 803 auctions held in Melbourne this week, with a preliminary clearance rate of 60.3%, after last week saw 613 homes go under the hammer, returning a final clearance rate of 59.9%. Over the same week last year, 956 auctions were held across the city and a clearance rate of 75.6% was recorded. Sydney was host to 465 auctions this week, with preliminary results showing a clearance rate of 56.6%. Last week, the final auction clearance rate for Sydney was 55.2% across 407 auctions after the previous week saw the clearance rate drop to just 46.9%. When the final results are released, it’s likely that the final clearance rate for Sydney will revise down to the low-50% mark.

$530,000

Area

WEEK ENDING 29 JULY 2018

Canberra

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29

PEOPLE

Aggregator FAST

IN THE HOT SEAT Inspired by his own home loan experience, Finance Detective’s Travis Meyer turned to broking after he retired from professional cycling.

Speaking to Australian Broker, he explains how and why his business philosophy echoes that of his sporting career

Who or what inspired you to become a broker?

When my wife and I bought our first property in Australia we A used a broker, and the process inspired me to enter the industry.

At the time I was an Australian citizen residing and working in Andorra as a professional cyclist, while getting paid by a Swiss company as a self-employed contractor. Just to add to the complexity, we were awaiting settlement on my apartment in Andorra as part of our deposit to go towards the new purchase.

My brother – who is also a professional cyclist and was in a similar situation – used a broker in WA to purchase an investment property and recommended I contact him too, which I am glad I did. Going through the process and seeing how easy it was for us, due to our broker’s skill set, made the experience a pleasure. Then, on top of that, we were getting this service without a charge but knowing our broker would be compensated through our lender of choice.

Our experience and these factors combined intrigued me and helped me plan for my retirement from athletics in early 2017.

Q

What’s one recent career highlight?

In my first year of business, I was nominated for both the Rising A Star Award at the WA Better Business Awards and the Newcomer Award at the MFAA Awards. I am a big believer in setting targets, and mine was to settle $20m in my first year from scratch, and to make both these finalist lists. I achieved both, so this gave me a lot of satisfaction and confidence going forward.

Q

What is your business philosophy and what inspired it?

My business philosophy is the same as my sporting career A philosophy. I was very much a team player and worked incredibly hard for my teammates to achieve the desired result. Now my clients are my teammates and I plan to do the same for them: remain ethical, work hard and deliver what is promised and needed.

Q

If you had the MFAA’s CEO over for dinner, what would you serve?

I am an easy-going, relaxed bloke who likes to switch off when I A am at home, so a relaxing BBQ with beers, snacks and salads is the way to go. AB

Q

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