Australian Broker 15.22

NOVEMBER 2018 ISSUE 15.22

Stronger together FBAA managing director Peter White on the IMBF launch /18

The road ahead Parth Pandya predicts how tech will change broking in 2019 /20

STUART STYLES The managing director of Arthurmac & Co explains how he built an award-winning brokerage /14

A big deal Anish Prasad on changing two first home buyers’ lives /22

ALSO IN THIS ISSUE… Caught on camera Highlights from the Connective Excellence Awards /24 Market data The factors driving Brisbane’s performance /26 In the hot seat Broker Daniel O’Brien reveals how he would spend a lottery win /30

NEWS

IN THIS SECTION

Lenders Heartland begins listing on ASX /04

Aggregators Aussie announces record performance /06

Technology Neo-lender grows as borrowers shift /10

Regulators APRA’s cash boost to reinforce resilience /12

Market New index highlights market strength /08

www.brokernews.com.au NOVEMBER 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

20 NOVEMBER CEDA annual dinner Held at the Sofitel Melbourne, the committee’s end-of-year celebration will welcome Reserve Bank Governor Philip Lowe as keynote speaker. He will deliver a review of the past year and also share his economic predictions for 2019. Individual member tickets start at $290, while non-member tables can be purchased for $4,000.

2 3 N O V E M B E R

23 – 25

NOVEMBER

MFAA annual golf day

Self Managed Super Fund Expo

The MFAA will host 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.

The SMSF expo is a platform for consumers and finance professionals to compare products and services, meet like-minded individuals and source expert information. The agenda includes free-to-attend seminars led by industry experts and one-on-one consultations with exhibitors. The event offers a vast range of financial information, technical know-how and SMSF expertise.

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

29 NOVEMBER

3 – 4 DECEMBER

Blue Wealth: Client appreciation event

Women in Leadership Summit

Client retention webinar

This is a global gathering of women in leadership who have made a difference in their businesses and communities. The Perth edition is followed by eight further gatherings in Auckland, Hong Kong, Singapore, the UK and US. The event focuses on diversity in the workplace and leadership techniques.

Covering the importance of client retention, as well as the tools and base activities required to support it, this MFAA webinar takes place from 2pm EST. Presented by Sharon Cameron-Lee, client retention specialist and partner at Keeping Clients, it will be available online until 5 March 2019.

Blue Wealth will host an evening under the big screen to thank clients and member brokers for their support in 2018. Taking place at Macquarie Shopping Centre in Sydney’s North Ryde, the event will include the first screening of Creed II in Australia, drinks and canapes.

5 DECEMBER

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

5 & 13 DECEMBER

2

7 D E C E M B E R

Vow Financial webinars

FBAA Social Melbourne

Vow’s last webinar sessions of 2018 will take place in December. Covering the latest professional development topics, they will cap off a year-long program that has seen such partners as Suncorp and NAB deliver sessions and updates on key topics.

Registration starts at 8.45am and the summit will commence at 9am. Morning tea will be provided and the event is due to conclude at 12.30pm. The Melbourne social will be preceded by a Sydney event on 30 November. Further details of both events are available on the FBAA website.

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4 – 5 MARCH Responsible Lending and Borrowing Summit Informa’s third responsible lending summit will welcome ABA director Christine Cupitt, Ombudsman Philip Field and ANZ customer advocate Jo McKinstray to an open forum reflecting on the lessons learned from the royal commission and exploring the opportunities to improve the industry for the future.

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 EMERGENCY WORKERS NEED LENDER SUPPORT to research by Firefighters Mutual Bank, only 13% of emergency service workers feel they have received support from their bank to help them save for the future, and nearly half feel they need more support. The bank’s GM, Jim O’Connell, said, “We are surprised at how underserviced our emergency service workers are by their financial institutions.

The message is clear – they need more support from their banks on their finances.”

ACCORDING

HOME LOANS LODGED BY BROKERS, OCTOBER 2017–MARCH 2018 Source: MFAA

Average number of applications lodged per broker (Including inactive brokers)

Average number of applications lodged per active broker

25

20

21.0

17.6

18.3

18.3

22.1

19.2 17.5

15 13.8

14.6

13.9

17.8

17.9

18.8

14.3 11.6

10

12.6

5

COMMERCIAL BROKERS DOUBLE IN TWO YEARS number of brokers writing THE commercial loans has doubled in the last two years, according to new MFAA data. Since the period October 2015 to March 2016, the number of residential brokers selling commercial finance products has increased by 124% from 1,641 to 3,668. Further, commercial loan settlements increased to just under $9bn during the six months to end March 2018 as more brokers have diversified.

Queensland, NSW and Victoria posted the highest increases.

“Loans from brokers have increased 60% because we invest heavily in a number of things and also focus on new brokers coming into the industry” John Oliver CEO, HomeStart

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0 NSW & ACT

VIC

QLD

WA

SA

HEARTLAND GROUP BEGINS LISTING ON ASX Listing follows completion of a corporate restructure of the reverse mortgage specialist and supports a strategy of targeting niche markets the completion of a corporate restructure, Heartland Group has begun listing on the Australian Stock Exchange.

The restructure saw Heartland Group Holdings Limited become the new parent company of reverse mortgage provider Heartland Seniors Finance, as well as New Zealand-registered Heartland Bank.

Heartland Group will begin trading under a Foreign Exempt Listing, which is expected to expand its capital sources and provide additional flexibility for future growth. Heartland’s primary listing will remain on the NZX Main Board.

The strategy is to operate in niche markets where it can provide the ‘best or only’ product, and to increase customer reach through online FOLLOWING

channels as well as intermediary, partner and referrer networks.

Heartland Bank’s core areas of focus are small business lending, reverse mortgages, motor vehicle finance, livestock finance and savings and deposits.

Heartland entered the Australian reverse mortgage market in 2014 with the acquisition of reverse mortgage provider Australian Seniors Finance, which it subsequently rebranded to Heartland Seniors Finance.

Since then, Heartland’s net finance receivables growth has gone from $380m at acquisition to $619m at the end of FY2018. It expects this growth to continue as other major providers of reverse mortgages have recently exited the market.

TAS

NT

National average

The restructure and ASX listing are significant milestones for the group. The restructure removes constraints on growth previously arising from Reserve Bank of New Zealand regulations, and will provide greater flexibility to explore and take advantage of future growth opportunities in New Zealand and Australia outside the banking group.

The corporate restructure took effect on 31 October, with all shares in Heartland Bank exchanged for shares in Heartland Group.

Heartland Bank became a whollyowned subsidiary of Heartland Group and the Australian group companies were transferred from Heartland Bank to Heartland Group.

“The ASX listing assists to provide Heartland Seniors Finance with the capacity to continue its strong growth and, to accelerate this, to meet the growing demand of Australian retirees who want to access the equity in their home to help fund a more comfortable retirement,” said Heartlands Senior Finance CEO Andrew Ford.

WHITE LABEL UPDATE

ADVANTEDGE HELPS BROKERS WITH QUICKER AND EASIER REFINANCING In an increasingly competitive broking industry, being able to offer customers a quick and easy refinancing solution could make the difference between winning repeat business or not, writes Advantedge Financial Services General Manager Brett Halliwell mortgage broking industry is as competitive as ever.

To be successful, brokers must meet and also exceed customer expectations throughout the entire home loan journey, from setting up of new loans to helping with refinancing needs.

Recent research from Deloitte shows the majority (70%) of a broker’s business comes directly or indirectly from existing customers, demonstrating high levels of customer satisfaction.

Breaking this down further, four in 10 leads come from repeat business with existing customers, while three in 10 leads come from referral by existing customers.

Advantedge works in partnership with brokers to drive high-quality referrals well into the future, by helping them deliver a positive customer experience. For example, we provide brokers with a range of digital enhancements and industry-leading tools to enable a faster, convenient and more streamlined refinancing process – namely, the FASTRefi settlement process, digital verification of identity, digital document send and sign, and our quality submissions checklist.

