Australian Broker 16.13

JULY 2019 ISSUE 16.13

Romancing the loan writers The majors are back in business – but can they win back brokers? /16

Plugging the gaps MoneyPlace’s Alf Vasta on the role of the personal loan /20

The CEO Sleepout 2019 Industry CEOs bed down in Balmain to raise funds for Vinnies /24

MATTHEW JOHNSON JEAN-PIERRE GORTAN The managing directors of Simplicity Loans & Advisory reveal how they’re raising the bar for commercial brokers /14

ALSO IN THIS ISSUE… A big deal Thuy Hook tackles secret debts to secure a client’s mortgage /22 Housing market data The latest property trends from Victoria /26 In the hot seat ME Bank CFO Adam Crane shares four tips for working in finance /30

NEWS

IN THIS SECTION

Lenders Majors voice support for new rule book /04

Aggregators Aussie eyes asset finance growth /06

Technology Mates’ rates lending app eyes expansion /10

Regulators ASIC sets out its new-year agenda /12

Market Fixed rate lending trends reverse /08

www.brokernews.com.au JULY 2O19 EDITORIAL Editor Melanie Mingas News Editor Madison Utley Production Editor Clare Alexander

DATES TO WATCH

Upcoming can’t-miss events

ART & PRODUCTION Designer Martin Cosme

2 4 J U LY

2 5 J U LY

14 AUGUST

What Comes After Mortgage Broking?

MFAA National Excellence Awards

Commercial Lending Workshop

In the wake of changes brought about by the royal commission, this two-hour event will assess how private banking can provide opportunities for mortgage brokers.

Focused on those working in the property development sector, the session will provide delegates with a broad overview of private banking.

Concluding this year’s Excellence Awards series, the Mortgage & Finance Association of Australia will recognise its national winners in a gala ceremony at Melbourne’s Crown Casino. In addition to naming the winners from the state heats, the ceremony will include a number of national-only recognitions.

In collaboration with MFAA, Simplicity Loans & Advisory will host a two-hour commercial lending workshop from 3.45pm at the Pullman Hotel, Sydney. This casual event is geared towards residential brokers looking for the tools required to identify, analyse and capitalise on the opportunities in commercial lending.

Production Manager Alicia Chin Traffic Coordinator Freya Demegilio

SALES & MARKETING Sales Manager Simon Kerslake Global Head of Communications Lisa Narroway

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

Melanie Mingas +61 2 8437 4720 melanie.mingas@keymedia.com

SUBSCRIPTION ENQUIRIES

21 AUGUST

29 AUGUST

30 AUGUST

National Finance Brokers Day

MFAA’s Tasmania PD day

CAFBA Conference and Awards

Taking place for the fourth time in 2019, National Finance Brokers Day will be marked across Australia, with the theme #brokersareyou. Founder Dino Pacella says this year’s event will showcase the interaction and value that brokers instil in their local communities.

Taking place at Elizabeth Street Pier, this one-day event will arm delegates with the information they need to get ahead on the industry’s latest developments, while also introducing them to a range of industry service providers and lenders at the adjoining supporter showcase.

CAFBA’s annual conference and awards take place at the Grand Hyatt Melbourne.

Conference attendance is complimentary, but registration is required. The awards ceremony starts at 6.30pm on the same day, with early-bird tickets on sale until 1 July.

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26 SEPTEMBER – 1 NOVEMBER

18 OCTOBER

10 – 12 NOVEMBER

Connective Conference 2019

Australian Mortgage Awards

COBA 2019 Stronger Together

With a two-day agenda, Connective’s Unite and Transform conference kicks off in SA on 26 September, before heading to Victoria (10 – 11 October), Queensland (17 – 18 October), WA (24 – 25 October) and NSW (31 October – 1 November). Each edition of the conference will be followed by a state awards ceremony.

Starting at 7.30pm, this year’s AMAs will see hundreds of mortgage and finance professionals return to The Star in Sydney to celebrate the industry’s best and brightest players, with awards in more than 30 categories. The 2019 event will feature Urzila Carlson, Duke Music and Linden Furnell.

The Customer Owned Banking Association’s 2019 convention will take place over three days on the Gold Coast.

Sessions will cover the future of the banking sector and the opportunities for customer-owned institutions. The speaking lineup includes an address from APRA chairman Wayne Byres.

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This magazine is printed on paper produced from 1OO% sustainable forestry, grown and managed specifically for the paper pulp industry Copyright is reserved throughout. No part of this publication can be reproduced in whole or part without the express permission of the editor. Contributions are invited, but copies of work should be kept, as Australian Broker magazine can accept no responsibility for loss. Australian Broker is the most-often read industry publication, according to independent research carried out by the Ehrenberg-Bass Institute for Marketing Science at the University of South Australia in December 2008. The research also found that brokers rate Australian Broker as the best for both news content and feature articles, followed by sister publication MPA. Overall, on all categories, Australian Broker ranks top followed by MPA. The results were based on a sample of 405 respondents who were the subject of telephone interviews.

NEWS

LENDERS MAJORS SPLIT ON PERFORMANCE banking data for May shows a divide in performance in new owner-occupied lending. Standout performer CBA boosted its owner-occupied loan book by $1.6bn, passing the $300bn milestone. Westpac also showed a notable increase, rising by $1.2bn to rest at $264.5bn. ANZ, however, experienced a $171m decrease in owner-occupied loans compared to the previous month, while NAB was down $71m month-on-month. In total, the majors added $2.6bn in new mortgages in May. APRA’S

NON-BANK LENDING ON THE RISE Source: RBA, CommSec

Loans and advances, annual change Banks

Other lenders

30% 25% 20%

11-year high 15% 10% 5% 0% -5%

NON-BANK NAMED BEST IN AUSTRALIA has scooped two awards from International Finance, a UK-based magazine. For the sixth time, the non-bank was named Best Investment Management Company – Australia and also took Best Non-Bank – Australia for the third consecutive year. “It is more important than ever for us to continue our important work and fill any actual credit formation gaps in the market and assist consumers,” said La Trobe Financial chief lending officer Cory Bannister.

LA TROBE FINANCIAL

“We need people to join with us and support the Heritage Bank Charitable Foundation by making donations that will enable us to achieve our goals” Bill Armagnacq Inaugural chair, Heritage Bank Charitable Foundation

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-10% -15% March 2008

March 2010

March 2012

March 2014

March 2016

MAJORS VOICE SUPPORT FOR NEW RULE BOOK “Historic” new code of practice to enshrine customer protections and set out new penalties for lenders banking institutions are now operating under a new code of conduct, following the introduction of the ASIC-approved Banking Code of Practice, which came into force on 1 July.

Written by the Australian Banking Association (ABA) in collaboration with the banks, the new code has been welcomed by numerous institutions.

“While there is more work for the industry to do in rebuilding trust with the community, this new code is an important and significant step towards achieving that goal,” said ANZ CEO Shayne Elliott.

The changes mean banks can no longer offer unsolicited credit AUSTRALIA’S

card limit increases, charge commissions on LMI, or sell insurance with credit cards and personal loans at the point of sale.

Banks must also actively promote and offer low- or no-fee accounts to low-income customers, implement a three-day grace period on all guarantees to give guarantors enough time to check their options, provide reminders when introductory offers on credit cards end, avoid legal and technical jargon in small business loan contracts, and provide customers with a list of direct debits and recurring payments to make it easier to switch banks.

NAB was the only major bank to highlight the additional measures it has taken. Using the

March 2018

new code as a springboard, NAB has removed 50 fees, introduced Apple Pay, abolished its controversial ‘Introducer’ program, and pledged to protect all regional and rural branches until at least 2021.

ABA CEO Anna Bligh said customers can expect to see a change to banking products and services immediately.

“We’ve completely rewritten the rule book for Australia’s banks.

The Banking Code of Practice has strong protections for customers, serious consequences for breaches and strong independent enforcement,” Bligh said.

