OCTOBER 2018 ISSUE 15.19
Preview: The AMAs What to expect at the Australian Mortgage Awards 2018 /16
The near prime boom Royden D’Vaz talks future opportunities in near prime /20
BRENDAN WRIGHT The CEO of FAST explains the leadership strategy helping brokers to achieve sustainable success /14
The challenger bank Goldfields Money CEO Simon Lyons on the merger with Finsure /22
ALSO IN THIS ISSUE… Big deal Ren Hor Wong finds a solution in specialist /23 Caught on camera Liberty Network Services sails the seven C’s /24 In the hot seat A broker shares the career guidance that inspired her /30
NEWS
IN THIS SECTION
Lenders Second major bank removes SMSF lending /04
Aggregators Mortgage Broker Forum calls for aggregator reforms /06
Technology Specialist lender launches paperless documents /10
Regulators Peter Kell resigns as deputy chair of ASIC /12
Market SMEs on alert as house prices drop /08
www.brokernews.com.au OCTOBER 2O18 EDITORIAL
SALES & MARKETING
News Editor Rebecca Pike
Sales Manager Simon Kerslake
Production Editor Roslyn Meredith
DATES TO WATCH
ART & PRODUCTION
Upcoming can’t-miss events
Designer Martin Cosme Production Manager Alicia Chin
19 OCTOBER
21 OCTOBER
21 – 23 OCTOBER
Australian Mortgage Awards
Perth Chinese Property Expo 2018
Customer Owned Banking Convention
Now in its sixth year, the expo attracts investors and first home buyers, as well as the local Chinese community, looking to purchase property in Australia. It comprises an exhibition and seminar with sessions delivered in English, Cantonese and Mandarin, designed to help Chinese buyers navigate the market.
Themed ‘The Challenge of Change’, this year’s COBA convention will be held in Melbourne and feature former prime minister Julia Gillard, alongside FINSIA CEO Chris Whitehead; Cognitive Finance Group founder Clara Durodié; Michael Edwards, VP for advocacy at the World Council of Credit Unions; and Bank Australia chair Judith Downes.
The leading independent awards event for the mortgage industry highlights the outstanding achievement of Australia’s top 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.
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
26 OCTOBER
30 OCTOBER
1 6 N O V E M B E R
MPA Non-Banks Roundtable 2018
AFG commercial white label launch
FBAA 2018 National Industry Conference
Hosted by MPA editor Otiena Ellwand, the line-up features speakers from La Trobe Financial, Liberty Financial, Homeloans Ltd, Mortgage EZY, Pepper Money, Firstmac and Better Mortgage Management. Visit www.mpamagazine.com.au to register for the live stream.
As part of its recent investment in Thinktank, AFG has launched a new product range, AFG Commercial powered by Thinktank. Specialising in commercial property loans, it is exclusive to AFG members. The launch event starts at 10am and includes a light lunch. Brokers who attend gain two CPD points.
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.
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
20 NOVEMBER
2 3 N O V E M B E R
30 NOVEMBER
CEDA Annual Dinner
MFAA annual golf day
FBAA Social Sydney
Held at the Sofitel Melbourne, the committee’s end-of-year celebration will welcome Reserve Bank Governor Philip Lowe as keynote speaker. He will present a review of the past year and share his economic predictions for 2019. Individual member tickets start at $290, while non-member tables can be purchased for $4,000.
A day of golf and networking at the Wembley Golf Course, WA, followed by the traditional end-of-year sundowners. There will be prizes on the day as well as competition holes and activities, including Longest Drive and Nearest the Pin – and mini golf for those who don’t want to play a full 18 holes.
Registration starts at 8.45am and the summit will commence at 9am. Morning tea will be provided and the event will conclude at 12.30pm. The Melbourne Social follows on 7 December. Further details of both events are available on the FBAA website.
2
www.brokernews.com.au
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.
www.brokernews.com.au
3
NEWS
LENDERS SOCIETYONE REACHES LOAN BOOK MILESTONE says it has become the first peer-to-peer (P2P) lender in Australia to reach $500m in loan originations across personal loans, agri lending and marketplace business. The lender now has its sights set on reaching $1bn by the end of 2019. Newly appointed CEO Mark Jones said, “The seasonal increase in consumer credit … will combine with the rollout and expansion of a number of new initiatives, including continued expansion of our broker distribution offering.” SOCIETYONE
SMSF ASSET SIZES 2012–16 Source: ATO
Proportion of SMSFs
2012
2013
2014
2015
2016
30%
25%
20%
15%
10%
5%
ING INCREASES RATES FOR INVESTOR LOANS has increased variable rates ING for investor mortgage customers by 15 basis points. The changes came into effect on 25 September for both new and existing investor loan customers. Previously, ING increased rates by 10 basis points for owner-occupier loans, whereas many lenders had chosen to increase rates for investors first. Over the past month, three of the four major banks have increased their rates by a similar amount and experts predict the trend will continue.
“[After nine years] it still frustrates me every day seeing good people’s lives destroyed by poor credit reporting practices and blatant mistakes” Graham Doessel CEO, MyCRA Lawyers
4
www.brokernews.com.au
0% $1–$50k
>$50k–$100k
>$100k–$200k >$200k–$500k
>$500k–$1m
>$1m–$2m
>$2m–$5m
>$5m
Asset size
SECOND MAJOR BANK REMOVES SMSF LENDING FROM PRODUCT OFFERING CBA follows in Westpac’s footsteps as Australia’s major four banks withdraw from SMSF lending Commonwealth Bank of Australia (CBA) has become the second major lender to withdraw from SMSF lending by closing applications for its SuperGear product. Announcing the move on 18 September, CBA said it was “streamlining” its product offering and as such would no longer offer the ability for self-managed super fund trusts to purchase investment property with their SMSFs. CBA also announced it would be removing low-doc loan products. In July, Westpac became the first major lender to remove SMSF lending from its product suite. The decision applied to Westpac and all its subsidiaries, Bank of Melbourne, St. George Bank and THE
BankSA. This means that none of the major four banks are now active in the SMSF lending space. A CBA spokesperson said in a statement, “As part of our strategy to become a simpler, better bank, we are streamlining our product portfolio and have made the decision to discontinue our SuperGear lending product, which enabled investment in residential and commercial property through self-managed super funds. This is part of our strategy to become a simpler, better bank.” SuperGear allowed SMSF trustees to purchase investment property or refinance an existing eligible loan for an investment property. The product was often used by trustees looking to
diversify a portfolio with real property assets. CBA will stop accepting applications for SuperGear at close of business on 12 October, while existing loans will continue to be honoured. Any approvals received between the time of the announcement and 12 October will have the condition that they must be settled and approved by 28 December 2018. For brokers, commission payments will continue as per the existing agreement. “We will continue to support our existing customers who have these loans with us,” the statement said. The number of SMSFs with assets valued at $1m or more increased from 27% in 2012 to 33% in 2016, according to figures from the ATO. In 2016, nonresidential property accounted for 10.4% of all assets, while limited recourse borrowing arrangements – such as SuperGear – accounted for 4% of total assets and residential property 4.4%.