A BROKER’S PERSPECTIVE

THE

Speedy service In partnership with MSA National and First Title, the FASTRefi settlement process provides a range of benefits, including improved conversion rates, reduced settlement costs and overall more streamlined mortgage processing – saving time for both customers and brokers. Brokers gave Advantedge a Net Promoter Score of +40, indicating they’re highly satisfied with the overall service they receive from Advantedge, specifically from our dedicated Scenarios Team and experienced business development managers.

For customers who are refinancing their home loan, using FASTRefi means they can access their funds quicker.

Provided all the necessary

Brett Halliwell

documents are submitted correctly, a FASTRefi could take more than a week off the traditional refinance process, which in the mortgage industry is a very valuable time saving.

Technology improving turnaround times One of the things we’re particularly proud of at Advantedge is our continual investment in digital enhancements that make the home loan process for brokers and their customers easier. The customer identification process can be expedited by using one of two market-leading Verification of Identity apps – IDyou and ZipID – which enable brokers to digitally collect customers’ 100 Point ID check.

In addition, Advantedge offers brokers digital document send and sign capability, which can shave days off the settlement and reduce the chance of errors and omissions, enabling submissions to go through the approval process as quickly as possible.

Getting it right the first time saves time Advantedge’s quality submission

checklist helps brokers easily ensure submission requirements are met, helping them get it right the first time and avoid delays.

Our commitment to customer service is resonating with brokers, as illustrated in the results of our latest broker satisfaction survey. Advantedge maintained a strong Net Promoter Score of +40 amongst brokers, with its strong service offering cited as a top reason for recommendation.

End customers are reaping the benefits of exceptional service through easy, hassle-free processes. Customer advocacy for brokers who help set up white label home loans is also at an all-time high at +76, equating to four in five customers saying they would recommend the broker who helped set up the loan. The top three things that influence end-customer advocacy are ongoing customer service, the loan set-up process, and the drawdown process.

This reveals that end customers, as well as brokers, value strong service throughout the loan process, and we’re helping brokers deliver on this for exceptional customer experience.

Less need for rework Elie Ayoub from Invictus Finance Solutions in Balwyn North, Melbourne, is highly regarded in the broking community, having helped thousands of clients achieve their property dreams.

With a client base in the thousands and around 30–40% of these being refinances, Elie doesn’t have much time to spare.

“We don’t want to be wasting time with reworks, so from our point of view dealing with Advantedge gives us peace of mind that, when you do contact them, someone is on the other end and they are able to answer your question,” he explains.

Exceeding client expectations According to Elie, a big part of his role during a refinancing deal is understanding “what our time frame is” and managing client expectations. For instance, digital tools like DocuSign have helped him exceed client expectations on this front.

Elie says Invictus uses the FASTRefi process frequently for clients who fit the criteria, estimating a time saving of 10 days for a standard refinancing scenario.

“Some lenders are quoting 21 days for a standard application, which is frightening. Combine a FASTRefi with DocuSign and in some cases you could cut up to three weeks off the standard refinance process.

I could potentially settle another two deals in those three weeks,” says Elie.

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NEWS

A G G R E G AT O R S AUSTRALIAN AGGREGATOR LAUNCHES INTO NZ Financial Management is to launch in New Zealand following a joint venture with Mortgage Express New Zealand. Astute will provide its fully integrated financial services model to the new joint project, which Mortgage Express will adopt in order to enhance its current service offering to its member base. Astute supports more than 500 members and provides solutions on finance, insurance and wealth, including the Astute Simplicity Home Loan.

ASTUTE

PURPLE CIRCLE REPORTS 230% SETTLEMENT GROWTH aggregator Purple Circle has welcomed three new broker shareholders as the group announced 230% growth in its settlement volumes. With a 46% increase in broker partner members since January, managing director Greg Pennells said the aggregator expected to double the number of brokers, shareholders and volumes by the third quarter of 2019. He said, “The royal commission has shaken up the industry, with traditional aggregators focusing less on members and more on themselves.”

BOUTIQUE

AUSSIE ANNOUNCES RECORD PERFORMANCE News concludes rollercoaster year for the group, which recently demerged with CBA. However, after a record financial year, expansion plans have been announced Home Loans has seen its market share in Queensland grow year-on-year to a total of $3.6bn, according to the group’s FY18 financial results.

It was announced in June that Commonwealth Bank of Australia would demerge with the brokerage and its wealth management businesses.

Despite concerns over what this would mean for the group, the chief executive of Aussie, James Symond, said it had been “building momentum in Queensland, especially with first home buyers and upgraders”.

“In a shifting market savvy borrowers are looking for expert guidance on their home loans, and we’re seeing that come through in AUSSIE

6

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a nice uplift in market share. Our growth plans are off to a solid start, and we have already opened two new stores in FY19 in Burpengary and Clifford Gardens,” he said.

“We have another new store opening soon in Flagstone, which is an especially exciting opportunity where we will be piloting a new form of market representation to capture the rapid residential and commercial growth in the area.”

The new openings are part of a target to introduce 10 new stores in early FY19, in tandem with an increase to 500 brokers in the mobile channel.

Aussie Flagstone will initially open in a display village and then relocate to a retail premises once

the commercial infrastructure in the area is developed and a retail site becomes available.

Queensland’s strong performance contributed to Aussie’s record national result for the 2018 financial year. It saw Aussie’s more than 1,000 mortgage brokers settle a monthly average in excess of $1.5bn.

The year also saw Aussie’s highest annual settlements ever, which amounted to more than $18bn, with multiple record months in its franchise channel.

As part of its expansion, Aussie has a range of metro and regional franchise territories now available across Queensland, and is also recruiting mortgage brokers for its mobile channel.

Speaking to Australian Broker in August, Symond reported that since CBA announced its demerger in June, Aussie has recorded the “strongest financial results of our 26-year history”, with the loan book approaching $65bn. A total of 14 new stores opened in the last year.

“As we flow through into 2019 there are three key foundations to our strategy: purpose-led transformation, adapting through diversity, and differentiating through culture” Brendan Wright CEO, FAST

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NEWS

MARKET ANNUAL HOUSING GROWTH AT FIVE-YEAR LOW prices continued to fall in October, taking the annual decline to 3.5% and reflecting the weakest macro housing market conditions since February 2012, according to CoreLogic. Dwelling values are trending lower across the combined capital city regions (-1.6%) as well as combined regional areas (-0.7%). Analyst Tim Lawless said the “broad-based weakness” made it clear that tighter credit availability was acting “as a drag” on demand as lenders reduce their “exposure to borrowers”.

HOUSE

GEOGRAPHICAL INFLUENCES IMPACT ARREARS DATA RMBS Arrears Statistics: Australia report by S&P shows an ongoing increase in home loans more than 90 days in arrears. At 0.74% of home loans, these now make up around 54% of total arrears, up from 42% five years ago. Regional bank mortgage originators reported the highest percentage of such arrears in August, at 1.33%, followed by the major banks, at 0.99%. “Some of the increase is due to geographic influences,” the S&P report says.

THE

“With building activity on a clear path to decline in 2019, the key question is when and at what level the downturn will reach a floor” Diwa Hopkins Economist, HIA

NEW INDEX HIGHLIGHTS STRENGTH OF MORTGAGE MARKET First-quarter figures for the new financial year provide further evidence of the value of brokers, according to AFG CEO David Bailey Mortgage Index for Q1 FY19 has reinforced the value of brokers in promoting marketplace competition.

The volume of mortgages processed by AFG declined by 2% compared to the previous quarter.

The group’s brokers lodged 27,900 mortgages, totalling $14.2bn, compared to 28,883 mortgages and $14.5bn in the final quarter of the 2018 financial year.

AFG CEO David Bailey said the royal commission was continuing to “rattle the market”, leading to lenders tightening their borrowing criteria.

Investors were most affected: this category dropped by 1% to 27% of loans processed.

Refinancers and upgraders stayed AFG’S

the same at 23% and 43% respectively.

Across the states, NSW, Victoria and Queensland were all down on the prior quarter, while gains were recorded in SA and WA. The Northern Territory saw the highest increase at 22%.