The code will be enforced by both the independent Banking Code Compliance Committee and the Australian Financial Complaints Authority.

“Whether it’s through your credit card, home loan, small business loan or just day-to-day banking, Australian customers will see tangible benefits from this new code,” Bligh added.

NEWS

A G G R E G AT O R S SUBAGGREGATOR CHOICE ADDS P2P TEAMS UP WITH TAXTO GROUP LENDER PANEL lender RateSetter will soon benefit from access to an additional 1,600 brokers nationwide, following its partnership with Choice Aggregation. “We believe the future for broking includes managing the broader finance needs of customers.

This includes deepening existing relationships and helping to attract a broader range of new customers,” said Choice CEO Stephen Moore.

P2P

RATE CUT BENEFITS LIKELY TO BE MUTED

AUSSIE EYES ASSET FINANCE GROWTH Brokerage predicting “significant rise” in demand for asset finance over the next 12 months foresees a significant rise in demand for asset finance in the coming financial year, predicting that its loan volumes in the sector will double.

The brokerage first stepped into the asset finance space in 2016, launching Aussie Asset Finance with an initial panel of four lenders: ANZ, Commonwealth Bank, Macquarie Bank and Westpac. Since then, Aussie has facilitated more than 1,000 loans and expects to see an increase in demand from individual, selfemployed and SME borrowers moving forward.

“Many of those taking up asset finance with Aussie are home loan customers who have used and AUSSIE HOME LOANS

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trust our model to provide them with competitive financing options for their businesses, investments and residential needs,” said Aussie chief customer officer David Smith.

“Aussie stores are now investing in dedicated asset finance brokers, who are benefitting from the increased confidence that was generated in the business sector following the recent federal election result and cash rate cut,” Smith added, referring to PM Scott Morrison’s campaign platform of extending instant asset write-offs to $30,000 to help small businesses with cash flow and improve access to financing.

“We are finding strong demand

from motor vehicle customers, who are enjoying the fact that we offer a range of lenders and options instead of being tied to just one financier, as often happens with car dealers,” Smith said.

While the end of the financial year might have galvanised borrowers into action, the measures put in place to incentivise asset financing will continue throughout July and beyond.

Olly Guilleaume, director of Limba Loans, explained, “There’s a lot of noise about obtaining your tax break before the end of financial year, which leaves people thinking that most of those tax breaks don’t exist post-EOFY, when the majority of those that have been marketed will still be available. It just means that the tax benefit is potentially recovered further down the track, but the assets are still there, they’re still relatively the same price, and they still get the same benefits.”

reductions might boost consumer confidence and economic stability, but according to Finsure MD John Kolenda, the lending landscape remains “highly restrictive”; he noted that “the average consumer qualifies to borrow 20% less now than 12 months ago, and the criteria varies drastically across lenders”. However, in a statement released after the July rate cut, RBA governor Philip Lowe commented that “rates are at record lows, and there is strong competition for borrowers of high credit quality”.

RATE

“Performance of the property market in the next 12 to 24 months is likely to be positive for investors, given we are at a low point in values” Zac Peteh Director, Mint Equity

NEWS

MARKET BROKERS BOOST MARKET PERFORMANCE mortgage broking industry contributed $2.9bn to the Australian economy in 2016–2017, according to a report published by Deloitte Access Economics – and that figure has likely climbed yet higher as the third-party channel’s market share continued to inch towards 60% last month. The broking industry supported the employment of more than 27,100 full-time workers over the same period. Deloitte’s report concluded that “mortgage brokers make mortgage markets work better”.

THE

CUSTOMER-OWNED BANKS GROW BY 8% are increasingly borrowing from customer-owned institutions: data published by APRA revealed that the sector’s housing loans increased by 8%, compared to just 2.6% across the big four lenders.

Deposits with customer-owned banks also increased 6.5% year-on-year. Australia’s customerowned banks now hold more than $119bn in assets, up 1.6% from the previous quarter. Conversely, the majors’ total assets declined by 0.4% in the March quarter.

HOMEOWNERS

“The MFAA expects [brokers’] market share will increase to between 70% and 75% in the next five years, reflecting improved trust and confidence in the channel” Mike Felton CEO, MFAA

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FIXED RATE LENDING TRENDS REVERSE Fixed rate demand rebounded in May, particularly in Queensland, where it comprised 26% of all home loans a notable decrease in demand for fixed rate loans, new data from Mortgage Choice indicates that borrowers are again ready to lock in rates, likely spurred by the election and June cash rate cut.

Mortgage Choice found that demand for fixed rate home loans increased over the month of May, accounting for 22.47% of all new loans, compared to 21.81% over the last 12 months.

“When you consider what has been happening in the market, the increase in demand is hardly surprising. Lenders on our panel have been aggressively discounting fixed rate home AFTER

loan products, which has been effective in enticing more borrowers to commit to a fixed term,” said Mortgage Choice CEO Susan Mitchell.

Fixed rate demand was highest in Queensland, where it comprised 26% of all home loans, and lowest in Victoria, where just 15% of borrowers opted for a fixed rate.

According to Mitchell, certain borrowers are ideally suited to benefit from locking in a fixed mortgage rate.

“This is good news for borrowers seeking repayment certainty – in particular, for first home buyers who are looking to take advantage of government schemes and

record-low interest rates to enter the property market for the first time,” she said.

However, Mitchell encouraged brokers and borrowers to work together to ensure that the consumer has the loan product that best meets their needs.

“While news of low interest rates is certainly going to pique borrower interest, it’s equally important that borrowers remember the interest rate isn’t the only component of a home loan, and they should look for the right loan product and features for their short- and long-term needs,” she said.

“I also encourage existing borrowers to speak to their mortgage broker to get their home loan reviewed. After all, the number of rate cuts we have seen in the last few weeks alone could mean there are more suitable and more affordable loan products on the market than the one they are currently in.”

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NEWS

TECHNOLOGY SUBAGGREGATOR TEAMS UP VIRTUAL ONE-STOP SHOP WITH TAX GROUP FOR AUTO LOANS response to a 96% increase in business over the past year, Platform Finance has launched Fleet Avenue, a virtual one-stop shop for auto loans. The service researches, locates and secures discounted pricing for new vehicles across 1,300 participating dealers. “We have noticed a rise in the number of people using brokers to arrange [this] finance; that’s why we established Fleet Avenue,” said director of aggregation Damian Mantini. KPMG’s Motor Industry Services report confirms that more cars are financed by brokers and aggregators than dealerships.

IN

MATES’ RATES LENDING APP EYES EXPANSION “Relationship-based lending” app Credi aims to facilitate unofficial loans between friends and family bank of mum and dad is getting a boost following the rollout of a new crowdfunding campaign by “relationship-based lending” app Credi. Through Equitise, Credi aims to raise $1m to fund marketing and international expansion.

“We have Credi users eagerly awaiting to invest in Credi. This endorsement confirms that our platform is a much-needed disruptor in the fintech space,” said founder Tim Dean, who also sits on the board of FinTech Australia.

Credi was launched to formalise interest rates and repayment schedules on loans between family and friends, a group that Credi THE

says lent more than $65bn in 2017, making it “the largest lending institution in Australia after the big four banks”.

The platform targets the common issues and friction often experienced with the informal lending of money and has positioned itself as a way for borrowers to circumvent the high interest rates of more traditional lenders.

Credi’s app is currently used by 5,200 people from 26 countries.

Over the past two years, it has facilitated more than $100m in transactions, with an average loan size of $80,000.

“Credi makes it easy to receive financial support from friends and

family as an alternative to traditional and more expensive forms of credit, such as bank loans, that often carry potentially crippling fees,” Dean said.

“Australians are already lending millions of dollars to friends and family on Credi at an average interest rate of 3%, compared to the double-digit rates charged by many of the majors.”

Credi will issue ordinary shares valued at 10.5¢ each, with a minimum investment of $210.