www.brokernews.com.au
5
NEWS
A G G R E G AT O R S CONNECTIVE LAUNCHES NEW DIGITAL TOOL has unveiled its Digital Marketing Hub, an integrated tool that works with a broker’s database in real time via the Mercury platform. With its power to automate targeted messaging and create trigger campaigns, the customer journey can be tracked to ensure contact is made with relevant information each step of the way. GM of sales and marketing Gingkai Tan said, “Our new marketing platform has been developed to help brokers cut through the noise.” CONNECTIVE
ALLOW TIME FOR INDUSTRY REFORM, SAYS AFG Mark Bouris, founder, Yellow Brick Road
MORTGAGE BROKER FORUM CALLS FOR AGGREGATOR REFORMS Recommendations published in new report call on aggregators to work with ASIC to lead industry compliance Mortgage Broker Forum (MBF) has released a report calling for aggregators to take on new responsibilities as part of six recommended guidelines. In its recommendations, the MBF has suggested aggregators be given greater responsibility for working with ASIC to improve compliance in the industry. In the report published on 20 September, the MBF recommended retaining upfront and trail commissions, saying the structure not only helped keep interest rates low but provided a strong incentive for mortgage brokers to put customers in the right loan the first time. MBF was founded to promote a unified broker response to current THE
6
www.brokernews.com.au
CEO David Bailey has said the reform package developed by the Combined Industry Forum “must be given time to work”, and that consumer focus should remain key to maintaining the strength of the third party channel. Bailey told Australian Broker, “Our industry has been actively addressing perceived conflicts of interest through the reform package developed by the CIF, and regulators have acknowledged the progress it is making. AFG will continue to urge decision-makers that it must be given time to work.” AFG
industry scrutiny, and comprises 11 independent mortgage broker firms, working with the support of hundreds of individual brokers. Central to the report’s recommendations is the creation of Registered Credit and Compliance Holders (RCCH) that would continue to aggregate mortgage brokers and lenders but also be responsible for the behaviour and compliance of their aligned mortgage broker networks. Each RCCH would be supervised by ASIC. Mark Bouris, founder of Yellow Brick Road and member of the Mortgage Broker Forum, said, “An RCCH would help ASIC do its job of supervising the mortgage broker industry, helping achieve better outcomes for customers.
“Aggregators would play an expanded role in the sector by holding the umbrella licence and ensuring its licensees comply. Mortgage brokers would become more accountable for their decisions. “The change would help ensure a healthy mortgage broker industry, which is critical to keeping the home lending market competitive. More than half of all mortgages, worth around $200bn a year, are organised through mortgage brokers.” The MBF believes national best practice guidelines would provide greater confidence in the industry. These would ask mortgage brokers to demonstrate that they always put customers’ interests first and regularly review clients’ financial circumstances after loan settlement. Bouris added, “It is critical that mortgage brokers remain a sustainable force for competition in the lending market. Otherwise the big lenders will dominate. We believe our recommendations would greatly enhance confidence in mortgage brokers and the services they offer.”
“Brokers who can clearly demonstrate they are putting client needs first will give their business an edge now and into the future” Brendan Wright CEO, FAST
www.brokernews.com.au
7
NEWS
MARKET MIXED NEWS FOR AUSTRALIA CREDIT RATING ratings agency S&P has revised its outlook for Australia’s banks from negative to stable, but warns that credit pressures remain. The revision reflects the reduced likelihood of one of the downgrade scenarios for the four major Australian banks and Cuscal Ltd, which S&P had previously included. However, it said pressure remained on the government to support Australian banks. The outlook for all four majors, as well as Cuscal and Macquarie Bank Ltd, remains negative. GLOBAL
BORROWERS STICK WITH VARIABLE RATES published by Mortgage Choice indicate that variable home loans made up 82% of all mortgages written throughout August 2018, which was an increase of 0.37% from the month before and almost 4% higher than the 12-month average. Across the country, demand for variable rates was the highest in Victoria for the eighth consecutive month, with 87% of borrowers selecting a variable rate. CEO Susan Mitchell said, “The data is largely unsurprising, especially when you consider that the Reserve Bank of Australia has left the cash rate on hold for over 20 months.”
SMES ADVISED TO BE ON ALERT AS HOUSE PRICES DROP Insolvency specialist warns that declining property values could create problems for SME owners in Australia
FIGURES
8
www.brokernews.com.au
owners often use their homes to guarantee loans, but this could be dangerous as recent reports suggest house prices have fallen at their fastest rate in more than six years. Trent Devine, a partner at Jirsch Sutherland, believes that while huge boom-fuelled increases in home equity have allowed many businesses to remain afloat in the past, the current drop in property values may now spell disaster for small business owners. He said, “Any business that has used personal finances for business borrowings is at risk. As property prices continue to fall, there are reduced levels of equity with which to finance or prop up a business.” BUSINESS
Devine said borrowing from home equity to start a business was extremely common in Australia, especially among husband-andwife businesses. “In the past, when times were tough, struggling businesses have been able to lean on the equity of their home,” he said. “Now, with falling house prices and other factors, this can have a disastrous knock-on effect for businesses.” He said the potential for business insolvency often stemmed from an ill-advised link between business and household finances, a situation that was unavoidable for many new businesses. “SMBs often use the same bank for the business that they use for
personal banking, therefore they’re likely cross-collateralised. They may have their mortgage and business loan with the same bank. They don’t separate one from the other,” Devine said. “Rises in interest rates and resulting mortgage stress can certainly flow onto businesses as we’ve witnessed over the past 12 months. If a business is struggling, banks might now note that there’s no property to support that business because the mortgage is under stress. Clearly, this means that business insolvency becomes a strong possibility.” Devine strongly advises that business owners treat home and business finances as separate entities to reduce risk. He said, “Use different banks for business and personal uses so that cross-collateralisation is not an issue. If you are utilising personal funds, perhaps [have] a loan secured to the business rather than a capital injection.”
HOUSING WEALTH PEAKS... FOR NOW Source: ABS, CommSec
Value of Aussie homes, $bn $7,000
$6,500
$6,000
$5,500
$5,000
$4,500
$4,000
$3,500 Sept 2011
Sept 2013
Sept 2015
Sept 2017
SHOULD WE PANIC ABOUT HOUSING? research director Tim Lawless has played down the forecasts made in a recent episode of 60 Minutes, which claimed there could be a 40–45% reduction in house prices from their peaks. He said, “Overall, it’s hard to see a scenario where Australian housing values could fall off a cliff. For this to happen we would need to see a material about-face in labour market conditions, a global shock, or a material rise in interest rates – none of which seems to be a likely outcome at the moment.” CORELOGIC
www.brokernews.com.au
9
NEWS
TECHNOLOGY ONLINE LENDER MARKS 70% LOAN GROWTH lender Prospa has seen 70% growth in loan originations, according to its 2018 end-of-year results. The company reached $367m in originations, which are up 9% on prospectus forecasts. It has now delivered $750m in total loans to more than 15,000 small businesses across Australia. Prospa’s total loan originations for the six months ended 30 June 2018 reached $211m, up 16% on prospectus forecasts and 61% on the previous corresponding period. ONLINE
ONLINE LENDERS IN ASIC’S CROSSHAIRS business lenders have been warned to remove unfair contract terms following the recent contract reforms made by Prospa and the banks. ASIC’s call to action was made in a letter to the now-former CEO of FinTech Australia, Brad Kitschke. It read, “ASIC requests Fintech Australia to ask its members to consider the changes made by Prospa, to assess whether their loan contracts need to be amended to ensure compliance with the unfair contract terms law.” ONLINE
SPECIALIST LENDER LAUNCHES PAPERLESS DOCUMENTS Joint venture project paves the way for digital sign-off across entire suite of home loan documents
joint venture between La Trobe Financial and MSA National has facilitated the launch of a completely paperless documentation service. Customers will now be able to sign their entire suite of home loan documents, including the letter of offer from the lender, digitally. The two companies collaborated to produce the service, which drives faster turnaround times and reduces the risk of lost documents. David Bleakley, chief settlement officer and vice president of specialist lender La Trobe Financial, said the launch was a positive development for brokers, too. “The move to digital documents is of great benefit for our brokers as we now give them the tools to more A
seamlessly and effectively engage with their customers from anywhere, at any time, via any device,” Bleakley said. “Last week we had borrowers who needed to settle their purchase of the home of their dreams within a very tight time frame. The broker reached out to La Trobe Financial and, with the assistance of the digital document solution, the borrowers were able to receive, review and execute their loan and security documentation within a short period of time, which allowed settlement to proceed within the specified time frame. “[It] is one of many customer enhancement initiatives La Trobe Financial will be rolling out in
the next 12 months.” Ayhan Baba, CEO of law company MSA, added, “The customer experience today, more than ever, relies on close collaboration between the lender and its settlement agent. “It was clear when we first met the team at La Trobe Financial that we had a similar vision and compatible culture. We both want to transform the customer experience by using digital technology, but we both also value the human interaction that overlays this. “Digital is all about doing away with paper and delays and unnecessary expenses, but the customer still wants human connection when coordinating their loan settlement. It is this blend that will win the hearts of customers and their mortgage brokers. “At the end of the day we are still people serving people. Our job is to strip away complexity and relieve the anxiety of the mortgage process.”