Loan-to-value ratios (LVRs) increased in SA, NSW and WA. The national average loan size has risen to a record $509,736, led by increases in average loan sizes in NSW, SA and Victoria.

NSW recorded an increase in average loan size of 3%, which Bailey attributed to a drop in apartment sales and lenders tightening criteria for investors, who usually have a lower average loan size. He said both factors were

driving up the average overall loan size in that state.

Commenting on the out-of-cycle rate hikes of the last quarter, Bailey said, “With the recent round of rate rises flowing through, many consumers have been speaking with their brokers to discuss the value of fixing all or part of their loans.

“Fixed rates have risen to 18.9% of loans by product category, whilst standard variable loans dropped to 64.3%. Basic variable products are also back in favour, increasing to 11.2% of all loans.”

Despite a previous rise in the market share for non-banks, the latest figures show that the major lenders clawed back some market share to reach 59.8%. The figure is well below their high-70s share back in 2013 and much lower than the share recorded outside of the third-party channel.

Bailey added, “This is further evidence of the value brokers deliver to competition in the Australian lending market.”

AFG MORTGAGE INDEX Q1, 2019 Source: AFG, October 2018

Lending by state

Loans by market segment

Majors’ share of the market

Upgraders NT +22% WA +6%

SA +2% VIC -6%

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23% – no change on FY18 QLD -2% NSW -2.5%

Investors

59.8%

27% – 1% decline in Q1 2019 Refinancers 43% – no change on FY18

proportion of all resi lending from major lenders in Q1

LOW LEVELS OF TRUST IN BANKS Source: Deloitte Trust Index 2018

Customers’ view of banks in general

21%

26%

believe banks have their customers’ interests at heart

believe banks will keep their promises

20%

32%

believe banks are ethical

believe regulators are doing a good job of holding banks to account

Customers’ trust in own banks is higher

36%

49%

feel their bank cares about their interests

trust their own bank to keep its promises

55%

60%

believe their bank treats them with respect

believe staff at their bank know what they are talking about

CONSUMERS DOUBT BANK ETHICS latest survey of Australian consumers has revealed that only 20% of people believe their bank acts ethically. Deloitte surveyed 2,072 representative Australians in August 2018 to get their views on trust in banking in Australia, both in general and in relation to their own banks.

The report also revealed that 60% of people think bank staff know what they are talking about and 55% believe that their custom is treated with respect. (See more survey results in boxout above.)

DELOITTE’S

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NEWS

TECHNOLOGY

Brett King

XINJA ANNOUNCES NEW ADVISER Brett King is to become an adviser for Australian neo-bank Xinja. The neo-lender is adding “significant global expertise” to its organisation with the announcement that King will act as a permanent adviser to the board and help guide strategic direction. King founded neo-bank Moven in 2011, which launched the world’s first mobile, downloadable bank account.

He is widely considered the most influential expert on retail banking innovation globally.

AUTHOR

NEO-LENDER GROWS AS BORROWERS SHIFT FROM BIG BANKS Wisr’s first-quarter figures show a 50% increase on the previous quarter, with the highest demand seen for loans to finance renovations, vehicles and lifestyles the first quarter of this financial year, neo-lender Wisr has seen loan origination grow by nearly 50% on the previous quarter.

Australia’s first neo-lender also saw a 22% increase in overall loan volume in the July to September period. It is the third consecutive quarter of loan growth in excess of 45%.

Wisr also announced that it has surpassed $50m in loan originations since it began operation, with almost half of that figure written from the start of 2018. CEO Anthony Nantes said borrowers shifting from traditional lenders, brand awareness and broadened product offerings were driving growth.

IN

He said, “This is the beginning of borrower flight from the big banks.

Findings from the royal commission into banking have prompted more Australians to look for better deals and a fairer, more transparent approach to financial services.”

During the quarter, Wisr saw a significant increase in loans for home renovations (up 26%), vehicles (up 17%) and lifestyle (up 33%) when compared to the previous quarter.

Since its launch in mid-August, WisrCredit has seen 10,000 visitors subscribe to learn more about their credit scores as well as access information from major credit agencies and other sources.

Borrower creditworthiness during the quarter was at near-record levels: the average borrower credit score

was 712, up from 675 during the same quarter this time last year.

Wisr’s Intelligent Credit Engine (ICE), which performs sophisticated credit risk analysis, identity verification, personalised interest rate modelling and institutional lender matching, can now draw from a wider range of data sources to make lending decisions. ICE can access two years of historical transactional data to better predict the future financial behaviour of potential borrowers.

“Wisr puts the financial wellness of our customers at the centre of everything we do, and we have been vigilant in the area of responsible lending through initiatives such as our platform improvements,” Nantes said.

“We continued to deliver consistently strong credit quality, exceeding the target for arrears and book performance, and continued to attract more prime customers.

Today Wisr customers have both higher income and credit scores than the national average.”

AUSTRALIAN FINTECH LANDSCAPE: EXPECTATIONS FOR 2019 Source: EY

10

79%

67%

54%

59%

45%

of fintechs intend to grow their revenue

intend to grow employee numbers

wish to expand overseas

agree Australian fintechs can compete internationally

agree that attracting suitable talent is a challenge

www.brokernews.com.au

Steve Weston

BROKER PROPOSITION ‘OUTSTANDING’ CEO of volt, Steve Weston, has said the broker proposition is “outstanding”.

At Salesforce’s Financial Services Basecamp in Sydney, Weston spoke to Australian Broker about the ongoing role of brokers in a tech-driven financial services sector. He said, “They’ll focus on rapport building, educating customers on home loans and advising on how to pay down debt quickly. [With technology] brokers will be able to service a larger number of customers.”

THE

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NEWS

R E G U L AT O R S 30/06/2003

STATE OF THE STATES Source: CommSec

7 6 8

5 2 1 3 4

1 Victoria

+ Job market – Equipment investment

Victoria is in top spot due to strong construction activity and the lowest jobless rate in a decade.

2 New South Wales + Retail trade – Housing finance

NSW is second in the overall economic performance rankings. NSW is in top spot for retail spending and dwellng starts.

3 Australian Capital Territory + Housing finance – Dwelling starts

The ACT retains third spot in the performance rankings and is topranked on relative housing finance.

4 Tasmania

+ Population growth – Economic growth

Tasmania remains in fourth position but is closing the gap with the ACT.

5 South Australia

+ Construction work – Population growth

South Australia is now in fifth position in the performance rankings and is third-ranked on construction work done.

6 Queensland

+ Dwelling starts – Construction work

Queensland is now in sixth position in the performance rankings.

Queensland ranks fifth on four of the eight indicators.

7

Northern Territory + Job market – Dwelling starts

The Northern Territory is third-ranked on economic growth but lags behind all other economies on five indicators.

8 Western Australia

+ Equipment spending – Retail trade

Western Australia is seventh or eighth on all indicators (eight on three indicators).

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APRA’S CASH BOOST EXPECTED TO REINFORCE RESILIENCE Treasurer’s office confirms a multimillion-dollar cash injection for the regulator and early reappointment of chair during “time of significant reform” Josh Frydenberg’s office has confirmed that APRA is to receive an additional $58.7m in new funding from the Coalition government to allow the regulator to “reinforce the resilience and soundness of our financial system at a time of significant reform”.

The new funding will be provided over four years from 2018/19 onwards and has four specific goals.

Firstly, the funds are intended to enhance APRA’s supervision across regulated industries by increasing the number of frontline supervisors for the largest and most complex financial institutions. They are also expected to enhance APRA’s ability to identify and address new and TREASURER

emerging risk areas, such as cyber, fintech and culture, by building internal expertise and increasing access to technical specialists outside APRA. Further, shares of the funds will be used to improve APRA’s data collection capabilities in order to leverage the benefits of interagency intelligence sharing, and to provide for a review of APRA’s enforcement strategy and its use of formal enforcement powers across the industries it supervises, including superannuation.

It has also been confirmed that current chair Wayne Byres will continue to chair the authority for another five years, ahead of his current term expiring in July 2019.