The offer will be open for just under a month, and its minimum target is $200,000.

“As Credi is a platform formalising loans for everyday Australians, it makes complete sense the company would turn to everyday investors or ‘the crowd’ to raise capital,” said Equitise co-founder Chris Gilbert.

“Credi has identified a massive gap in the market that the banks and other financial institutions have failed to act swiftly on.”

FINTECH FOR BIG BUSINESS LAUNCHES disruptor Ebury has expanded into trade credit against unsecured payables and receivables with line sizes of up to $5m per client. Focusing on SMEs that trade internationally, Ebury uses an online platform that provides cost transparency and only charges interest for credit used. Ebury’s repayable finance line offers a 150-day repayment period, while the receivable finance product has a 120-day repayment period. “Our clients require larger credit lines and have more complex needs.

Most retail business lenders can’t or won’t meet these needs,” said Ebury MD Rick Roache.

FINTECH

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With you at

Every Life Stage With our broad product range, finance brokers have the opportunity to cater for their clients’ financial needs at every life stage.

CONSTRUCTION

Building Your Future

LITE DOC®

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SMSF

COMMERCIAL

Building a Business FULL DOC

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Setting Up Home

To partner with a team that is looking out for you, and help you grow your business call us today 13 80 10 or visit www.latrobefinancial.com

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To view our ratings and awards please visit our Awards and Ratings page on our website. This publication is for accredited broker use only and is not for distribution to consumers. Copyright 2019 La Trobe Financial Services Pty Ltd ACN 006 479 527. All rights reserved. No portion of this may be reproduced, copied, or in any way reused without written permission from La Trobe Financial.

NEWS

R E G U L AT O R S

AFCA TO MANAGE RETROACTIVE COMPLAINTS consumers and small businesses harmed by financial misconduct can retroactively lodge complaints with AFCA, dating back to 1 January 2008. According to AFCA, legacy complaints will be managed through its normal process; however, the organisation admits addressing them won’t be easy. “We expect that these matters are likely to be highly complex and further complicated by the number of years that have passed since the issue occurred,” said chief ombudsman and CEO David Locke.

AUSTRALIAN

ASIC SETS OUT NEW-YEAR AGENDA James Shipton reiterated the regulator’s approach to enforcement and shared the body’s key strategic priorities for the new financial year a keynote address last month at an event hosted by the Committee for Economic Development of Australia, ASIC chair James Shipton outlined how the regulator will tackle responsible lending, enforcement and cooperative regulation in the new financial year. Shipton also detailed ASIC’s seven principal strategic priorities for the coming 12 months to support that vision (see the box below).

Shipton’s address followed ASIC’s announcement that it plans to update its responsible lending guidelines for the first time in nearly 10 years.

“Through any economic cycle, responsible provision of credit is critical to the long-term

sustainability of the economy, as well as being a cornerstone consumer protection. This is why … we are consulting to update our expectations on them,” he said.

As part of the process, select banks will undergo public hearings to detail their lending practices and help “robustly test” the industry submissions that arise during the period of consultation.

Shipton also confirmed that ASIC is committed to doing all it can to ensure that vulnerable consumers are treated fairly and financial services providers are kept accountable.

He didn’t mince words when it came to enforcement, reiterating that ASIC plans to “use the full extent of its new penalties and powers through the discipline of

DURING

APRA ISSUES NEW RATE BUFFER RULES has confirmed it no longer expects lenders to assess home loan applications using a minimum interest rate of at least 7%. Following the receipt of 26 submissions on the topic, the regulator issued a letter on 5 July stating that ADIs can now review and set their own minimum interest rate floor and use a revised interest rate buffer of at least 2.5% over the loan’s interest rate. APRA originally introduced the serviceability guidance in December 2014.

APRA

‘why not litigate’”.

While Shipton noted that some in the industry have misread the recent doubling down on enforcement, ASIC’s “core focus [remains] on deterrence, public denunciation and punishment of wrongdoing by way of litigation.”

The introduction of new regulatory tools is part of the ramp-up; Shipton named the recently proposed product intervention powers as an example. The measure, open for consultation from the last week of June into August, allows ASIC to take “proactive action” and intervene when financial or credit products are likely to result in “significant consumer detriment”.

Finally, on the topic of interregulator cooperation, Shipton said ASIC and APRA are striving to “formalise and enhance” their information-sharing arrangement.

Additionally, ASIC has been working more closely with AFCA, AUSTRAC, the New Zealand Financial Markets Authority and other regulators both domestically and abroad.

ASIC’S SEVEN STRATEGIC PRIORITIES Source: ASIC

Addressing royal commission recommendations and referrals

1 Effective and efficient enforcement action

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2

Addressing harms in insurance

3 Establishing ASIC as conduct regulator for superannuation

4

Protecting vulnerable consumers

5 Improving governance and accountability

6

7 Addressing poor financial advice outcomes

FE AT URES

SPECIAL REPORT

PAYING IT FORWARD

Inspired by the support they’ve received throughout their careers, Matthew Johnson and Jean-Pierre Gortan of Simplicity Loans & Advisory have devised a new training and referral program that they hope will elevate the standard of commercial broking

SIMPLICITY LOANS & ADVISORY AT A GLANCE

2017

Year the company opened its doors

3

Offices in operation

9

Number of team members

2

Hours per workshop (starting 14 August in Sydney)

2

CPD points from the MFAA for each workshop attended

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Simplicity Loans & Advisory opened its doors in July 2017, managing directors Matthew Johnson and Jean-Pierre Gortan were on a mission to pursue their passion for commercial finance.

With more than 15 years of experience each, they were well versed in broking but knew that to achieve their business objectives, they would need to learn much more.

Whether for a sounding board to workshop a difficult deal or advice on which lenders are likely to fund a project, they turned to their peers – and the support they received has been the foundation of their success since.

As their industry reputations grew, they in turn became the ones advising others how to navigate difficult deals, often going along to meetings to help guide lessexperienced commercial brokers.

Now Gortan and Johnson have devised a formal PD program intended to elevate the standard of commercial broking as a whole.

“In our experience, it’s a very collegiate industry. We have certainly been beneficiaries of that, and, without being too altruistic about it, this is an opportunity for us to give something back,” Johnson says.

With the support of the MFAA, which has accredited each of their two-hour courses with two CPD points, Gortan and Johnson will host a series of free workshops, designed to arm established resi brokers with the basic knowledge of how to write a commercial deal and the questions to ask customers in the process. The agenda is based on feedback from brokers at various points in their careers, as well as WHEN

the questions Johnson and Gortan answer every day.

“If we can help elevate resi brokers in how they highlight a commercial deal, it will help the industry develop as a whole and grow the market share of brokers in the commercial space,” Gortan says.

“The more the industry is able to demonstrate to customers that they are the right people to talk to instead

For brokers to be able to diversify their business in the next 12 to 18 months, they need to start making changes now. Commercial customers want help from someone who knows what they’re doing – a service for a reasonable price.”

In tandem, another pattern was emerging in Gortan and Johnson’s observations – many brokers, when approached by a potential commercial client, were passing on the work because they didn’t want to risk eroding their brand through substandard service.

“Those conversations were the genesis – what if we could help build a system that can help these brokers help the client and help their business?” Johnson says.

As such, the workshop series is supported by a referral portal,

“If we can help elevate resi brokers in how they highlight a commercial deal, it will help the industry develop as a whole” Jean-Pierre Gortan, managing director of sales, Simplicity Loans & Advisory of going to a bank, it’s the right pull for everyone.”

Development with a difference Industry associations, aggregators and lenders were quick off the mark when resi broker remuneration came under threat earlier this year, urging those who still have all their eggs in one basket to look beyond their primary sources of income. However, Simplicity’s own diversification into broker PD pre-dates Hayne’s recommendations.

“Most brokers are making reactive business decisions based on things that are happening in the market today. But they are going to miss the boat unless they plan for the future,” Gortan says.