“Our new Worth Your While guarantee confidently endorses our brokers and their ability to provide real value to their customers” James Symond CEO, Aussie Home Loans
MYSTATE BANK NATIONAL BROKER NETWORK SURVEY Source: MyState Bank
10
90%+
59%
32%
75%
11%
27%
40%+
said changes to lending practices required brokers to collect, verify and record more client information than ever before
said the changes significantly increased demand on time and resources
said the changes moderately increased demand on time and resources
expect the online broking channel to increase market share
believe online broking could take a 20% market share
said they were looking to adopt new technology and software to remain competitive
believe their current business model is robust enough to succeed
www.brokernews.com.au
www.brokernews.com.au
11
NEWS
R E G U L AT O R S
REVERSE MORTGAGES TRAINING ADVISED a recent ASIC report on reverse mortgages, the FBAA is calling for the introduction of mandatory training and accreditation for anyone wanting to offer reverse mortgages. In its report, ASIC reviewed 17,000 reverse mortgages and found that while they can help Australians achieve a better way of life in retirement, there is a poor understanding of the risks and future costs of the loan. It also said lenders had a “clear role to play”. FOLLOWING
PETER KELL RESIGNS AS ASIC’S DEPUTY CHAIR After seven years on the leadership team, Kell will leave the regulator in December
resigned from ASIC on 18 September after seven years of service. Kell was a key contributor to ASIC’s leadership team throughout his time with the regulator, first as a member and then from 2013 as deputy chair. A statement from Treasurer Josh Frydenberg said that Kell’s “experience and understanding of corporate regulation has been appreciated by successive governments as well as members of ASIC”. Kell’s time at ASIC followed a stint as deputy chair of the ACCC. He has also been on the Australian Government Financial Literacy Board since its establishment, and has made a PETER KELL
APRA WARNS BANKS ABOUT OUTDATED TECH chairman Wayne Byers has highlighted concerns that banks have invested too little in computer systems, increasing the risk of outages. Speaking during an event by payments services firm Cuscal, he accused the banks of having a “backlog of maintenance “ jobs across a “patchwork of systems” and called for funding to be “increased, not just prioritised”. “This is particularly problematic given the legacy infrastructure on which many institutions are currently operating,” he added. APRA
12
www.brokernews.com.au
significant contribution to improving financial literacy and overseeing the transition of the new chair of ASIC, including serving as acting chair. ASIC has six commissioners, with new commissioner Danielle Press starting this week. Sean Hughes is due to commence as a commissioner later this year. Frydenberg’s statement also highlighted the reforms made to ASIC to ensure it has the resources and powers it needs to combat misconduct in the financial services industry and across all corporations for the protection of Australian consumers. These include injecting $70.1m to boost enforcement capabilities and address other regulatory
priorities, as well as $121.3m in additional funding in 2016 to bolster ASIC’s investigative and surveillance capabilities. Further, Daniel Crennan QC has been appointed to the role of deputy chair, with a key focus on enforcement action, and criminal and civil penalties have been strengthened. This move includes increasing terms of imprisonment and fines; increasing the maximum civil penalties that can be imposed by courts; and allowing wrongdoers to be stripped of profits illegally obtained, or losses avoided, due to contraventions of the law. Kell appeared at the royal commission twice and, although he was due to leave ASIC in May when his five-year term expired, he was asked to remain in order to work on its response to the royal commission. It is expected that this work will be complete by the time his resignation comes into effect on 6 December.
30/06/2003
RESEARCH REVEALS BORROWER SATISFACTION Source: FBAA; MyNextAdvice
Survey 2,049 clients who had settled loans
95% overall confidence in brokers relevant to the research
94% were happy with their broker’s knowledge and competency
Focus A range of key performance indicators including broker-client relationship and ease of doing business
93% agreed their broker had their clients’ interest at heart
93.6% found their broker understood their needs, objectives and financial situation
92.1% were satisfied with the strength of the broker-client relationship
www.brokernews.com.au
13
FE AT URES
SPECIAL REPORT
THE THREE PILLARS OF LEADERSHIP Helping brokers to weather the industry’s storms, FAST is promoting a fresh approach to leadership in 2019. CEO Brendan Wright explains the philosophy to Australian Broker
KEY BUSINESS METRICS
1,350
brokers in the network
$21+ BN
residential, business and asset finance settlements in FY18
$7+ BN
total settlements for commercial asset finance
+52
NPS score
40
lenders on the panel
2018
MFAA Aggregator of the Year award
14
www.brokernews.com.au
Richard Branson to Warren Buffett, there is no shortage of people sharing their wisdom regarding business leadership. However, while inspiring, their one-size-fits-all approach doesn’t always translate to the world of broking. Filling the void for its 1,350-strong broker network, NAB-owned aggregator FAST is promoting a new leadership strategy with the objective of supporting brokers in creating successful and sustainable businesses. Implementing the plan, the aggregator’s CEO, Brendan Wright, has charted a path through to 2019 and beyond that defines the key leadership skills demanded by the changing industry landscape. Observing a “complex and ambiguous” operational environment, Wright’s three pillars of leadership were devised in the wake of such developments as ASIC’s broker remuneration review, the Combined Industry Forum (CIF) and, of course, the royal commission. “As we flow through into 2019 there are three key foundations to our strategy: purpose-led transformation, adapting through diversity, and differentiating through culture,” says Wright. The first step to enduring success is a defined purpose, according to Wright. As business owners, brokers must identify their purpose and then bring it to life in order to remain successful in the face of whatever regulatory or economic developments may occur. The second pillar involves brokers embracing and leveraging FROM
diversity in all its forms – business, gender and even sources of information – to drive positive business outcomes. “Gender diversity makes sense because we all know that men and women think and do things differently, and that creates opportunity. But this is also about leveraging the diversity of experience, capability, background, ethnicity and other factors, to drive positive business outcomes for brokers and positive outcomes for
and how you can adapt in ambiguous and complex times,” he continues, highlighting that it isn’t just brokers but customers too, who face this increasing complexity. “The foundations are there for broker business owners to show quality of leadership and get on the front foot in terms of helping their clients to move through the complex scenarios that exist now when obtaining finance,” Wright says. While the three pillars hold equal importance, the implications of diversity arguably reach the furthest. In this context, Wright emphasises that diversity is a partnership rather than a collection of opinions and experiences, which means business owners don’t have to come up with all the answers on their own. “Leveraging diversity, from your stakeholders and employees
“Quite simply, when evolving and creating a strategy that differentiates any business in a marketplace, it’s important to have two or three key pillars to that strategy” Brendan Wright, CEO, FAST their customers,” Wright explains. Citing the CIF as a “perfect case” of how this can be achieved for the common good, Wright maintains that adapting through diversity is about bringing together a range of perspectives that work towards the same goal. He says, “If you think about the CIF, you have aggregators small, medium and large; banks and lenders small medium and large; you have five industry bodies; the consumer advocate – and they are all coming together to ensure the industry takes a proactive approach to identifying what it’s going to do. “The CIF is a classic example right now of the value of diversity
to the customers that you serve, you can create an environment in which you are receptive to diverse thinking and backgrounds that propose answers you may not have thought of. Rather than thinking, ‘I have to come up with all the answers’, this is where the significant value in adapting to diversity comes in,” he says. The third pillar, differentiating through culture, focuses on the good customer outcomes that should be front and centre of any business. Explaining how the pillars were devised, Wright says, “Quite simply, when evolving and creating a strategy that differentiates any business in a marketplace, it’s
In partnership with
Brendan Wright, CEO, FAST