Byres’ reappointment is intended to

“ensure continuity of leadership”, according to the Treasurer’s statement.

As announced earlier this year, Byres will be supported by deputy chairs John Lonsdale and Helen Rowell, who will both serve for the next five years.

The statement from the Treasurer’s office read: “Byres’ reappointment is important for stability during this time of significant reform in Australia’s financial system.

“The new funding as well as the reappointment of Mr Byres and appointment of a second Deputy Chair – Mr John Lonsdale – will support APRA in developing a stronger focus on accountability and enforcement in the financial system.

“The Coalition Government continues to invest in our financial system regulators to ensure they are equipped with the resources and powers they need to enforce the law, improve community confidence and maintain the stability of the financial system.”

AFCA OPENS FOR BUSINESS

FLEX COMMISSION BAN BEGINS

Australian Financial Complaints Authority (AFCA) started to take complaints on 1 November, consolidating the Financial Ombudsman Service, Credit and Investment Ombudsman and Superannuation Complaints Tribunal. Speaking at its launch, AFCA’s independent chair, Helen Coonan, said, “AFCA will play an important role in restoring trust in Australia’s financial institutions. We will influence reform in the financial services sector by raising standards and improving internal practices to reduce and resolve disputes.”

ban on flex commissions for the car finance market commenced on 1 November to create “fairer and more transparent pricing on car loans”. This means consumers will be offered a rate based on their credit score rather than their ability to negotiate. ASIC commissioner Danielle Press said, “We found that flex commissions resulted in consumers paying very high interest on their loans. We were particularly concerned about the impact on vulnerable consumers.”

THE

ASIC’S

INDUSTRY UPDATE

ONDECK DATA FINDS STRONG CUSTOMER PATTERNS IN ONLINE BUSINESS LENDING Evidence of lending peaks in period prior to the end-of-calendar-year festive season

APRA’S CHANGE PROPOSALS WELCOMED proposed changes to capital requirements for authorised deposittaking institutions (ADIs) have been welcomed by industry groups, including the Customer Owned Banking Association (COBA). APRA’s paper on the loss-absorbing capacity of ADIs features such proposals as increasing total capital requirements by up to five percentage points of risk-weighted assets. COBA CEO Michael Lawrence said, “Again, this is better than nothing, and any move to level the playing field is welcome.”

APRA’S

Cameron Poolman

analysis by OnDeck Capital Australia (OnDeck), a subsidiary of the US-listed OnDeck Capital, has shown definite peaks and troughs in small business online lending and confirmed strong cyclical funding patterns across the sector in Australia.

Service industries like accommodation and food services showed increases in funding pre-Christmas and at the end of the financial year, in line with the increased demand for services over the festive season and in preparation for end-of-year reporting. The construction industry also showed stronger funding during these periods.

Cameron Poolman, Chief Executive Officer, OnDeck Australia, said there was a strong correlation between the seasonal nature of the lending patterns and the reasons small businesses were seeking funding.

“A survey undertaken earlier this year told us around 40% of funding went towards equipment purchase and another 36% and 32% of funding went to managing cash flow and inventory purchase respectively,” Poolman said.

“If we overlay the survey findings against the data, we can see an alignment between small businesses thinking strategically about peak periods and taking advantage of DATA

ROYAL COMMISSION CONFLICT CLAIMS ASSESSED Sunita Sah has published her findings into conflicts of interest unveiled by the royal commission. Referencing various studies, Sah revealed that financial advisers were likely to give advice that benefited their own self-interests rather than the interests of their clients. Further, Sah said advisers were more likely to provide biased advice if they gave advice to multiple recipients, because this increased the psychological distance between themselves and the clients.

PROFESSOR

down times and reporting periods to ensure businesses are efficient and ‘fit for purpose’ during their busiest periods.”

The data also found some lending patterns in other small business sectors were more evenly distributed around the year. Bucking the festive season and end-of-year trend, retail trade lending remained constant throughout the year, despite the obvious spike in consumer demand for retail products around festive periods.

According to the data, some borrowing patterns also extended to the day and time small businesses sought funding. Most small businesses were likely to apply for a loan in the middle of the week and during business hours.

Poolman added: “These patterns are obviously entrenched across small businesses. For brokers, this means understanding the patterns and then building awareness with their own clients about the impact of these patterns on their businesses.

Most importantly, each business is different, so brokers should work with their clients to really understand when and how much to borrow to take advantage of market cycles and maximise growth opportunities.”

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SPECIAL REPORT

SOLUTIONS-BASED BROKING Stuart Styles, managing director of Arthurmac & Co, explains how he transitioned from selling cars to specialist loans and why finance is all about asking the right questions

careers is a dream many hold but few pursue, despite the success stories.

Amazon founder Jeff Bezos started his working life as an investment banker before launching an online marketplace from his garage. Actress Lisa Kudrow worked as a biologist for almost a decade before joining the cast of Friends, and Arnold Schwarzenegger went from body builder to Terminator to governor of California – becoming highly successful in each role.

From purpose to pay scale, there are dozens of reasons to switch careers: satisfaction, work-life balance and the opportunity to CHANGING

make a difference are often cited by those who make the leap.

For Stuart Styles, managing director of the award-winning

a yard with his father before working in showrooms for the big brands. While he enjoyed the people and finance side of the

“We have had to find the right lender and solution for the client and really utilise our skills as brokers to get the deal done” Stuart Styles, managing director, Arthurmac & Co Arthurmac & Co, it was a combination of all of the above.

The son of a car salesman, he started in the auto trade running

work, he was battling against absent managers and a seven-day working week, and morale was dwindling.

Then he spoke to a friend who happened to run a brokerage and, accepting an offer to learn the trade, Styles decided to focus on his passion for arranging finance, and build a new career in broking non-conforming and private loans.

“It was hectic to begin with.

The hours were nine to five, six or seven, but I had my weekends back and I loved it from the start,” he recalls.

“It was everything I needed in terms of a career: I love the finance aspect, I love dealing with people, and it was just really interesting for me.”

As part of a four-strong team writing upwards of 90 mortgages

HOW SPECIALIST LENDING CAN DIVERSIFY YOUR BUSINESS

BY CORY BANNISTER, CHIEF LENDING OFFICER, LA TROBE FINANCIAL

There have been many recent examples that highlight the importance of diversification, in cases where broking businesses were set up specifically to write one particular product. We saw these businesses grow exponentially, and watched as these brokers rose through the ranks, winning awards for volume and growth in the industry. Unfortunately, this did not last long for many of these businesses, particularly when lender supply lines were cut unexpectedly, causing the brokers’ own supply capabilities to evaporate, along with their business plans.

Case studies of markets that have changed significantly over the past 12 months, and which may disrupt business models, include SMSF loans, non-resident loans, development finance, commercial loans, investment loans, and interest-only lending.

We believe diversification to be one of the most important fundamentals for any investment, and arguably, a finance broking business is just that, an investment.

Therefore a strategy to diversify should be seriously considered in order to safeguard a broker’s business. Specialist lenders can make diversification easy.

14

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In partnership with

end-to-end finance solutions.

“We’re a bit unique in that we do the whole lot, not just the broker part and sending it to a lender.

We get all the ducks in a row for settlement; we do the whole transaction from start to finish,” Styles says.

Stuart Styles, managing director, Arthurmac & Co

a month, it was a baptism of fire to say the least. However, the move also brought a serendipitous encounter with the person who would become Styles’ business partner, Angela Simonetta. Two years later. Arthurmac & Co was established.

“I started in private and nonconforming lending. and in my first two years of broking I had learned how to get the difficult deals done. It was good in a way because I learned what questions to ask clients to find out how to solve the problem for them. Once

you find an appropriate solution for a client they tend to be very loyal. They come back to you the

Today, as much as half of Arthurmac & Co’s business is derived from repeat clients:

“Some brokers simply take orders for their customers … Don’t be an order taker, be a dealmaker” Stuart Styles, managing director, Arthurmac & Co next time, and as a result you really want to take them from point A to D or E down the track,” Styles says.

private lending and second mortgages, business clients and even developers looking for

Generating results The non-conforming space has witnessed rapid growth over recent months as vast swathes of borrowers have discovered they now fall outside of the mainstream banks’ lending criteria.