“Irrespective of whether trail is safe, making yourself an expert in an area is not an overnight thing.

Marketplace.finance. The site acts as the hub of Simplicity’s group training and referral network, allowing brokers to talk about their transactions and source further advice and support from a network of peers who are at various points in their own careers.

Crucially, Marketplace allows primarily residential brokers to interact with the team and complete commercial deals. The portal formalises the critical duties and roles of the individual broker and how the client is dealt with

by Simplicity after being referred, including how and when each party will engage, the broker’s retention of the client, what happens with any further transactions, and the amount of commission to be split, including trail – which itself happens at the aggregator level.

In partnership with

Jean-Pierre Gortan, MD of sales (left), and Matthew Johnson, MD of operations (right), Simplicity Loans & Advisory

After being accredited, the broker is given access to the Marketplace Advice Group Forum, which provides an avenue for brokers trying to personally write a deal to tap into a collective knowledge pool.

“Everything must be transparent and formalised to give people as much comfort as possible. We aren’t here to take their deals or clients, but to help them get deals done and build their business,” Johnson says.

Gortan adds, “The idea is to help brokers learn how to fish, rather than just feeding them.”

The rise of the non-bank and other trends While commercial diversification is defining the broker industry currently, there are a number of market forces influencing

commercial broking.

First is the rise of the non-bank. A growing body of anecdotal evidence suggests that non-banks today are funding much more than mortgages and personal loans.

Established in the commercial arena for decades, La Trobe Financial is just one of the lenders that has seen an uptick in business.

Currently averaging $400m a month in new loans across residential

“We aren’t here to take [brokers’] deals or clients, but to help them get deals done and build their business” Matthew Johnson, managing director of operations, Simplicity Loans & Advisory “Historically, we would write 90% of our business with the major banks, and over the last one to two years, it has slowly been moving to probably 70% non-bank, 30% bank,” Johnson says.

and commercial, the non-bank announced the appointment of Ron Dunbar as executive GM and head of commercial in February.

Meanwhile, Pepper Money stepped into commercial finance

earlier this year, appointing Malcolm Withers to head its new business division.

According to Gortan, the presence of these lenders in the market has done more than simply keep the commercial lending sector afloat.

“If the various non-banks didn’t come in, the market would likely have stalled. They have definitely taken up the slack [from the banks], and overall, it has helped the economy have a softer landing in the current property cycle,” Gortan says.

While the bulk of the demand for commercial finance still comes from business borrowers, commercial property investors are also making a mark, spurred by the current low interest rate environment.

“In commercial property, historically you don’t get the capital growth you do in other asset classes, but you do get strong yields. There has definitely been a demand for commercial property as an investment class more so than what you probably saw, say, five years ago and earlier,” Johnson says.

However, while the sector is showing strong performance, changes could be on the horizon for commercial brokers in the next five to 10 years. Gortan predicts a tech-induced contraction of the sector, which some will be more susceptible to than others. However, this can also provide opportunity, as Johnson explains.

“We are taking what has historically been a very manual process between brokers, clients and lenders, and, through digital information transfer, we aim to create a smoother, easier way of doing business,” he says.

Over the course of the next several years, much will change with regard to technology, client demand and rates. The real differentiator in that process will be how commercial brokers promote their value in protecting the flow of capital to businesses, developers and construction projects – and ultimately keeping the economy moving. AB www.brokernews.com.au

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FE AT URES

NE WS ANALYSIS

ROMANCING THE LOAN WRITERS Last year, while executives from the major banks answered to the royal commission, their non-bank competitors quietly issued 60% of all new mortgages. Now, with their sights set on regaining lost ground, the majors are back in business with new tools, touchpoints and tech – but is it enough to win back the third-party channel?

major banks hold around 80% of Australia’s mortgage market, and brokers now drive 59.7% of residential loans across all lenders. So, when a royal commission was called to investigate misconduct in the industry, few expected the relationship between the two to sour as quickly as it did.

However, by mid-2018, the revelations from AMP and the departure of senior executives from across finance paled in comparison to the standoff occurring between banks and brokers.

Then borrowers started to vote with their feet, too. Whether correlation or coincidence, S&P found that non-bank lenders issued 60% of all new home loans in 2018.

Although knee-jerk changes to lending policies across the majors handed a free kick to the nonbanks, that number tells a story.

Now, five months and a federal election since the release of the commission’s final report, the majors are moving on – and asking brokers to move with them.

“The commission was an incredibly important examination, far more important – and necessary – than we originally thought. We have learnt, and are continuing to learn, a lot about ourselves, the industry, community expectations and where we must do better to deliver fair and responsible banking,” says Simone Tilley, head of national broker distribution for ANZ. ANZ has been part of the broker THE

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industry for almost 30 years, and in the last financial year, its mortgage portfolio reached $272bn, 55% of which was broker-originated. During commission hearings, ANZ chief executive Shayne Elliott warned that a fee-based remuneration structure would turn broking into a “privilege for the wealthy”.

“Brokers play a vital role in helping our customers navigate what can be a stressful and complex process and are integral to promoting competition and choice within the industry,” Tilley says.

Her comments are echoed by Adam Croucher, who was promoted to GM for third-party banking at CBA in January of this year.

“Building a strong and sustainable

third-party channel has always been a key pillar of CBA’s home-buying strategy, and that remains unchanged,” Croucher says.

“We remain completely committed to the mortgage broking channel and continue to invest heavily to support brokers.

We note the recent discussions about broker remuneration structures and will continue to engage with all of our stakeholders in these discussions.”

CBA’s mortgage portfolio reached $381bn in value for the last financial year, 40% of which was originated through brokers.

New regulation While remuneration may be safe

for now, other changes are being implemented to regulate the broker channel and the wider lending space. For example, the best interest duty proposed by Hayne is

FAST FACTS: MAJOR BANKS AND BROKERS

80%

59.7%

THE FOUR MAJORS’ SHARE OF ALL MORTGAGES IN AUSTRALIA

MOST RECENT BROKER MARKET SHARE

$381bn $894bn VALUE OF ALL OWNEROCCUPIER MORTGAGES AT THE MAJORS IN MARCH 2019

VALUE OF MORTGAGES AT CBA IN THE LAST FINANCIAL YEAR

$272bn VALUE OF ANZ’S MORTGAGES IN THE LAST FINANCIAL YEAR

a measure that has inspired both positivity and caution across the industry. While some employ a cavalier attitude, welcoming the chance to prove the difference brokers can make, others remain cautious of how such a duty will be defined and imposed.

As participants of the Combined Industry Forum (CIF), both CBA and ANZ have been across these changes for some time. Tilley serves as the chair of CIF’s governance, data and reporting stream, and she says it’s important any changes are phased and based on consultation from multiple groups.

“We support a new broker best interest duty. However, any changes need to take place over time and involve careful consultation with all affected groups,” she says.

“We do need to help the industry evolve to ensure its customers are served in a transparent, fair and responsible manner. In addition, any changes need to be decided by

collaboration between industry and governments to ensure the outcomes are right for customers, brokers and the wider community.”

For CBA, the main area of regulatory focus at this point is

channel, it is important for us to know that the brokers we deal with understand their regulatory obligations, as well as CBA’s policies, systems and processes,” Croucher says.

“The commission was an incredibly important examination, far more important – and necessary – than we originally thought” Simone Tilley, head of national broker distribution, ANZ living expenses. To support brokers, the bank has introduced a monthly living expenses calculation template, available through its website. The template is an editable PDF, which can be downloaded and emailed or printed.

“As an advocate of the broker

“It is for this reason that we continue to work closely with our brokers to understand what tools they may need in order to deliver good customer outcomes.”

Focused on the future All four major banks face significant

remediation bills and ongoing work to restructure their businesses.

However, their loan books continue to grow, even if their market share has stuttered at times.