important to have two or three key pillars to that strategy. “At FAST we decided these three are the most relevant: they provide an opportunity to differentiate in a competitive market for sustainable business success, and achieve good customer outcomes for the client and brokers.” Know and show To implement the pillars, Wright advocates a ‘know and show’ approach, whereby the broker appropriately records, and then uses, the information from their client interactions. As a concept, know and show was first introduced at the sixth
annual FAST Business Excellence Conference, held in August, and it is rooted in the importance of a broker not only knowing their customers but also being able to demonstrate that knowledge. Wright’s message was echoed at the conference by NAB’s GM for performance and operations, Nicole Devine, who spoke along with executive GM of NAB broker partnerships Anthony Waldron, futurist Steve Sammartino and Stephen Scheeler, former Facebook CEO for Australia and New Zealand. Addressing the conference, Devine said, “Most brokers would say they have a customer-centric culture, but how do you show it
and how often do you think about it? This is where compliance frameworks and asking the right questions to fully understand a client’s situation come into play.” For Wright there are two ways brokers can achieve this: by changing how and why they communicate with clients and using aggregator platforms, such as FAST’s Podium, as business operating platforms on which to build a richer profile of each client. “This might sound simple, but it’s critical to be inquisitive, ask open questions, ensure you really help the client flesh out what they are trying to achieve and what their current circumstances are, and
then record it in the aggregation platform,” he says. His advice ties in with the extended role data now plays in client relationships – instead of simply creating an extensive log of a client’s details, specifically using data as a springboard from which to tailor their experience. It also ties in with how a broker can show the ongoing service they provide to their client. Supporting this, a series of investments are being made in Podium. The platform will be updated with new features and expanded functionalities specifically designed to help brokers engage and connect with their customers. The strategy will create a tool that Wright describes as being “highly agile”, with future-proofed capabilities to integrate with new APIs and apps as they enter the market. “These developments have already started and will continue to build momentum through early 2019 to September and October,” Wright says. There is no uncertainty that further changes will occur across the industry and, in light of the distance CBA has created between itself and its integrated verticals, the future could see more ownership – and leadership – shake-ups for the bank-owned aggregators. In addition, open banking and comprehensive credit reporting are being ushered in as data takes new precedence across the finance industry. However, as Wright highlights, the developments only bring more opportunities for brokers. “In 2018 we have seen more and more consumers and business owners going to brokers to get their financial services needs met, and that will continue to be the case. The exciting opportunity is that the industry and brokers have a clear road map around how to deliver their service, so it’s exciting times,” he says. AB www.brokernews.com.au
15
FE AT URES
PEOPLE
THE AUSTRALIAN MORTGAGE AWARDS 2018
Defining excellence in the industry, the Australian Mortgage Awards will return to Sydney on 19 October with a show-stopping line-up – and one of the best bands in town
17th Australian Mortgage Awards will take place later this month and, with 213 finalists from nearly 90 companies – not to mention Australia’s favourite cover band – the 2018 event is set to be the most exciting yet. Recognising excellence and highlighting the outstanding achievements of those in the business, the AMAs are the leading independent awards event for the mortgage industry, and winning one of the highly coveted trophies is a career-defining moment. Justin Kennedy, managing director at Key Media APAC, said, “The AMAs continue to recognise excellence in the mortgage and finance industry. Competition has been strong this year. In some categories, we’ve received well over 100 individual nominations – with so much competition, this year is shaping up to be one of the biggest and most competitive AMAs ever. “I would like to take this opportunity to congratulate all the finalists. We’re looking forward to THE
AWARD SPONSORS
16
www.brokernews.com.au
hosting the event and celebrating with the best in the industry.” What to expect in 2018 Awards will be presented across 31 categories, including national awards, brokerage, broker and BDM awards, as well as aggregator, industry and lender awards. Guests are invited to enjoy a welcome reception from 7pm, and the ceremony starts at 7.30pm. The AMAs wouldn’t be possible without the support of the industry’s top names. In 2018, these include ALI Group, ANZ, Bankwest, Bluestone, Equity-One, FBAA, Liberty, ME bank, MFAA, MSA National, NextGen.net, OnDeck and Pepper Money. Sponsoring the AMAs for the 10th consecutive year, Westpac is the official event partner. The judges The award categories are judged by independent and respected professionals from across the mortgage and finance industry (see box, p17). Their combined experience
means the judging panel is impartial, balanced and, above all, qualified to assess the thousands of nominations received. The judges review each submission in the assigned categories and allocate points to provide every finalist with a score. The scores are then tallied to reveal the winner in each category. The entertainment The AMAs wouldn’t be complete without the best entertainment in town. Master of ceremonies Lawrence Mooney is best known for his cult favourite ABC show Dirty Laundry Live. As an award-winning stand-up comic, he was nominated for the Barry Award at the Melbourne International Comedy Festival 2015, and won Best Show at the Sydney Comedy Festival 2015 for his show Surely Not! To help Australia’s star brokers celebrate, Lawrence will be joined on stage by musician and singer Linden Furnell, and the night will round off with a 90-minute set from Furnace and the Fundamentals. AB
ON THE NIGHT
Date: Friday 19 October 2018
Time: From 7pm
Dress code: Black tie
Venue: Event Centre, The Star, 80 Pyrmont Street, Sydney
Event partner
The 2018 AMAs are judged by:
“We look forward to attending the Australian Mortgage Awards every year! They’re a great excuse to get glammed up, but more importantly give us the opportunity to celebrate the leaders in our industry. It’s also wonderful to see the Liberty team amongst the industry’s best winning awards, which reinforces we’ve got the formula right.”
John Mohnacheff National sales manager, Liberty Financial
“The Australian Mortgage Awards provide an important opportunity to acknowledge excellence and highlight the outstanding achievements of those in the industry who go that extra mile to help borrowers succeed.”
Mario Rehayem CEO Australia, Pepper Money
OFFICIAL PUBLICATIONS
R obert Seton, head of sales and development, Trail Blazers Finance M artin North, principal, Digital Finance Analytics P eter Heinrich, MD, The National Finance Institute E lise Ivory, partner, Dentons F rank Ganis, non-executive director, various public companies N ick Young, MD, Trail Homes C ory Bannister, VP chief lending officer, La Trobe Financial D aniel Carde, GM third party distribution, Resimac Ltd G reg Ashe, director, QED Risk Services Pty Ltd R oyden D’Vaz, head of sales and marketing, Bluestone Mortgages Joseph Trimarchi, solicitor, Joseph Trimarchi & Associates B lake Buchanan, GM aggregation, Specialist Finance Group Andrew Ford, CEO, Heartland Seniors Finance M artin Lynch, head of reverse mortgages, IMB Bank Therese O'Neill, founder and CEO, Alphabroker Mentoring G raham Cooke, insights manager, Finder.com.au D avid Gandolfo, president, Commercial & Asset Finance Brokers Association of Australia (CAFBA) Tanya Sale, CEO, Outsource Financial Pty Ltd R enee Blethyn, national partnerships manager, Suncorp L ouisa Sanghera, MD, Zippy Financial Group Janelle Pearce, national head of commercial introducers, Westpac Business Bank L isa Montgomery, mortgage and consumer finance specialist, Lisa Montgomery M ike Cameron, group executive, customer and revenue, PEXA S tefania Riotto, manager – broker relationship team, Consumer Banking and Wealth, National Australia Bank S am Makhoul, MD and chief legal officer, MSA National
ORGANISED BY
www.brokernews.com.au
17
FE AT URES
“I’d like to congratulate our network members whose commitment to excellence and best practice has culminated in our largest-ever contingent of AMA finalists, with 19 of our best up for awards. Since 2014 – when we contested three categories – our presence in the AMAs has grown yearly. This is a reflection of the outstanding talent we house. Awards aren’t the reason our brokers get out of bed in the morning, but it gives me great satisfaction to see their knowledge, aptitude and work ethic recognised amongst the industry’s best.”