Research commissioned by Pepper Money and released by Fifth Dimension in September shows that six in 10 declined home loan applicants are likely to be eligible for an alternative loan, yet don’t know where to turn.

While the goalposts have moved, it doesn’t mean these would-be borrowers are any less able to repay their loans: as demand soars, non-conforming arrears are falling. Standard & Poor's Performance Index has posted a steady decline in arrears throughout the year, with non-conforming loan arrears reaching a record low of 3.65% in May. Meanwhile, delinquencies continue to rise among prime mortgagors.

This shift in dynamics means more brokers have to get to grips with the alternative solutions available in the market.

“I’ve always been cynical because I work in the nonconforming space, whereas a lot of brokers automatically go to the big four. What we are doing is more solutions-based lending, where we have had to find the right lender and solution for the client and really utilise our skills as brokers to get the deal done," Styles says.

“It’s not just here, tick this box, give us two payslips and off we go.

There is a little more to it, and it takes a bit of time – which I guess www.brokernews.com.au

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is why most brokers have shunned it,” he adds.

The change in market dynamics has also brought new life to the private, or peer-to-peer, lending space.

Data from ASIC shows that in 2017 Australian consumers and SMEs borrowed $300m from private lenders – almost double the $156m recorded in 2015–16. More than simply an indicator of the sector’s maturity, the figures also reflect a shift in sentiment among borrowers and investors.

“We act in the purest sense of the broker. We source private investors who want to lend funds on mortgages, and we also seek out the borrowers. We put those two together and we do a whole transaction,” Styles says.

This has been identified as a primary area of focus for Arthurmac & Co over the coming six months, and the firm’s AFS licence is currently in the pipeline, meaning it will soon be able to facilitate and manage loans end-to-end.

“That will be a big step for us, and it will bring a lot of efficiencies that currently we don’t have.

We rely on the investors, who sometimes don’t necessarily have the proper processes in place to manage everything, but this will be our main focus for the next six months and we are pretty excited about it,” he says.

“Our funding lines are getting bigger and bigger.”

Finding a niche Specialisation has been the key to success for Arthurmac & Co, allowing the firm to compete within its own class and on its own terms. However, that isn’t to say it has always been easy, especially during the GFC. In 2012, after weathering three consecutive years of growth declines in the region of 30% annually, Styles closed the 16

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Arthurmac & Co office and took a broking job at a second-tier bank.

“It was just a crazy period. I shut down the office, moved everything back home and took the bank job.

I lasted three days – I just couldn’t do it!” he says.

With a network of potential clients still demanding his

perseveres. I’m someone who just doesn’t give up, and I think to succeed in anything you just have to push through those days where it’s tough,” Styles says.

The firm is currently in what Styles refers to as its second incarnation – Arthurmac & Co 2.0 – with a bespoke office and a

“We get all the ducks in a row for settlement; we do the whole transaction from start to finish” Stuart Styles, managing director, Arthurmac & Co expertise, Styles started to rebuild the business, diligently growing to a point of critical mass. Within 12 months he required admin support and new premises.

After taking time out to work for another firm, Simonetta returned in 2014 and a new team was recruited.

“We have had a lot of setbacks, but I guess I’m just the type who

strong path marked out for the short- to mid-term future. The current team of three full-time and two part-time members comprises Angela Simonetta, settlements and administration of private loans; Michael Hughson, senior broker and credit analyst; Bonnie Dalziel, key administration executive; and Melinda Rea, trust administration.

This core team will expand to

10 over the next 19 months, and there is more on the cards too.

Managing people – as well as the demands of the industry – comes with its own set of challenges, and Styles attributes the team’s working relationship to a combination of prescriptive processes, collaboration and the chance to have ownership of their work.

“Management style is something you learn as you go. I’m more of a hands-off type of operator; I like the team to use their own initiative. Everyone contributes, and it sounds a little bit cliché but it’s a real team effort,” he says.

On the flip side, for a team to be successful, its members must have a great attitude.

“I learned a long time ago that I can’t get everything done on my own. You need good people around you, and you need to be able to rely on them. So trust is a big thing, and number two is attitude.

“All we need is someone who can work in a team, and that’s down to attitude. We can teach the rest,” Styles adds.

KEY BUSINESS METRICS Source: CoreLogic

2005

5

year Arthurmac & Co was founded in Melbourne

30+

members of team – set to expand to 10 by 2020

3

Australian Mortgage Awards – received in 2013, 2016 and 2018

lenders accredit the firm

1,000+

loans settled by Stuart Styles over 15 years

From left: Michael Hughson, Sally Styles, Stuart Styles, Bonnie Dalziel, Angela Simonetta .

The right questions In adopting a consultative approach to broking, Styles and the team at Arthurmac & Co have been able to utilise the loans available from various lenders in the marketplace to help clients achieve their goals in almost any circumstances.

For Styles, it’s the difference between being average and being excellent, and it’s dependent on asking the right questions.

While on the one hand there are

brokers who simply go through the motions of asking about credit cards and offset accounts, the ones who do more than scratch the surface are asking about different things entirely.

“This is about consultative selling. You need to find out about your clients, and in this environment it’s even more important to do that because, if you don’t, you will be left behind.

“Some brokers simply take orders for their customers: do you

want an offset with that? Do you want a credit card with that? Don’t be an order taker, be a dealmaker,” he says.

It’s an approach that has served Styles well, and, as a result, at the 2018 Australian Mortgage Awards Arthurmac & Co won the Pepper Money Broker of the Year – Specialist Lending award.

There will no doubt be many more success stories to come.

“I’ve had a lot of help to get where I am, and I couldn’t have

done it without people in the industry helping me in one way or another. This is a people business and we rely on other people,” Styles says.

“We are really looking forward to our next step. It has taken a while for us to get here – we’re not an overnight success; you just have to persist. You have to persevere and you have to keep the goal of what you want to achieve at the front of your mind. If you don’t, you won’t get it." AB www.brokernews.com.au

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IN THE NE WS

STRONGER TOGETHER Following the launch of the International Mortgage Brokers Federation, FBAA managing director Peter White explains how and why the new broker group was formed and the pivotal role it will play the federation, and I coordinated with the UK, New Zealand and USA to come on board while also working on various strategies for the federation.

There will be more countries joining.”

While the new body will share ideas, refer clients, gather market intelligence

regulatory journey and history.”

Through the federation, the world’s first international referral network will also be established, enabling brokers who have clients moving overseas to be able to refer them to a broker in another IMBF country,

“If we want to stay ahead of the curve we need to be formally talking to each other, understanding each other’s markets, economies, regulatory journey and history” Peter White, executive director, FBAA

Peter White, executive director, FBAA

regulators often collaborate across borders to share knowledge and outcomes, but the industries they regulate are rarely afforded the same opportunity. In a bid to level the playing field – and support brokers in the process – a new, global federation has been established, the International Mortgage Brokers Federation (IMBF).

The culmination of two years of work by Australia’s FBAA, the federation launched in Canada last month during a conference held by the Canadian Mortgage Brokers Association (CMBA).

A world first, the IMBF is comprised of industry bodies from Canada, Australia, the USA, New Zealand and the United Kingdom. Other countries that use third party origination networks to distribute loan products have also been invited to join.

FBAA managing director Peter White has travelled and networked extensively to bring the project to fruition. He describes the federation as “the leading global forum for bringing the international mortgage broking FINANCIAL

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community and its suppliers together to collaborate”.

“When I spoke with the CMBA, I mentioned I was establishing a global network of like-minded associations given I had been to the UK and New Zealand in 2016 and the three of us were heading down this path,” White says.

“The Canadians said they were looking at something similar, and the conversation continued from there.

The Canadians assisted in setting up

and identify trends, it will also foster collaboration to advocate for brokers on a global scale, and ensure suitable representation is made during any changes to regulations and legislation.