APRA’s banking statistics for March 2019 – the first full-month figures following the commission’s final report – showed that the majors loaned nearly $894bn in owneroccupier mortgages, up from the February figure of just over $890bn.

CBA posted the highest value of owner-occupier loans, followed by Westpac, ANZ and NAB. For investor mortgages, the majors loaned $469bn over March, compared to the previous month’s $470bn. In this category, Westpac posted the highest total value, followed by CBA, NAB and ANZ. However, just as the non-banks saw gains in 2018, the non-majors have also started to encroach on the big four’s market share. In March of this year, the owner-occupier loan book at the top 10 non-majors totalled $183bn, about $1.5bn more than the February 2019 figures.

Yet overall lending remains down, and brokers report that they’re struggling to meet client expectations amidst ongoing product and policy changes. Both ANZ and CBA have made a series of commitments to reconnect with brokers through both technology and processes, and both banks are looking to innovate their broker touchpoints.

CBA has recruited 60 new staff to its assessment team, allowing the www.brokernews.com.au

17

FE AT URES

Adam Croucher, GM for third-party banking, CBA

bank to provide what Croucher describes as “an enhanced, consistent service offering for our brokers and their customers”.

The bank has also invested in its Broker Support Hub, which provides brokers with “expert advice and answers” over the phone, and in March, CBA launched the CommBank Loan Tracking software platform. Based on broker feedback, the platform provides brokers with real-time updates.

“We recognise our mortgage broking partners are a key channel for customers who are looking to purchase a home. We have supported the broker channel for more than 20 years and will continue to support the channel through ongoing investment,” Croucher says.

Meanwhile, at ANZ, the focus is on data-led, timely and relevant education for both brokers and aggregators, based on feedback from BDMs. “In 2018, we trialled partnered podcasts with aggregators and, not surprisingly, found that we got the best response from broker-led content,” Tilley says.

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“We will continue to look for opportunities to partner with the broader industry in education over the course of 2019 and beyond.”

Although NAB declined to answer direct questions, the bank’s most recent financial results directly credit brokers for boosting business

Simone Tilley, head of national broker distribution, ANZ

brokers to apply on behalf of their small business clients for unsecured business finance of up to $100,000.

The bottom line The royal commission’s recommendations threatened the existence of thousands of broker

“We have supported the broker channel for more than 20 years and will continue to support the channel through ongoing investment” Adam Croucher, GM for third-party banking, CBA in the last reporting period.

Compared to September 2018, the bank’s mortgage lending increased $6.8bn, which NAB attributed to growth in the broker channel and strong results in New Zealand.

Meanwhile, NAB’s business lending increased 5.3% year-onyear, following the launch of NAB QuickBiz for Broker in May 2018.

The digital platform enables

businesses, but now the wider impact threatens the foundations of the Australian dream of property ownership.

Lending policy changes have had a far-reaching economic impact, and property values remain dampened, despite the efforts of APRA and several false starts in terms of recovery.

Pre-election auction activity came

to a near halt; clearance rates were down more than 10% year-on-year at the start of May. In the March quarter, home-buying activity reached a 17-year low in Sydney, and arrears are on the rise elsewhere in the country, particularly in WA and Queensland.

APRA figures released in late June show that housing loans with customer-owned banks increased by 8% over the last 12 months, while the major banks grew by just 2.6%.

However, there is hope on the horizon for the market. The RBA has reduced the cash rate twice since June, and APRA has finalised its serviceability changes, meaning that all ADIs can now review and set their own minimum interest rate floor and use a revised interest rate buffer of at least 2.5% over the loan’s interest rate.

While it’s clear banks and brokers cannot thrive without each other, the most difficult lesson from this experience is that Australia cannot thrive without credit. If the last 15 months have demonstrated anything, it’s the value in a certain African proverb: “When elephants fight, the grass is hit the hardest.” AB

$ $

$

$

$

$

$

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FE AT URES

IN THE NE WS

PLUGGING THE GAPS Australia’s relationship with credit has changed, and it’s having huge implications on the tools brokers keep to hand. Alf Vasta, the newly appointed head of broker for MoneyPlace, explains how prospective mortgage applicants can leverage the trend

debts, for example, is much more likely to get the home loan of their choice if they consolidate their outgoings into one loan repayment.

Once in the home, renovations can also be funded at a lower rate through a PL. Launched five years ago and acquired by Liberty Group in February 2018, MoneyPlace offers unsecured loans of up to $45,000 over three, five or seven years.

Comparison rates start from 7.65%, and funds can clear within 48 hours. For the 10 minutes spent completing an online application for their client, a broker can earn up to $975 per deal.

People and processes Vasta’s strategic appointment in May of this year will allow him to build on his previous role as an award-winning BDM with Liberty

last couple of years. We have seen the landscape change, and I believe personal loans will really become mainstream for the broker’s armoury in the next 12 to 18 months,” he says.

In adding value for brokers and borrowers, the MoneyPlace philosophy is three-fold: there’s no footprint on the client’s file, loans are priced according to individual risk, and technology is at the forefront, along with the opportunity for the broker to get the client a better deal.

“By not offering PLs, you’re putting your existing client base at risk, and if somebody else offers that, they will be providing a holistic financial solution to that client, and then the mortgage is gone, too. So yes, earning an income is important, but you also need to protect your client

“I believe personal loans will really become mainstream for the broker’s armoury in the next 12 to 18 months” Alf Vasta, head of broker, MoneyPlace

Alf Vasta, head of broker, MoneyPlace

likely that 2019 will go down as the year Australia broke its credit card habit.

However, it’s also likely to go down as the year when borrowers learned how to leverage the personal loan.

While credit card spending declined 3.9% in the year to April, personal lending experienced a 4.3% surge in April alone.

A number of bank and non-bank lenders have positioned to capitalise on the increased demand for this often-overlooked financial tool, among them MoneyPlace, which is experiencing annualised growth of 250%. With a new head IT’S

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of broker now on board, that figure is set to grow.

“When you think of a personal loan, you think about a new car or a holiday, but actually, we [fill] gaps in a broker’s business,” says Alf Vasta, head of broker for MoneyPlace.

“We have solutions for pre-, mid- and post-mortgage where a personal loan can help a client. If you know a client is going to be purchasing a property over the next six to 12 months, debt consolidation is a massive trend.”

Vasta explains that a prospective mortgage applicant with multiple

to create a team that will continue to drive MoneyPlace’s growth.

“My remit is to build a team, but before we build a team, we need to make sure that we have the processing done right,” he says.

While Vasta describes his move from BDM to broker head as a “no-brainer”, his transition was inspired by wider trends in the market, from the PL application process at a bank branch to the need for brokers to deliver more solutions to different areas of a client’s financial life.

“For me, it’s what has been happening in the market over the

book,” Vasta says.

However, he believes the big opportunity lies in education – on both the MoneyPlace product and the wider PL market, especially the ways a mortgage broker can leverage personal loans to write more mortgages.

“I think the key thing with any broker is to look at moving from being transactional to providing that holistic, full-service financial advice,” Vasta says.

“To do that, personal loans need to be in the toolkit, and we provide that gap finance to tie in with their mortgage.” 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:

Melanie.Mingas@keymedia.com

A BIG DEAL

Even when armed with the full facts, broking a mortgage is no easy task. But when clients have financial skeletons in their closet and an impossible deadline to meet, the pressures stack up. Thuy Hook, mortgage broker at EZ Financing, explains Location: Redcliffe, Qld

THE FACTS

Loan size and term $490,000 for 30 years

Client and goal Early 40s couple looking to buy their dream home

Lender Liberty

Aggregator Choice

I started by contacting BDMs to workshop the deal, making sure they were aware just how quickly we needed the funds to clear. They didn’t promise anything but said if I got the deal 100% correct upfront, then I stood a better chance. The pressure was officially on.

Within 24 hours, I was able to present to the clients all the options available.