"It’s been quite a year for us, being finalists in a number of industry and small business awards, regionally and nationally – and we have been thrilled to win five of those. But I am particularly excited to have been selected as finalist in three categories at the prestigious AMA awards, alongside such a high calibre of finalists. This recognition really means the world to me and my team. I am humbled to share the honour with some truly amazing brokers, and wish everyone the very best of luck.”
“The business has been in operation since January 2017 and up until June this year I have been a sole operator. My parents had various small businesses, and I have always had a desire to run my own. I believe that background and now running RB Finance really helps me relate to my clients and drives me to get the best possible outcome for them while allowing them to maintain focus on their family and business. So to be recognised on our first full year of operation for the effort we put in for our clients is very satisfying.”
Sam White
Beau Duggan
Louisa Sanghera
Ryan Baddock
Executive chairman, Loan Market Group
Franchise owner and broker, Nectar Mortgages
Managing director, Zippy Financial Group
Managing director, RB Finance
“Being recognised by the AMAs provides true validation that all the hard work is absolutely worth it. When I started my business three years ago, my goal was to make finance understandable, relatable and engaging to those aged 25–35. To be named amongst the leading brokers in this fantastic industry is a humbling honour and one that will only push me and the business to new heights.”
18
“To receive affirmation that what we do for our clients is considered best practice, in an industry known for its incredible customer service and positive outcomes, is an honour. It is also an opportunity to pause to acknowledge those who continually support me in building a business in an industry I am passionate about. Without my remarkable family, mentors, partners and clients, I wouldn’t be able to live my dream of doing what I love, every day.”
“It’s an honour to be recognised as a Young Gun of the Year in only my first 12 months as an accredited broker. The best part of my job is helping my clients every day, especially first home buyers who didn’t think they would ever own a home. Congratulations to the other finalists. What an incredible bunch of talented individuals!”
“The AMAs are the industry’s leading awards and I am humbled to be recognised as a finalist amongst other great brokers. With so many different changes and challenges within the industry in the last 12 months, it’s great to see so many brokers doing well and excelling in their field. I look forward to celebrating everyone’s success on the night.”
“As a business we're incredibly proud to have been recognised as finalists across multiple categories at the AMAs this year. In my eyes, it validates the hard work my team does throughout the year and provides us with a valuable opportunity to reflect as a business on how far we've come and look at what we hope to achieve over the coming year.”
Will Unkles
Christian Stevens
Alex Veljancevski
Damien Roylance
Director, 40 Forty Finance
Credit adviser, Shore Financial
Lending specialist, Eventus Financial
Director, Entourage Finance
www.brokernews.com.au
19 October • The Star Sydney
BOOK YOUR TABLE NOW Event partner
Award sponsors
Official publications
Organised by
www.australianmortgageawards.com.au
www.brokernews.com.au
19
FE AT URES
BUSINESS PROFILE
THE BOOM IN NEAR PRIME LENDING In its first three months of near prime lending, Bluestone witnessed a 96% increase in application volumes and a 153% increase in settlements. However, as national head of sales and marketing Royden D’Vaz explains, the best is yet to come
20
www.brokernews.com.au
were, and still are, struggling to get a new home loan or refinance an existing one,” D’Vaz says. In addressing the needs of self-employed business owners and
properties, or mortgage refinancing. By individually assessing each application instead of using credit scorecards, Bluestone builds a broader picture of a client’s ability
“Brokers are often really surprised at how simple and rewarding it can be to help these customers” Royden D’Vaz, national head of sales and marketing, Bluestone PAYG borrowers who are locked out of mainstream banking, Bluestone can help with debt consolidation, funding business expenses, paying ATO debts, buying investment
to meet payments. This allows the lender to accept a wider variety of income sources – bonus and commission payments, most Centrelink pensions – and also
meet the borrowing needs of self-employed applicants who don’t have the documentation required by major bank lenders. “Taken together, these benefits mean that Bluestone is able to offer loans to a much wider variety of people compared to mainstream lenders who automate their assessments with scorecards and disregard the actual circumstances of borrowers,” says D’Vaz, who predicts the growth trend in near prime will continue into next year and beyond. “The trend of increasing lending in the near prime space will continue as non-bank lenders pick up volume that was previously being written by the banks,” he adds. “As many borrowers who
NON-BANK LENDING ON THE RISE Source: CommSec
Banks lose out to other lenders Banks
Other lenders
30% 25% Loans and advances, annual change
one trend has defined residential lending in 2018, it’s that more and more applicants have been denied loans by their primary – often big four – bank. According to data from CommSec, first home buyer activity is currently near a six-year high, but overall home loans data shows a year-on-year decline of 6.2%, the largest fall in 15 months (see graph). Further, investor home loans are currently nearing a five-year low. On the other side of the industry the non-banks are picking up the pieces. Lending to businesses and individuals with low documentation, previous defaults and blemishes in their credit history, the near prime sector is booming. “Near prime offers these borrowers a flexible and competitively priced alternative,” says Royden D’Vaz, national head of sales and marketing at non-bank lender Bluestone. In April, Bluestone announced its entry into the near prime residential lending space and in the first three months witnessed a 96% increase in application volume and a 153% increase in settlements in Australia. In terms of market penetration, Bluestone notched up a 55% increase in self-employed loans and a 115% increase in near prime loans for FY2017/18. “Our introduction of near prime loans came at a time when many mainstream lenders were tightening lending criteria and making it harder for borrowers to access funding. As a result, an increasing number of borrowers IF
20% 15% 10% 5% 0% -5% -10% -15% Jan 2008
Jan 2011
Jan 2014
Jan 2017
cutting down the time between lodgement and approval.