The organisation also aims to develop and adapt new and existing standards that enhance the industry and promote strong ethical practices by its members.

“It enables all of us to have concise knowledge on how all markets work,” White explains. “Our governments are all talking to each other and formulating regulations from their learnings, and if we want to stay ahead of the curve we need to be formally talking to each other, understanding each other’s markets, economies,

ensuring continuity and a share of commission.

“The IMBF is about sharing knowledge and learnings for industry associations and their interactions, issues, outcomes, successes and challenges with regulators and government,” White says.

A board of governors has been established and the executive team will be announced shortly. For now, the FBAA and CMBA both sit on the federation’s global board of governors, and the final structure is yet to be announced. White will act as interim spokesperson, and Australia and Canada will take the lead executive positions within the new federation. AB

MEMBER ASSOCIATIONS Australia

Canada

UK

New Zealand

USA

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OPINION

A CHALLENGING ROAD AHEAD Parth Pandya, CTO at Technobrain Solutions, predicts dramatic changes for the mortgage landscape over the coming 12 months, with implications for brokers, aggregators, banks and tech developers the last few years the priorities for the major and tier-two banks have centred around building profitable customer-facing digital channels.

Increases in process improvement and investments related to smarter decisionmaking at the banks are expected to hit the market in the next 24 months.

There has also been a significant rise in the number of digital banks and nonbank lenders. We see fintech companies developing banking aspirations of their own, while on the flipside banks have shown the desire to become efficient, technology-led companies.

This means one thing: from now until December 2019 the landscape will evolve significantly for brokers, aggregators, banks and the technology developers themselves. I see multiple opportunities for those willing to take them, but there is also risk for incumbents that refuse to adapt.

result, greater conversions. I expect the market to see the launch of larger broker-centric software platforms with a more holistic solution set. These would work hand in hand with brokers as partners and not just as software or compliance providers.

It is highly likely that we may see a more aggressive and broker-centric aggregator win the lion’s share of the market in the foreseeable future.

IN

Opportunities for broker aggregators Aggregators have enjoyed a successful business model that has also paved the way for brokers to offer more than residential loans.

However, dated and labour-intensive broker platforms will pose a real challenge in terms of justifying the ‘monthly fee plus commission’ model on each deal. Having identified the need for efficiencies, some brokers have started their own internal systems by using technologies such as ID verification, secure document collection and marketing automation. But there is room for aggregators to provide a more unified, industry-specific, end-to-end solution.

The next generation of broker platforms will need to consistently employ CRM-based marketing, lead nurturing and data-driven insights for the broker to have more contextual conversations with the client and, as a 20

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new opportunities through the introduction of such things as technology training and support services.

Does this mean that brokers will be replaced by smart systems and artificial intelligence?

The technological enhancements in the field of AI are certainly impressive, but the tech itself has been around since the 1980s. Today, AI is cheaper, smarter and increasingly relevant to customers, but significant challenges remain, especially when integrating the human factor with business. It is easy to get carried away, but the really interesting stuff is still years away from coming to fruition.

For now, we must look at AI with a fresh perspective. Instead of replacing the broker, I believe it can complement the broker’s skills and work hand in hand.

This could include an AI-generated priority list of customers to target and contact based on the needs segment they fall under, for example ‘ready for refinance’ or ‘ready for first home upgrade’.

More mainstream and successful implementation of AI is likely to develop in the area of fraud detection, and therefore the broker channel’s concerns

It is highly likely that we may see a more aggressive and broker-centric aggregator win the lion’s share of the market in the foreseeable future

Parth Pandya CTO, Technobrain Solutions

Trading tech for market share The broker channel continues to evolve, and this has been marked by the arrival of millennial brokers who typically come from a banking and technology background and are very comfortable with the concept of business on the go.

They are constantly looking for ways to boost efficiency. A business that is cheaper to run and one that is compliant with regulations is a profitable business, and they recognise that the answer lies in technology.

As the year rolls on, I expect to see brokers continuing to thrive through innovation in their business models and in the way they interact with customers using tech. From digital calendars to automated chatbots and offloading of data entry by the customer through customer-facing applications – all will change the way brokers traditionally run their businesses.

The pressing need for brokers to redesign their businesses will give rise to

about AI should be in the area of fraud and misleading or undisclosed information.

Niche market growth Non-bank lenders and digital banks will grow their footprint by servicing specific areas. Their investments in technology will grow and serve niche segments across multiple lending scenarios.

In terms of trends impacting the broker channel, pure online and customer self-service lenders seem more likely to acquire tech-savvy customers at the expense of brokers. The space is certainly worth watching to see if brokers can present these non-bank lenders as real alternatives. Non-bank lenders specifically will thrive with the support of an extensive and experienced broker channel, effectively acting as a potent sales team.

Will these predictions prove to be accurate? Only time will tell, but the signs and data at hand are aligned. AB

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21

PEOPLE

Have an interesting deal?

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

Rebecca.Pike@keymedia.com

A BIG DEAL

THE SOLUTION

Anish Prasad, finance specialist at Pivotal Financial, explains how he transformed a word-of-mouth referral into a golden opportunity for two first home buyers – and a channel of repeat business for himself Location: North Lakes, Qld

THE FACTS

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Client and goal A young couple looking to buy their first home

Lender Bankwest

Aggregator Connective

He had never received any late payment reminders and was shocked to learn of the defaults, but the couple were taking a proactive approach and liaising with various companies to have them removed. However, the process can take as long as five years, and they didn’t

THE SCENARIO

Relationship-building is a vital part of broking and it takes a lot of time and effort to build a network to a point of critical mass. Professional reputation, a strong work ethic and a history of positive results are all vital, but, once in place, word of mouth takes over and the fruits of your labour really start to show.

A local, privately owned real estate office had heard about my service through another real estate agent who I had worked with in the past. They referred a young couple to me, who had been searching for their first property for a year and now that they had found it they didn’t want to lose it.

Their plan was set out: the male applicant worked in construction and planned to renovate the house to add to its value. But there was a bump in the road.

The couple had been declined by their bank because the male applicant had two minor defaults on his credit file related to utility bills carried over from a previous rental property.

Loan size and term $432,000 for 30 years

Leveraging the relationships I had built over the years, I turned to BDM Andy Zhao at Bankwest. The response was positive, their turnaround times were good, and it was time to get the ball rolling.

I ordered a valuation up front and submitted the application. The assessor picked up the file the following day and conditionally approved the loan, but that wasn’t the end of the story.

With an LVR of 88%, LMI was required, but the insurers declined the file due to… the utility bill defaults! Luckily we had an advocate on our side, and the assessor at the bank said she was happy to go back and appeal this decision if we could provide more details of the defaults.

I presented the additional information that was required, along with letters to prove no money was outstanding and the defaults were in the process of being removed.

A day later – and still within the original finance period – we were contacted with some good news: the loan had been approved.

THE TAKEWAY

Despite trying to reassure them that their case was not a lost cause, the couple had pretty much lost all hope of securing this property, mostly due to the tight deadlines we faced. So when they heard the loan had been approved, they were over the moon, as was the real estate agent.

While this was all in a day’s work for a broker, the service and turnaround had impressed the agent and their client so much that there was also a bonus in this deal for me – the agent said they would use me as their go-to finance specialist for any future clients. This has led to a further two referrals, which each came with its own unique challenges but I was able to

My first step was to get a rundown of what happened with the bank and the previous broker, to understand the client’s situation

Anish Prasad Finance specialist, Pivotal Financial

want to risk losing their chance to buy this property.

At this point they were stressed and disheartened and needed a professional to help out with the purchase.

I started to contact lenders that would have an appetite for this deal, without waiting for the defaults to be removed. Deadlines were looming, so the proposed lender would need to have quick turnaround times.

secure the finance on both occasions.

Not only was this deal a fantastic opportunity for all parties but I had a really positive experience with Bankwest and the assessor, who went above and beyond to support my clients and overturn the insurer’s original decision.