Because of the nature of their situation, the lenders I presented were all nonbanks, and I clearly provided the rates, fees and repayments each offered.

Naturally, the clients went for the lowest rates and fees, so I spent all that Monday writing the submission, which was eventually lodged at 11pm due to their complicated business structure. Thanks to the BDM, by Tuesday afternoon we had a conditional, subject to valuation – but just as I was about to breathe a sigh of relief, the valuation came back … $50,000 short.

The client wanted to proceed, as she felt the valuer was being harsh, and the lender was excellent, approving the loan and drawing up the documents by Thursday.

I rushed around getting the documents signed and witnessed, and returned them directly to the settlement agent that afternoon. The loan settled at 2pm on Friday, and the clients were delighted.

THE TAKEAWAY

THE SCENARIO

As all brokers know, each case comes with its own challenges, but it’s the curveballs that make life really colourful.

Last year, I was approached by a couple in their early 40s who ran a door and window manufacturing business. They had bought a property at auction in Redcliffe, Queensland, for $700,000.

It was their dream home, and they were keen to move in at the earliest opportunity.

They had $210,000 in cash from the sale of their previous home, which equated to 30% of the price of the new property, and they planned to cover the rest with a new mortgage. To secure this finance, they initially turned to their bank and were delighted to hear that the loan wouldn’t be a problem. But several delays during the application process led them to miss their finance deadline, and so with an extension out of the question, they made the decision to go unconditional on their contract of sale.

As they got closer to settlement, things started to get tense. With only five days left, their friend, for whom I had secured a loan previously, referred them to me.

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THE SOLUTION

I started to work on their case, but there were some skeletons in the closet. First, the delays with their bank weren’t as straightforward as I – or the husband – had been led to believe. Their application was actually declined because of undisclosed debt and late payments on credit cards. In fact, the wife had run up

As difficult, stressful and seemingly impossible as this deal was at the time, I have received countless referrals from these clients, and today they and many of their friends and staff members are better off.

There were three key wins for the clients, too: I recently refinanced their loan to a mainstream bank at a lower rate, a new valuation came back at $750,000, and they now have no credit card debt.

All of these things have strengthened their financial position, but they also

“Their application was actually declined because of undisclosed debt and late payments on credit cards”

Thuy Hook Mortgage broker, EZ Financing

significant debts across 10 cards, which were all maxed out and accruing late payment fees.

I wasn’t the only one feeling the stress at this point –the couple’s relationship was also under strain, and the husband was keen to get this deal through so they wouldn’t have to pay default interest for failing to settle on time. I knew there were lenders out there who would take this deal, and I wasn’t prepared to give up.

provided a learning curve for me. As I became aware of the size of the problem, I was careful not to over-promise. I simply made a plan as to how to approach each loan and identified the potential pitfalls, being careful to warn the clients of them, too. This way, there are no nasty surprises and the customer has more trust in you.

For any other broker who is facing a client or deal like this, believe in yourself – and of course, if needed, ask for help. AB

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23

PEOPLE

CAUGHT ON CAMERA Photography by Simon Kerslake

Bernard Fehon, founder of the CEO Sleepout

the sun set on Sydney on 20 June, 373 CEOs and senior executives prepared to bed down for the night at White Bay Cruise Terminal in Balmain for the Vinnies CEO Sleepout. Among them were Alex Wade, the CEO of AMP Wealth; Di Challenor, Westpac’s GM of global transaction services; Nathan Walsh, co-founder and CEO of Athena Home Loans; Jean-Pierre Gortan, MD of Simplicity Loans & Advisory; Dave Hyman, co-founder and MD of Lendi; and William Xin, founder and director of Xin Mortgage.

As temperatures plunged as low as 4˚C, the executives heard about the causes of homelessness, the extent of the problem and the many ways the funds raised from the event will help.

“Before tonight, we did a tour of Matthew Talbot Hostel with a group of employees, which was a big eye-opener for us all, and that then encouraged other people to donate to the sleepout,” says AMP Wealth’s Alex Wade, who was taking part for the first time.

Wade adds, “I lived in Singapore for a long time, and you don’t see homelessness at all there, for whatever reason. Then when you come back here, you see a lot, especially near our office in Circular Quay. The scary thing is, it isn’t even the same people every day.”

Each participant had their own reason for taking part, from personal experience to personal challenge. Two years ago, Westpac’s Di Challenor returned to Australia from a stint overseas. Already heavily involved in OzHarvest, she wanted to find another cause to support that she was equally passionate about.

“I’ve always donated books and clothes to Vinnies, so when I heard about this and somebody reached out and asked if I wanted to do it, I thought maybe this is what I’m supposed to be involved in,” Challenor says.

“The support I’ve had in fundraising is amazing – I’m quite

Phil White, QBE Insurance

AS

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William Xin of Xin Mortgage

Westpac’s GM of global transaction services, Di Challenor

Alex Wade, CEO of AMP Wealth

Jean Pierre Gortan, Simplicity Loans & Advisory

overwhelmed. Next year I’m going to set a higher goal and go more aggressive.”

Lendi co-founder and MD Dave Hyman decided to take part after a walk through Sydney with his nine-year-old daughter.

“She was asking about the homeless people we saw, and I was explaining to her the different ways people land in that situation. Then, within a week, I had seen an advert online about the sleepout, and I thought it’s just time to give it a crack,” he says.

His fundraising was a companywide effort, involving trivia nights, a bake sale and “a whole bunch of

other initiatives”.

“I was really humbled by the support we got from employees and others. A lot of people have been very generous, which makes a big difference.”

Close to home Homelessness is increasing in Australia’s major cities – 68% of all rough sleepers are now located in the capitals, up from 48% in 2001. But that doesn’t capture the extent of the problem. Rough sleepers accounted for a mere 7% of the homeless population in 2016, according to the Australian Housing

and Urban Research Institute.

“We work in an industry that is all about helping people to get into a home, but sadly not all Australians have that opportunity,” says Athena Home Loans co-founder and CEO Nathan Walsh.

“This is about us getting a taste of what thousands go through every night, and also to support the wonderful work that Vinnies is doing. I’m really delighted to be a part of that.”

Jean-Pierre Gortan of Simplicity Loans & Advisory was inspired to take part by personal experience.

“I have friends who have been

Genworth’s Prudence Milne, Andrew Cormack, Kate Svoboda, Michael Bencsik, Erica Pickford and Bradley Dean

Nathan Walsh, co-founder and CEO of Athena Home Loans

Dave Hyman, co-founder and MD of Lendi

QBE’s Vivek Bhatia, Jonathan Groves, Bettina Pidcock, Jon Fox, Chris Killourhy and Phil White

homeless, so whatever I can do to shed more light on the topic is a great thing. Donating money here and there is good, but donating your time is much more valuable because you highlight the issues to your network,” he says.

Although this was Gortan’s first sleepout, he’s already planning to return next year.

“I‘m very proud of what we have been able to achieve, and my wife and kids are proud, too. I genuinely don’t think it’s that big a sacrifice to be out for one night, but to give back is important,” he says.

Team effort The event wasn’t just made up of solo participants; Genworth, QBE Insurance and CBA all had teams taking part. At Genworth, June is charity month, and the firm has sent a team to the CEO Sleepout for a number of years.

“In a firm of 260 people, it was easy to get a team together. We also have offices in Melbourne and Brisbane, and we have people taking

part in those events, too,” says CFO Michael Bencsik.

“The executive teams are very enthusiastic about the sleepout, and we have been supporting the event for many years.”

Meanwhile, Phil White, chief customer officer for credit lines and CEO of QBE LMI, took part for the fourth time alongside colleague Vivek Bhatia, CEO of QBE Australia Pacific. They were joined by chief marketing officer Bettina Pidcock, who was taking part for the second year, as well as three team members sleeping out for the first time.

“I do it for a number of reasons; our business is all about helping people get into housing, and I think it is our duty and social responsibility to give back and help those who aren’t as fortunate as some of our customers,” White says.