Royden D’Vaz, national head of sales and marketing, Bluestone
historically borrowed from banks find they can no longer do so, there will be an increased demand for near prime options – something brokers are in a prime position to provide.” Understanding near prime Despite the benefits for borrowers, awareness and understanding of near prime lending remains low. According to D’Vaz, one of the most common misconceptions among brokers is that near prime deals are difficult to package, which he says is “simply not the case”. “It’s a big shame from our perspective, because these brokers
are missing out on some really great opportunities,” he says. To tackle this and other misunderstandings, Bluestone’s BDMs regularly hit the road, visiting brokers to explain how a non-bank specialising in near prime can transform their deals. Supporting the existing team, three new BDMs were appointed in June to serve NSW, Victoria and Queensland. The credit team also received a boost and there are plans for further growth on the horizon to meet the growing demand for near prime loans. “In our experience brokers are
often really surprised at how simple and rewarding it can be to help these customers. “A lot of the time borrowers come to us after they have been rejected by other banks, and often they’re dealing with significant time pressures to get funding secured before a deadline. We go to great lengths to help them move through the process as smoothly as possible,” D’Vaz says. Once the application is lodged, brokers have direct access to the Bluestone credit team and can directly coordinate in case of missing documents, additional details and other requirements,
Rate reduction The benefits don’t end there. In March, Bluestone cut its interest rates by 75–105 basis points across the Crystal Blue product suite, which includes a range of full- and alt-doc products that provide lending solutions to established self-employed borrowers with greater than 24 months’ trading history, and PAYG borrowers with a clear credit history. To mark the move into near prime, in April rates were cut again, this time by up to 225 basis points across the entire product suite. “By cutting our rates we were instantly able to offer solutions to millions more Australians who can’t quite meet big bank criteria but don’t really fit the specialist profile either. It was a win-win decision for everyone at the table – the company, our brokers, and their customers,” D’Vaz explains. The cuts followed the acquisition of Bluestone APAC by Cerberus Capital Management. “The new funding we were able to access through this deal allowed us to pursue opportunities that would have been impossible before, and moving from specialist lending into near prime was an obvious strategic choice,” he says. The news doesn’t end there as D’Vaz says the emphasis for Bluestone will remain on optimising systems and processes with a focus on supporting brokers. Hinting at what could be on the horizon for 2019, D’Vaz says, “We’re also exploring several options for expanding our product offering to include more financing solutions for individuals and small businesses. We’re not quite ready to talk specifics, but I’m confident that our brokers will welcome what we have in store for 2019 with wide open arms.” AB www.brokernews.com.au
21
PEOPLE
IN THE NE WS
THE CHALLENGER BANK Promising to become a digital banking game changer, the newly merged Finsure and Goldfields Money will provide lending solutions via broker distribution, but with a digital twist. Goldfields Money executive director and CEO Simon Lyons talks to Australian Broker
in September, the merger between Finsure and Goldfields Money Limited (ASX-GMY) claims two Australian firsts: it is the first time a bank has merged with a mortgage aggregator, and the newly formed entity has pledged to become Australia’s first “truly scalable digital challenger bank”. Announcing the deal, Simon Lyons, Goldfields Money executive director and CEO, said the new model would focus on providing lending solutions via brokers, while creating a market-leading digital banking platform to “shake up the Australian banking sector”. The deal combines Finsure’s broker network – 1,400 strong and backed by a further 5,500 with access to Better Choice loans – with the reach of an ambitious regional bank that’s already embracing digital. It follows Finsure’s acquisition of LoanKit in 2013, and Finsure Group co-founder and MD John Kolenda has said further acquisitions could follow. Goldfields loans have been available through Finsure brokers since September, and a joint strategy has been implemented, with Lyons reporting there is an “active program to physically grow the business”. He says no redundancies are expected but a name change is on the cards – proposals will be made to shareholders in November – and the newly formed entity is due to undergo a rebranding process. COMPLETED
The digital challenger The key to the new firm’s future strategy is the creation of a marketleading digital platform that will offer a new customer banking experience. “The core elements of a digital bank are always around people, process and product, but you need distribution. Distribution is the key part of any platform,” says Lyons. 22
www.brokernews.com.au
Simon Lyons, executive director and CEO, Goldfields Money
Brokers will remain the key channel for distribution, and new digital tools will support both their work and the customer experience. In Lyons’ own words, it’s about using customer data to better anticipate customer needs, and then creating products and services to meet them.
around banking and finance more generally,” he explains. “Effectively, when people think of digital banking they only think about apps, internet banking and smartphones. But really, it’s what’s in the back,” Lyons says. In response, over the last year
“The core elements of a digital bank are always around people, process and product, but you need distribution” Simon Lyons, executive director and CEO, Goldfields Money “Our plan with Finsure is to invest a lot of money into technology around making the user experience better, and around improving the access customers have to their own information, to enable them to make smarter decisions
brand-new systems have been commissioned, powered by Temenos – which provides systems to 41 of what it terms the “top 50 banks” globally. The intention is a seamless user experience that leverages data without the need for processing.
While it’s partly about replacing legacy systems and creating efficiencies, the wider strategy is also about enhancing reach with customers, giving them ownership of their data beyond the provisions of open banking, and personalising the experience in the process. “You collect an enormous amount of information when you write a loan for a customer and when you have 1,400-plus customer-facing brokers you get a lot of intelligence about what the market wants and what they need in terms of product; what works and what doesn’t,” Lyons says. “For us, the digital bank is a means of actually being able to grow our business in a really economical and scalable form. Ultimately, what that means is benefits to the customer such as quicker turnaround time, and more efficient things across the way we operate as a bank.” AB
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
Ren Hor Wong, executive chairman and CEO at N1 Holdings, took the specialist route to secure his client’s mortgage and, at the same time, demonstrated the value, competition and diversity brokers bring to the market
THE FACTS
Loan size and term $700,000 for 30 years
Client A couple in their 30s
Goal Upgrade primary property
Location Sydney
Aggregator Finsure
their credit histories and current financial position. This helped me to understand exactly how much they needed to borrow but, more importantly, how they planned to pay it back. As part of the due diligence in this process I also enquired about their
THE SCENARIO
Over the course of this year, lending standards have changed dramatically, and many borrowers have found themselves locked out of a market they previously would have had no trouble accessing. Adding to the problems this has caused, more and more people have blemished credit histories and, while this has given rise to a surge in non-bank lending, it takes a broker to navigate the often-complicated and unfamiliar non-bank sector. I was approached by a Sydney-based couple who wanted to move into a larger home. However, due to their credit histories they required a specialist product to fund their purchase – they just didn’t know it yet. The wife saw their dream home at auction and paid the 10% deposit needed to secure the property, but they had not acquired pre-approval. Obviously this jeopardised their entire plan, but it was only the start of the problems. It soon transpired that the husband had a credit card default of more than $7,000 and they needed to borrow 90% of the property’s value, taking them into LMI territory. As the saying goes, life is full of surprises. As brokers, our clients often turn to us to mitigate some of life’s unforeseen developments, and this was a classic case. At our first meeting, I sat down with both the husband and wife to go through
Lender Resimac
off this gave them lower-risk fees and interest rates. Throughout this process it was important for me to explain what their options were, as well as how they would impact future financial decisions; after all, nobody wants to be overstretched with debt. THE TAKEWAY
There was a huge educational curve for the clients in this deal, which placed pressure on us in two ways: first of all it meant we had to take additional time to investigate the options available within their current circumstances, and second, but more importantly, we had to manage expectations by ensuring we could secure the finance needed. Ultimately the clients were very happy with the outcome – they got the mortgage and the property, while also addressing their future goals and restructuring their finances in a way that would support achieving them. It was also a win for brokers as it demonstrated the value we bring, especially for clients who require the services of a non-major, or even non-bank, lender. The clients were aware that the product they needed wasn’t typically available at any of the major banks, but the specialist, professional knowledge needed to find the right loan could only come from an
As the saying goes, life is full of surprises. As brokers, our clients often turn to us to mitigate some of life’s unforeseen developments, and this was a classic case ultimate financial goals, and this presented another opportunity for me to help them avoid any further surprises. THE SOLUTION
Ren Hor Wong Executive chairman and CEO at N1 Holdings
The priority was to ensure serviceability, which meant that we had to reduce the cost of repayments, as well as associated fees, as much as possible. Over the course of our meetings and the necessary background checks, I discovered that the credit card default had occurred more than two years ago. This opened up some additional possibilities and helped us leverage their credit status to qualify for a less expensive loan. We suggested a specialist product at 85% LVR, rather than 90%, and straight
impartial professional, ie a broker. As the mortgage lending landscape continues to change in response to regulatory outcomes and factors beyond our control, deals like this really demonstrate the value brokers bring, not only to their clients but to competition across the industry. Without the expertise of a professional, this couple would not have been able to buy this property, or set themselves on the right track to secure their future financial goals. Meeting – and using – a broker has its value. My conclusion is that, as brokers, we need to know what’s available in the market, including alternative and specialist lending products that aren’t commonly available to clients who only talk to major banks. AB www.brokernews.com.au
23
PEOPLE
CAUGHT ON CAMERA More than 170 delegates sailed the seven C’s of credit, collaboration, commitment, compliance, customer, custom and connection at the Liberty Network Services National Conference. Held in Byron Bay in August, the conference provided LNS advisers with the knowledge needed to navigate the industry’s current challenges. The speaker line-up featured founder and CEO of LBDGroup Janine Garner; bestselling author Chris Helder; and business mogul and pro surfer Layne Beachley. Keeping the advisers entertained, INXS’s Kirk Pengilly performed and Nova FM’s Joel Creasey also made an appearance. Liberty Network Services MD Brendan O’Donnell said, “We have a tremendous network of advisers, all determined to be the best they can be, embracing their useful beliefs to enable them to reach new heights.”