Now in their first home, the couple have started on the renovations and have told me they will be in touch when it’s time to buy their next property. AB

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PEOPLE

CAUGHT ON CAMERA Leading brokers from across Australia were recognised at the Connective Excellence Awards, which took place in Perth, Sydney (pictured), Melbourne, Brisbane and Adelaide from 5 to 27 September. Each event recognised the top brokers across 16 categories, including Compliance Hero, Best Newcomer and Mercury Hero, as well as presenting an Empowerment Award honouring women in industry associations, broking and business development. Connective director Mark Haron said, “Our Connective Excellence Awards recognise the outstanding achievements of our brokers. I’d like to extend my congratulations to all our 2018 winners for the commitment, innovation and integrity which resulted in your remarkable success across a very challenging year in our industry. Well done.”

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THE CHOICE IS YOURS

MAGAZINE The only independent magazine dedicated to mortgage industry news, opinion and analysis

WEBSITE Breaking news, in-depth profiles, features, online forum and Australian Broker TV

ENEWSLETTER Daily news service delivered straight to your inbox every morning

FOR MORE INFORMATION, PLEASE EMAIL EDITOR@BROKERNEWS.COM.AU www.brokernews.com.au

25

DATA

WESTERN AUSTRALIA

QLD SPOTLIGHT

Little prospect of capital or rental growth in the unit market Although affordable, Perth fails to attract buyers due to a weak economy and limited prospects.

“House prices in Perth keep falling due to local economic conditions, poor consumer confidence and an adverse supply and demand ratio,” says Kate Forbes, national director of property strategy at Metropole Property Strategists. She says this trend highlights how important perception is to a buyer.

Despite many assurances that the Perth market is close to bottoming out, the lack of economic push has kept expectations low.

“Like other states, WA’s population trend has a significant impact on the market’s overall performance. To get people back into the state, more jobs will need to be created,” Forbes says. “Due to significant oversupply of new apartments there is little to no prospect of capital growth or rental growth in the Perth apartment market for many years.”

Area

Type Median value

Quarterly

12-month

growth

growth

Perth

H

$500,000

-2.9%

-1.0%

WA Country

H

$325,000

-5.8%

-2.9%

Perth

U

$380,000

-4.0%

-3.7%

WA Country

U

$220,000

-13.7%

-13.3%

NEW SOUTH WALES

Sydney remains a valuable market, despite unit corrections Within the capital city, renovation and development may be the key to riding out the correction period seen across units.

“We’re seeing a lot of good-value buying in a strategy of construction, where you can add value to a marketplace or a property in a flat market,” says Caifu Property’s head of acquisitions, Damien Lee. “Based on the fact that Sydney had doubledigit growth for six years, a 0.04% or flat fall-off is no reason to freak out,” he adds. It comes down to investing wisely and selecting a property that can be adequately sustained by the demand that Sydney’s strong economy generates. For instance, the apartment market has been inundated with an influx of completed developments, causing rental rates to drop.

“There is an oversupply in the marketplace,” reports Leanne Pilkington, president of the Real Estate Institute of NSW. “Rents are falling and properties are staying on the market longer than usual.”

Area

Type Median value

Quarterly

12-month

growth

growth

QUALITY HOUSES, VALUE PRICES Areas outside of Brisbane are shining and the capital city is showing signs of recovery following an influx of apartments

is beginning to recover from an oversupply of units, but it’s still in a precarious position.

“The oversupply of apartments in Brisbane is starting to get back to an almost-normal level, though it’s probably still a few courses away from getting back to normal,” says Damien Lee, head of acquisitions at Caifu Property.

“But it wouldn’t take much to put it into oversupply again, based on some more big projects coming through. So in Brisbane and its surrounds we’re still tagging the land side of things.”

The house market does in fact seem to be flourishing, in contrast to the unit market, with values rising at strong rates.

“We’re seeing fantastic price growth in the housing market, from middle ring into the suburban ring, based on the satellite city factors that they’re planning in,” Lee says.

Areas outside of Brisbane continue to be the stars of the Sunshine State. Southeast Queensland has been great for interstate investors, given the affordability of properties in that area, its significant population growth and the available opportunities in the job market.

While the Gold Coast continues to perform well, however, it may also be in danger of oversupply.

“The Gold Coast is about to come into a heavy oversupply of apartments with approval and construction underway, but there’s a limited supply of new residential land available on the Gold Coast as well,” Lee says.

The luxury market seems to be slowing down, but ultimately buyers are still getting quality houses at far lower rates in the Gold Coast than in Sydney and Melbourne. Within 50 minutes of the CBD are houses for less than $550,000, and with an infrastructure boom in Brisbane this could drive considerable demand for nearby pockets. AB

H

$927,250

-8.7%

1.0%

Median price (houses)

NSW Country

H

$472,000

0.0%

4.7%

$523,266

Sydney

U

$712,888

-1.0%

-1.0%

NSW Country

U

$390,000

-0.6%

0.0%

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While oversupply in central Brisbane threatens capital growth, Gold Coast suburbs can’t keep up with demand I’m seeing an oversupply of apartments and investor properties in the inner city, to the point where lenders and owneroccupiers are now retreating from the unit market. Owner-occupiers aren’t happy with the high level of investors, and lenders are concerned about resales.

However, foreign and interstate investors continue to buy in the expectation that there will be capital growth, but that generally doesn’t come to fruition.

In terms of price performance, there is a slight correction happening right now, and northern Queensland continues to be worst hit, but ultimately, if a property is priced well and presents well it won’t stay on the market long at all.

On the Gold Coast there are areas that can’t keep up with demand. Many locations that weren’t previously desirable now are, and there is capital growth too.

I recently had a client who paid $270,000 for a property, did some basic renovations, and 18 months later sold it for $410,000.

Deslie Taylor Owner manager, Mortgage Choice

SUBURB TO WATCH: ROCHEDALE SOUTH

Sydney

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BROKER PERSPECTIVE

BRISBANE

Median price (units) $260,292

Source: CoreLogic

12-month growth

3-year growth

5-year growth

Indicative gross rental yield

5.3%

18.3%

28.5%

4.2%

12-month growth

3-year growth

5-year growth

Indicative gross rental yield

-14.1%

-14.0%

-2.0%

5.5%

AUSTRALIAN CAPITAL TERRITORY

Politics strengthens economy but high values deter demand OPPORTUNITIES AND KEY INFRASTRUCTURE

Projects

Mega metro

Cross River Rail

Space race

$17bn worth of projects are scheduled in Brisbane to 2026

$20bn project will quadruple public transport network by 2043

Brisbane Transit Centre will be demolished to make way for CRR

Potential rocket launch sites in the state are being investigated

HIGHEST-YIELD SUBURBS IN AUSTRALIAN CAPITAL TERRIRTORY Suburb

Type

Median price

Quarterly growth

12-month growth

Moura

H

$85,550

7%

-6%

Dysart

H

$67,000

-7%

-25%

Blackwater

H

$100,000

-5%

11%

Tully

H

$130,000

-25%

-24%

Mount Morgan

H

$95,000

1%

6%

In Canberra, politics continues to support this stable, growing market through steady employment opportunities and job creation. However, for Multifocus Properties CEO Philippe Brach the current population growth rate in Canberra is still not adequate to support the city’s remarkably high property values.

“Canberra is a market that relies on politicians because it’s the political capital of Australia. The price point is fairly expensive, but it’s only got 300,000 people living there. I’d rather stay close to a capital city that’s got five million people in it,” he says. “At the end of the day, your capital is going to be driven by population growth. In Canberra, there’s a little bit, for sure, but not enough.”

Given the many apartments under construction at present, oversupply could wind up becoming a big issue for Canberra if demand wilts due to pricing.