“The support we get is amazing.

Some of our customers have supported us with donations of $1,000, our staff have contributed, and even people we don’t know have pitched in $20. It all adds up.”

The team from CBA

Making a difference By dawn on June 21, Vinnies had exceeded its $7m fundraising target through 11 sleepouts across the country. Further events were held in Geelong and Perth on 27 June.

For Sleepout founder Bernard Fehon, who received an OAM in 2018 for his work, the result was humbling.

Fehon was inspired to start the CEO Sleepout when he saw his children doing sleepouts for Vinnies through their school while he was organising fundraising dinners for CEOs, and he thought he could combine the two ideas.

“The idea was born in a little meeting room at a Vinnies facility in Merrylands in February 2006, and

then in June of that year at Stadium Australia, on the longest night of the year, about 10 CEOs took part in the first event, and we raised about $40,000,” says Fehon, who today is the CEO of Blue Mountains Economic Enterprise.

The funds are used to support Vinnies’ services and facilities, providing essential supplies and practical support to those experiencing or at risk of homelessness.

“Over the years, money has gone to other places, too. For example, funds are dedicated to supporting older single women – that’s a growing area of homelessness. We work across the full spectrum of services,” Fehon says. AB www.brokernews.com.au

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DATA

WESTERN AUSTRALIA

VIC SPOTLIGHT

Perth’s rate of decline is on hold, but recovery is tenuous Perth is gradually climbing back up to a strong position and, along with the wider state, is poised for “stability and moderate growth going forward”, according to Rocket Property Group CEO Ian Hosking-Richards. “Population growth would need to pick up to see significant price rises, which in turn depends on jobs growth, which is currently lacklustre but should pick up over time,” he says.

Recovery is tenuous at this point, and lending restrictions are playing their part in slowing momentum, but there is confidence for the future.

“It may be a slow return to form, but long-term prospects are good,” Hosking-Richards says.

Indeed, Perth’s rate of decline held steady at 0.4% over the two months to April 2019 – a good indication that the market is finding its footing.

“March and April recorded the lowest declines since June 2018, which is encouraging,” says Damian Collins, president of the Real Estate Institute of WA.

Area

Type

Median value

Quarterly growth

12-month growth

Perth

H

$480,000

-0.8%

-2.0%

WA Country

H

$330,000

-1.5%

-3.3%

Perth

U

$368,500

-1.3%

-5.0%

WA Country

U

$295,000

6.8%

1.5%

QUEENSLAND

A buyers’ market beyond the metro burbs As has been the case for a while, the best places to buy in Queensland have been outside the capital. “The Sunshine Coast and Gold Coast have had a lot more interest recently – oversupply has been sucked up; prices are starting to move in the unit market,” says Results Mentoring director Brendan Kelly.

On the rental side, vacancies have been dropping into a comfortable range, according to the Real Estate Institute of Queensland (REIQ).

Gladstone saw its average vacancy rate improve from 4.2% to 3.5% for the first time since 2012; meanwhile, Townsville’s rental market tightened from 4.3% to just 1.5%.

However, these moves could also put pressure on the market if rents begin to rise as a result of limited supply. “In Queensland, 34% rent our homes, and with continued population growth, we clearly need additional supply,” says REIQ CEO Antonia Mercorella. “The state is stepping back from public housing, which means the load falls to private investors.”

Area

Type

Median value

Quarterly growth

12-month growth

Brisbane

H

$530,000

0.9%

2.9%

QLD Country

H

$432,500

-0.7%

-2.2%

Brisbane

U

$380,000

0.0%

1.8%

QLD Country

U

$362,000

-0.8%

0.3%

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THE RIPPLE EFFECT Melbourne’s decline has hit double digits, but the suburbs and regional areas are reaping the benefits as demand remains buoyant of decline might be going down across the national market, but Melbourne is not yet done falling.

According to CoreLogic’s Home Value Index report for April 2019, the capital recorded an annual decline rate of 10%. This drop is particularly evident in the priciest parts of the city, which have seen the greatest annual rate of decline (13.7%) of all the capital cities.

Nonetheless, it’s not all bad news for Melbourne. While high prices have crippled parts of the market, affordability has given other pockets much more visibility than before.

CoreLogic’s report noted that Melbourne’s lower quartile performed better, a boost that’s due at least in part to first home buyers carving out a bigger slice of the market. Going after lower-priced properties has enabled these buyers to negotiate more successfully for loans.

The regional markets continue to be the biggest winners in this season of negativity; parts of regional Victoria were able to buck the downward trend across the country in April.

“Regional areas such as Ballarat, Greater Bendigo and Greater Geelong have been experiencing growth following Melbourne’s surge, with demand in these areas still high, which shows through with the vacancy rates of 1.13%, 0.93% and 0.84%, respectively,” says Clint Greaves, director of Real Estate Investar.

“We recorded vacancy rates across Victoria of 1.09%, with Melbourne at 2.52%.”

While the regional markets are getting their chance to bloom, Melbourne remains on track to recover its former glory quickly, with a growing population and infrastructure projects in the pipeline. Planned road and rail upgrades should create additional employment opportunities. AB RATES

BROKER PERSPECTIVE

Now that the royal commission and federal election are behind us, it's starting to look like a great time to buy We may well have experienced the property decline we had to have.

Off-the-plan apartment sales and valuations have been hit hard in certain pockets of Melbourne.

But now that the royal commission, federal election and the first RBA rate cut have all passed, we are seeing an increased appetite from our clients.

While enquiries from first home buyers are steadily increasing, we are also seeing a small pick-up from investors. Those prepared to hold onto property for the long term, and who are positioned with either pre-approvals, solid incomes or equity, may find great opportunities in good-quality properties.

The perfect storm of lower vendor expectations, cuts to interest rates and an easing in bank loan assessment criteria could possibly make this a great time to enter the property market.

As such, any further declines in property values may be limited.

Paul Antos Principal, Aegean Finance Partners

SUBURB TO WATCH: NIDDRE Median price (houses) $973,531

Median price (units) $639,394

12-month growth

3-year growth

5-year growth

Indicative gross rental yield

-15.7%

6.7%

37.0%

2.2%

12-month growth

3-year growth

5-year growth

Indicative gross rental yield

-0.3%

16.9%

27.4%

3.8%

HIGHEST-YIELD SUBURBS IN VICTORIA

OPPORTUNITIES AND KEY INFRASTRUCTURE

Suburb

Type

Median price

Quarterly growth

12-month growth

OUYEN

H

$91,500

-2%

-30%

WARRACKNABEAL

H

$115,000

3%

1%

MERBEIN

H

$180,000

0%

-2%

RED CLIFFS

H

$200,000

-5%

-12%

CORRYONG

H

$177,500

6%

5%

ST ARNAUD

H

$150,000

0%

5%

ORBOST

H

$172,500

5%

9%

SHEPPARTON

U

$184,500

7%

-12%

MORWELL

H

$170,000

3%

1%

$2bn

$50bn

pledged to build a high-speed rail line to Geelong

earmarked for Suburban Rail loop, connecting mid-suburbs

MORTLAKE

H

$165,000

0%

0%

CHURCHILL

H

$180,500

1%

3%

COBRAM

U

$177,500

-1%

-1%

AUSTRALIAN CAPITAL TERRITORY

Area

$90bn

$5bn

in major road, rail and transport projects underway

committed to rail link with Tullamarine Airport

Type

Median value

Quarterly growth

12-month growth

Canberra in a race for best property market Even in the thick of a nationwide property market downturn, Canberra is cultivating one of the best capital markets. According to CoreLogic’s Home Value Index for April 2019, Canberra was the only capital to record an increase in dwelling values between March and April, edging out even Hobart, which saw a price drop of 0.9% during the same period. This is indicative of the strong market conditions in Canberra, which also reported one of the highest annual gains in the country at 2.5%, just behind Hobart’s 3.8%. Canberra was also one of only three cities, alongside Hobart and Adelaide, to avoid a fall over the 12 months to April 2019.