24
www.brokernews.com.au
www.brokernews.com.au
25
DATA
WESTERN AUSTRALIA
TAS SPOTLIGHT
Affordable loans and properties boost opportunities for buyers According to CoreLogic’s July Home Value Index, Perth is one of the capitals driving national average prices down, yet values are on the rise compared to March as the city's recovery continues. “It’s pleasing to see prices rebound this quarter. With the worst of the downturn appearing over, the improvement in house and unit prices suggests buyer confidence is returning, which should bode well for sellers as we move into spring,” says Hayden Groves, president of the Real Estate Institute of WA. The winter season contributed to a slowdown in Perth’s performance, but several suburbs have powered through, recording sale volumes. Standouts include North Perth and Queens Park for houses and Balcatta and Claremont for units. “The June 2018 quarter continued the trends observed during the December 2017 quarter, with good-quality family homes attracting a lot of attention in aspirational areas,” Groves says. Supporting this, owner-occupier loans are the most affordable in recent memory. Area
Type Median value
Quarterly
12-month
growth
growth
Perth
H
$505,000
-1.0%
-1.0%
WA Country
H
$325,000
-6.1%
-3.7%
Perth
U
$390,000
0.0%
-3.7%
WA Country
U
$235,000
-9.6%
-11.5%
SOUTH AUSTRALIA
Adelaide defies trends seen across the eastern states Adelaide has spent many years putting in a middling performance, and recent plant closures have had a significant effect on the economy. However, confidence seems to be creeping back. “The June quarter matched the recordbreaking median posted last quarter and shows no signs of going anywhere but upward. When we hear the eastern states have come off the boil and into cool water, Adelaide is defying the trend,” says Alex Ouwens, president of the Real Estate Institute of SA. “Now is a great time for first home buyers and investors, and the results show that they are on board. Business sentiment is at its highest in many years too. The growth has been supported by a boost in sales, although there are concerns that the taxes imposed on overseas investors could curb interest. “The resolution of these issues would enhance the real estate experience and growth of opportunities for young people in SA.”
Area
Type Median value
Quarterly
12-month
growth
growth
TIME UP FOR TASMANIA?
After a year of runaway success, Hobart is still shining in the national property market, but dark days could be on the horizon
remains one of Australia’s strongest markets, but investors need to keep a careful eye on where the wind is blowing. Being one of the smallest capitals with a population of around 220,000, Hobart is susceptible to more volatility than its counterparts. This is why Henry Fields, property research and acquisitions coordinator at Client Best Interest, believes it’s important for investors who are contemplating buying in Tasmania to consider the broader economic picture. “You can see the effects of macroeconomic conditions most starkly in Hobart suburbs,” Fields says. “It’s a highly volatile property market, which reflects its fragile economic history. I’ve been doing some research lately on the long-term average growth rates, and throughout Hobart some suburbs were just as low. While generally performing better than major capitals Sydney and Melbourne, Hobart could already be affected by the nationwide slowdown.” According to CoreLogic’s Home Value Index for July 2018, the annual growth rate fell to 11.5% – the slowest recorded since February 2017. Growth is still holding strong, but buyers need to consider where to find the best markets. The Apple Isle’s rental market also soared by 10% in July, predominantly due to limited supply. Those who have invested in Hobart are reaping the fruits now – the city has seen the highest total returns in Australia at 17.1%. Beyond the metro areas, regional Tasmania recorded total returns of 12%. However, both figures are lower than they were in the previous year, supporting the idea that the state’s long-term growth prospects could be shaky. Additionally, the total number of properties on the market in 2018 has also declined since 2017. Nevertheless, Tasmania’s low prices and stock levels could keep demand going for a while yet. AB
H
$463,000
0.7%
3.4%
Median price (houses)
SA Country
H
$287,750
-7.2%
0.7%
$395,548
Adelaide
U
$384,000
-0.3%
4.1%
SA Country
U
$220,000
2.3%
0.0%
www.brokernews.com.au
Investors profit while first home buyers struggle in a market of two halves In Hobart, the majority of a broker’s business comes from investment loans, and there is no question regarding the strength of the market, with both interstate and international investors playing a pivotal role. One crucial point that I come across is that the real estate agent and vendor are listing properties at a certain price, which is applicable to nearby houses but not necessarily what the property is worth. Secondly – and this point is always brought up but remains crucial – it is getting harder and harder for young Tasmanians to purchase their first house. Many young people are coming to brokers to enquire about getting their first home loan, yet they cannot reach the 20% deposit. For the investors, however, with house prices continuing to skyrocket, rental incomes are at an all-time high, and this means that they are genuinely making big profits. From here on in, I believe that the market is going to continue to flourish. Emmanuel Marios Finance broker and Outsource Financial member, Derwent Finance
SUBURB TO WATCH: MOONAH
Adelaide
26
BROKER PERSPECTIVE
HOBART
Median price (units) $263,103
Source: CoreLogic
12-month growth
3-year growth
5-year growth
Indicative gross rental yield
18.8%
42.0%
47.2%
4.9%
12-month growth
3-year growth
5-year growth
Indicative gross rental yield
13.5%
17.9%
21.9%
5.3%
AUSTRALIAN CAPITAL TERRITORY
Employment in the political sector underpins market strength OPPORTUNITIES AND KEY INFRASTRUCTURE
Infrastructure
Population growth
Home values
Returns
There are 247 projects in the pipeline valued at a total of $13.9bn over 10 years
The annual growth rate stands at 0.64%, in line with government targets
Annual growth fell to 11.5% in July, the slowest recorded since February 2017
Hobart has seen the highest total returns in Australia at 17.1%
HIGHEST-YIELD SUBURBS IN TASMANIA Suburb
Type
Median price
Quarterly growth
12-month growth
Queenstown
H
$78,250
8%
20%
Gagebrook
H
$175,000
3%
19%
Rocherlea
H
$150,000
1%
2%
Mayfield
H
$162,250
4%
12%
Ravenswood
H
$160,000
0%
3%
Values keep rising in Australia’s capital, which in combination with Canberra’s hefty land tax could cause demand to dwindle. Affordability in Canberra declined slightly in the March quarter, with the proportion of income required to meet home loans increasing to 19.7% from the previous quarter, according to Malcolm Gunning, president of the Real Estate Institute of Australia. “It’s tracking in much the same way as Melbourne and Sydney, where you’re seeing vacancy rates rise. Homebuyers are taking a strong hit because, with the abolishment of stamp duty, the land tax has steadily increased,” Gunning says. “The effect will probably be more pronounced when you don’t have the same capital growth.” What will continue to drive interest in Canberra is its economy. The political sector remains its biggest employer, and this attracts demand from those looking to enter this job market. Area
Type Median value
Quarterly
12-month
growth
growth
Canberra
H
$689,000
-1.7%
6.2%
Canberra
U
$435,000
-1.1%
0.3%
www.brokernews.com.au
27
DATA
QUEENSLAND
12-month
growth
growth
Brisbane
H
$535,000
0.6%
2.9%
QLD Country
H
$426,000
-3.0%
0.0%
Brisbane
U
$407,000
1.8%
-1.2%
QLD Country
U
$387,500
-1.9%
2.3%
VICTORIA
MEDIAN HOUSE AND UNIT PRICES
Total housing finance commitments rise, even as price growth slows
$1,000,000
Type Median value
Quarterly
12-month
growth
growth
Melbourne
H
$735,000
-0.7%
7.7%
VIC Country
H
$357,000
-0.8%
6.1%
Melbourne
U
$535,000
0.6%
5.5%
VIC Country
U
$270,000
0.4%
4.5%
28
www.brokernews.com.au
Total auctions
91
Sold
35
Not sold
19
Clearance rate
64.8%
PERTH Total auctions
38
Sold
3
Not sold
13
Clearance rate
18.8%
$1,100,000
Houses
Units
Sydney Melbourne Brisbane Adelaide
Perth
Hobart
$515,000
$360,000
$425,000
$0
$380,000
$100,000
$485,000
$200,000
$326,500
$300,000
$450,000
$500,000 $400,000
$532,000
$700,000 $600,000
$710,000
$800,000
$680,750
$900,000
$851,500
The local economy continues to prop up the housing market in Melbourne. “Victoria’s total housing finance commitments and new construction finance commitments have continued to grow, despite a slowdown in price growth. This is due, in large part, to strong population and jobs growth,” says Matthew Lewison, director of OpenCorp. “Victoria has been the big mover in the employment market. This has been helped by the strong construction market, which continues to drive the economy." With increased supply dampening demand, however, pressure on Melbourne’s property prices continues to lift, giving more affordable pockets of the metro room to breathe. “Volume at the higher end of the Melbourne market has come off quite a bit, while the more affordable end ... is still carrying on with plenty of activity,”Lewison says. Others have observed a demand shift to fringe suburbs as buyers are priced out of the CBD.