Area

Type Median value

Quarterly

12-month

growth

growth

Canberra

H

$695,500

-0.6%

6.1%

Canberra

U

$440,000

0.0%

1.2%

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DATA

SOUTH AUSTRALIA

12-month

growth

growth

Adelaide

H

$469,000

2.9%

2.9%

SA Country

H

$290,000

-4.9%

1.0%

Adelaide

U

$385,000

4.1%

4.1%

SA Country

U

$186,000

-23.1%

-2.6%

VICTORIA

MEDIAN HOUSE AND UNIT PRICES

Regional areas stumble but Geelong makes a splash

$1,000,000

Type Median value

Quarterly

12-month

growth

growth

Melbourne

H

$725,000

-4.2%

8.2%

VIC Country

H

$351,000

-2.5%

6.7%

Melbourne

U

$535,000

-0.9%

4.9%

VIC Country

U

$261,611

-3.1%

3.8%

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Total auctions

133

Cleared

53

Uncleared

25

Clearance rate

67.9%

PERTH Total auctions

34

Cleared

5

Uncleared

6

Clearance rate

45.5%

Houses

Sydney Melbourne Brisbane Adelaide

Perth

Hobart

$510,000

$420,000

$338,000

$0

$360,000

$100,000

$500,000

$200,000

$311,500

$300,000

$458,000

$500,000 $400,000

$538,500

$600,000

$705,000

$700,000

$675,000

$800,000

$850,000

$900,000

Regional Victoria’s overall push may be going south, with smaller pockets reaching oversupply more quickly than the capital.

“Regional Victoria has gone a little quiet – we don’t hear too much about that any more. It’s had its run,” says Damien Lee, head of acquisitions at Caifu Property.

However, some areas are taking the opportunity to re-establish their reputations, like Geelong, which was considered a ‘rough’ town at one point. “With the new highway, the new train line proposal, gentrification and a new greenfield space, that transportation network all the way down to Geelong will start to come alive,” Lee says.

Already, Geelong is starting to hit its stride given the ease of commuting to Melbourne and its more reasonable prices. “You can find a four-bedroom house on a nice block at only $500,000 – prices have grown quickly because it is a commutable distance from Melbourne,” Multifocus Properties CEO Philippe Brach points out.

Area

ADELAIDE

Darwin

Units

$439,000

Quarterly

$375,000

Type Median value

Auction volumes were the highest they have been since late March: 2,919 homes were taken to auction across the combined capital cities this week, increasing from 2,139 the previous week but a decline from the 3,713 witnessed last year. The higher volumes were largely thanks to Melbourne, as vendors rushed to auction prior to the Melbourne Cup Carnival slowdown.

Preliminary results show a clearance rate of 50.2% across the combined capital cities, although it’s likely to drop below 50% for the fifth consecutive week. Last week saw the final clearance rate revise down to 46%, while this week last year saw 64.5% of auctions return a successful result.

Melbourne was host to 1,706 auctions, making it the second busiest week for the city all year.

Preliminary results show a clearance rate of 49.8%, up from the previous week when just 45.7% of auctions were successful, which was the lowest clearance rate the city had seen since June 2012. Over the same week last year, the auction clearance rate was significantly higher, with 70.2% of the 1,983 auctions returning a successful result.

$535,000

Area

WEEK ENDING 28 OCTOBER 2018

$662,500

Metropole Property Strategists’ national director of property strategy, Kate Forbes, notes that Adelaide was the only Australian capital to not see a reduction in settled sales over the 2017/18 period. However, its capital growth potential seems to be diminishing.

“Prices are generally trending upwards but are very subtly reflecting a sharp slowdown in the pace of capital gains,” she says. “In a marked shift, the greatest growth is towards the lower and middle of the market.”

Forbes also comments on the continued fragmentation of the market, highlighting Glenelg South and Gilberton as strong-performing suburbs.

“There’s no such thing as ‘the’ market – some submarkets do better and some worse.”

This is echoed by Metropole Property Strategists CEO Michael Yardney, who points out that some suburbs are showing three times the capital growth of others. “I know some investors are looking for opportunities in Adelaide, hoping prices will increase, but there are few growth drivers,” he adds.

CAPITAL CITY AUCTION CLEARANCE RATES

$320,000

An uneven market with diminishing capital gains

Canberra

CAPITAL CITY HOME VALUE CHANGES Capital city

Weekly change

Monthly change

Year-to-date change

12-month change

Sydney

-0.1%

-0.6%

-4.7%

-6.3%

Melbourne

-0.2%

-0.7%

-4.9%

-4.6%

Brisbane

0.1%

0.0%

0.4%

0.5%

Adelaide

-0.1%

0.0%

0.4%

0.7%

Perth

-0.3%

-0.8%

-3.6%

-3.5%

-0.1%

-0.6%

-3.9%

-4.5%

Combined 5 capitals

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

BRISBANE CANBERRA Total auctions

101

Cleared

42

Uncleared

36

Clearance rate

Total auctions

148

Cleared

30

Uncleared

57

Clearance rate

34.5%

53.8%

SYDNEY Total auctions

796

Cleared

267

Uncleared

260

Clearance rate

TASMANIA

MELBOURNE Total auctions

50.7%

1,706

Total auctions

1

Cleared

665

Cleared

1

Uncleared

670

Uncleared

0

Clearance rate

Clearance rate

49.8%

TASMANIA

Area

Tasmanian tourism: Boon or bane?

Compared to houses, the affordability of apartments in this market improved over 2015–18. “That’s been underpinned by sea changers from the eastern states, particularly Melbourne. A lot of retirees or telecommuters have moved into Tasmania, particularly Launceston and Hobart,” says Real Estate Institute of Australia president Malcolm Gunning. “Tasmania has its own momentum like northern Queensland, as there is strong interest in people relocating down there because it has a very well-developed food and lifestyle culture.”

But while tourism is Tasmania’s strong suit economically, the state’s dependence on this industry could have a negative impact. “The strongest economy is tourism, which could be affected depending on the cost of travel. The unemployment rate is still one of the highest in Australia, but tourism has soaked up a bit of that, particularly among younger population,” Gunning says.

N/A

Type

Median value

Quarterly growth

12-month growth

Hobart

H

$440,000

-5.4%

11.6%

TAS Country

H

$295,000

0.7%

7.8%

Hobart

U

$331,400

-3.9%

10.8%

TAS Country

U

$240,000

-1.8%

0.8%

All data sourced from CoreLogic.com.au

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29

PEOPLE

Aggregator PLAN

IN THE HOT SEAT After a year of regulatory scrutiny, Daniel O’Brien, broker at PFS Financial Services, talks about challenges currently facing brokers – and reveals how he would spend a $1m lotto windfall

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

The greatest challenge is being the punching bag for the likes of A the royal commission, Productivity Commission and industry regulators; we and our industry are under fire. We have many ‘experts’ giving their opinions on what we do and how we do it, but none of them seem to have actual real-world experience in what we do.

One simple example: the interest rate discount margins clients receive in 2018 are around 1% higher than 10 years ago. That’s due to us, the brokers, creating a fairer playing field for consumers.

Reducing or killing trail will not benefit the client. They will not get cheaper rates from the banks, and they will get inferior service going forward. If brokers are paid 20% less, quality people will leave the industry to earn more elsewhere.

Providing a first-class service costs money. Upfront commission is for doing the upfront work – trail is not a cherry on top for doing nothing.

Q

Q A

If you won $1m, what would you do with it?

I would take my partner and our children to Disneyland – and maybe sneak in a child-free trip to Vegas.

What do you wish you’d known when you started out as a broker?

How to be a broker! I was 24 and I had a good finance base but A limited lending knowledge. I wish I had actually thought up simple things like: where will I get business from? How will I pay bills? I was counting on one referral source to keep me fed; that referral source only kept me malnourished! Having a clearer back-up plan would have been better.

Q

What was your first job?

I was a cook at KFC when I was 15. To this day, the toughest job A I’ve ever had. It was in 1995, before things like occupational health and safety were in vogue. I was a scrawny 40kg kid lifting 20kg of chicken, full stretch, out of vats of boiling oil. It was a very physically demanding job and I did it at a clip of $4.50 per hour.

Q

Q A 30

What’s one of your recent career highlights?

Settling my biggest-ever deal in August 2018 – an $11.8m commercial development loan. AB www.brokernews.com.au

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