Area
ADELAIDE
Darwin
$412,000
Quarterly
$370,000
Type Median value
This week saw auction volumes increase across the combined capital cities, with 1,907 homes taken to auction, returning a preliminary clearance rate of 59%. While the preliminary clearance rate shows a week-on-week improvement, it’s likely that as final results are collected the weighted average will fall to remain within the low- to mid-50% range, where it has been tracking for some time now. Last week, the number of auctions reduced slightly to 1,748, and a final clearance rate of 55% was recorded. In the same week last year, the auction market was performing quite differently, with a higher 66.9% success rate across a higher volume of auctions (2,258 auctions). Results by property type show the unit market outperformed houses this week, with preliminary results showing 63.9% of units sold, while houses came in at a lower 57.1% success rate. However, as usual, houses accounted for a much larger proportion of overall auctions. In Melbourne, a preliminary auction clearance rate of 62.4% was recorded across 894 auctions this week, up from 57% across a lower 805 auctions last week. One year ago, the clearance rate was a stronger 71.8% across a significantly higher volume of auctions (1,111).
$534,000
Area
WEEK ENDING 9 SEPTEMBER 2018
$660,000
Strong migration continues to be the Sunshine State’s trump card. “It has been speculated for a while that the more affordable property price and strengthening employment market would be attractive compared to Sydney’s high cost of living. Statistically, this is now showing up, with NSW having its worst net interstate migration result for 10 years,” says OpenCorp director Matthew Lewison. Queensland’s rising population is buoying demand for houses, especially in the southeast, and rental markets have tight vacancy rates. Pockets of Greater Brisbane – Ipswich, Logan, Moreton Bay and Redland – have vacancy rates ranging from 1.2% to 2.5%, according to the Real Estate Institute of Queensland’s Rental Survey for August. In the Brisbane LGA, the vacancy rate tightened over the June quarter from 3.1% to 2.3%. Nonetheless, local real estate agents consider the market fragmented, with some suburbs performing better than others. Meanwhile, regional areas of the state have strengthened considerably since 2016.
CAPITAL CITY AUCTION CLEARANCE RATES
$355,000
Affordable lifestyle boosts population growth and shrinks vacancy rates
Canberra
CAPITAL CITY HOME VALUE CHANGES Capital city
Weekly change
Monthly change
Year-to-date change
12-month change
Sydney
-0.2%
-0.3%
-3.7%
-5.9%
Melbourne
-0.2%
-0.5%
-3.5%
-2.1%
Brisbane
0.0%
-0.3%
0.2%
0.8%
Adelaide
0.0%
0.2%
0.6%
0.9%
Perth
-0.1%
-0.5%
-2.4%
-2.1%
-0.1%
-0.3%
-2.9%
-3.4%
Combined 5 capitals
*The monthly change is the change over the past 28 days
BRISBANE CANBERRA Total auctions
69
Sold
27
Not sold
15
Clearance rate
Total auctions
159
Sold
38
Not sold
39
Clearance rate
49.4%
64.3%
SYDNEY Total auctions
654
Sold
263
Not sold
192
Clearance rate
57.8%
TASMANIA
MELBOURNE Total auctions
894
Total auctions
2
Sold
460
Sold
1
Not sold
277
Not sold
0
Clearance rate
Clearance rate
62.4%
NEW SOUTH WALES
Area
Market advancing but investors warned to lower expectations Despite the fall in growth, Sydney’s market is still advancing. However, investors should not have high expectations. “Sydney properties are still selling reasonably quickly and have good auction clearance rates. I’d expect some growth this year despite the negative first half,” says Jeremy Sheppard, director of research at Empower Wealth. “However, now is a bad time in the cycle for investors to jump in expecting above-average growth. And yields are no incentive either. It’s still a healthy market for investors wanting to apply some value-adding strategy, but it’s not that flash for sit-and-wait investors.” By contrast, sellers in the Newcastle–Maitland region are getting more leverage in negotiations because of increased demand. “Vacancy rates are quite low, assuring investors in well-placed properties of continued income,” Sheppard says.
N/A
Type
Median value
Quarterly growth
12-month growth
Sydney
H
$960,000
-0.5%
0.8%
NSW Country
H
$470,000
0.0%
4.5%
Sydney
U
$712,000
0.3%
-1.4%
NSW Country
U
$387,500
-0.4%
1.3%
All data sourced from CoreLogic.com.au
www.brokernews.com.au
29
PEOPLE
IN THE HOT SEAT Shelley Beggs, finance broker at LoanBrix, reflects on the career guidance that inspired her to break into the industry, and the lessons she has since learned from her peers and customers
Who inspired you to become a broker? I was inspired to join the industry by broker Trevor Giacometti. A I started working as Trevor’s personal assistant in 2011 and he encouraged me to enrol to complete the diploma and become a broker myself. In May 2014 I qualified and Trevor mentored me for two years, during which time I grew and learnt even more until I could stand on my own two feet. I have also met and been inspired by other men and women within Finsure, and hopefully I will continue to grow and learn in this amazing industry.
Q
What’s one of your recent career highlights? This year, a large proportion of my clients have been first home A buyers, and I’ve had a combination of customers buying homes and building their own. Buying your first home, or deciding to build it, can be quite a daunting experience. It forced me to take a step back as a broker and learn to explain different concepts in different ways depending on the knowledge of the younger generation and where they were coming from. Throughout the entire process I gave a lot more time and energy to the customer, as you become involved in each step of the way during construction, helping them to realise their dream home as it is being built. This did bring a special kind of reward, with genuine appreciation from customers who also consistently referred me to their friends.
Q
If you won $1m, what would you do with it? I would take three months off work and travel around various A parts of the world. My first stop would be Guatemala, then Bulgaria and Africa, and I would finish off with Antarctica. Then I would come home and complete my private pilot’s licence, buy a small plane and continue to work happily as a broker.
Q
What do you wish you’d known when you started out as a broker? Firstly, the power of making a connection when I first meet A my customer, whatever form that may take. Then, the need to stay in touch and build on that connection to develop the relationship. Not all my customers convert into a loan immediately; some do, some take time, and some never work out at all – and that’s life! It’s not personal. AB
Q
30
www.brokernews.com.au
www.brokernews.com.au
31
32
www.brokernews.com.au