While Canberra’s positivity certainly stands out, the ACT government’s decision in 2012 to eliminate stamp duty over a 20-year period has been making its impact felt as well. Stamp duty revenue in the state fell over 2018, and this decline is expected to continue as the national downturn runs its course.

Canberra

H

$654,250

0.6%

2.3%

Canberra

U

$435,000

-0.4%

0.2%

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DATA

NORTHERN TERRITORY

Darwin

H

$499,000

0.8%

-1.0%

NT Country

H

$405,000

0.0%

1.2%

Darwin

U

$300,000

-1.5%

-9.5%

NT Country

U

$315,000

-1.1%

7.3%

NEW SOUTH WALES

MEDIAN HOUSE AND UNIT PRICES

Hope remains strong for Australia’s largest city

$1,000,000

Type

Median value

Quarterly growth

12-month growth

Sydney

H

$850,000

-2.1%

-6.1%

NSW Country

H

$460,000

-0.5%

1.6%

Sydney

U

$675,000

-1.4%

-2.7%

NSW Country

U

$399,000

0.0%

0.0%

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Total auctions

79

Cleared

24

Uncleared

20

Clearance rate

54.5%

PERTH Total auctions

33

Cleared

4

Uncleared

8

Clearance rate

33.3%

Houses

$0

Sydney Melbourne Brisbane Adelaide

Perth

Hobart

$540,000

$380,000

$100,000

$495,000

$200,000

$350,000

$300,000

$469,500

$500,000 $400,000

$520,000

$600,000

$682,000

$700,000

$656,500

$800,000

$820,000

$900,000

Sydney might not be in its best condition at present, but expectations for the market are still high. “Key indicators show the state economy is not doing too badly,” says Rocket Property Group CEO Ian Hosking-Richards. “Having said that, the property market, and particularly the investment sector, appears to be lagging as investors take a wait-and-see approach. This reticence to take action is exacerbated by continued lending restrictions in the finance sector.”

As Sydney moves through the property cycle, Hosking-Richards believes the market will stay soft for the time being, especially as new supply comes in. The annual rate of decline has already hit 10% over the past year, according to CoreLogic’s Home Value Index for April 2019.

But it seems that not even the highly publicised negativity has kept NSW from being on investors’ minds – Real Estate Investar has recorded more than 100,000 investment outcome-specific searches for the state.

Area

ADELAIDE

Units

Darwin

$433,500

12-month growth

$320,000

Quarterly growth

$450,000

Median value

$385,000

Type

Auction volumes increased week-on-week with 1,487 auctions held across the combined capital cities during the week ending 16 June, returning a preliminary auction clearance rate of 66%.

Over the previous week, the final clearance rate dipped to 48.3% across 805 auctions; the lower volume of auctions was attributed to the Queen’s Birthday long weekend across most of the capitals. Over the same week last year, auction volumes were higher (2,002); however, the clearance rate was weaker at 52.4%.

Melbourne was host to 725 auctions the week of 16 June, and preliminary results returned a 67.9% clearance rate. Over the previous week, 215 auctions were held across the city, and the final clearance rate came in at 62.8%.

Meanwhile, in Sydney, 522 homes were taken to auction the week of 16 June, up from 313 the previous week. The preliminary clearance rate came in at 74.7%, up from 56.2% the previous week. That makes this potentially the most successful result Sydney has seen since at least April 2018, possibly longer. One year prior, a clearance rate of just 49.4% was recorded across 708 auctions.

$545,944

Area

WEEK ENDING 16 JUNE 2019

$670,000

While Darwin probably won’t be recording strong growth any time soon, there are subtle signs of better things to come. Even though Darwin was the only capital city other than Sydney to record a fall in rental rates over the 12 months to April 2019, it wasn’t the biggest loser in terms of annual declines, according to CoreLogic’s Home Value Index. Darwin’s rate of decline (7.1%) is, in fact, slightly lower than that of powerhouses Sydney (10.9%) and Melbourne (10.0%).

The upper quartile of Darwin’s market, in particular, showed improved performance.

According to the Real Estate Institute of the NT’s report for the March 2019 quarter, the Top End saw the first increase in its median house price in more than a year, bringing the value back to over $500,000. Suburbs like Katherine and Tennant Creek also recorded higher sales volumes alongside increased median prices.

CAPITAL CITY AUCTION CLEARANCE RATES

$319,750

Rate of decline slows amid signs of better things to come

Canberra

CAPITAL CITY HOME VALUE CHANGES Capital city

Weekly change

Monthly change

Year-to-date change

12-month change

Sydney

0.0%

0.3%

-4.3%

-10.4%

Melbourne

0.0%

0.0%

-4.3%

-9.8%

Brisbane

0.0%

-0.5%

-2.3%

-2.4%

Adelaide

-0.2%

0.0%

-0.7%

0.1%

0.0%

-1.1%

-4.6%

-8.9%

0.0%

-0.1%

-3.8%

-8.6%

Perth COMBINED FIVE CAPITALS

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

BRISBANE CANBERRA Total auctions

36

Cleared

16

Uncleared

18

Clearance rate

Total auctions

92

Cleared

17

Uncleared

29

Clearance rate

37%

47.1%

SYDNEY Total auctions

522

Cleared

281

Uncleared

95

Clearance rate

74.7%

TASMANIA

MELBOURNE Total auctions

725

Total auctions

0

Cleared

390

Cleared

0

Uncleared

184

Uncleared

0

Clearance rate

Clearance rate

67.9%

TASMANIA

Hobart prepares for low-growth phase Rents in Hobart are increasing at the fastest rate among the capital cities, at 5.7% in the 12 months to April 2019, but CoreLogic’s Home Value Index for April 2019 reported that property values dropped by 0.9%. Although Hobart still commands the highest annual growth of all the capital cities at 3.8%, the drop in prices could signal the beginnings of a slowdown.

“Tasmania’s been in growth for ages now, and it’s been the darling of the country since mid-2015. But it peaked during 2018 – growth has started to wind back,” says Results Mentoring director Brendan Kelly. “This time next year, there will be neutral or low-digit growth.”

However, a plateau in one part of the Hobart market could create opportunities for other price points. The most affordable pockets of the city continued to record strong growth of 8.2% over the 12 months to April 2019.

Area

N/A

Type

Median value

Quarterly growth

12-month growth

Hobart

H

$470,000

1.3%

10.5%

TAS Country

H

$310,000

0.3%

7.1%

Hobart

U

$385,000

2.9%

12.5%

TAS Country

U

$238,125

0.0%

-0.4%

All data sourced from CoreLogic.com.au

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29

PEOPLE

IN THE HOT SEAT When he completed his undergrad degree, all Adam Crane knew was that he didn’t want to be an accountant.

Now the CFO for ME Bank, he shares his tips for working in finance

Who or what inspired you to enter the finance industry?

I did my undergraduate degree in accounting and A finance. At the end of the degree, all I knew was that I didn’t want to be an accountant, which is ironic because I’m now a CFO. With my sights set on anything but accounting, I took on a credit assessment role at Esanda Finance. I was lucky enough to have a manager, Larry Pumpa, who saw potential in me and provided me with the right opportunities to grow and develop my skills to set me up for a career in finance.

Q

What’s one of your most recent career highlights?

My recent appointment at ME Bank. It’s a great A business that’s well positioned as a real alternative for Australians who are disenfranchised by big banks. The ME team is great – everyone I’ve met is aligned behind a shared sense of purpose, and I can’t wait to get started in this new role.

Q

What’s your favourite way to relax after a stressful time at work?

With a nice glass of red wine and by spending time A with friends and family. I’m also a tragic Collingwood supporter. At the moment, watching them helps me relax, but up until last year, I think my wife would say otherwise.

Q

What do you wish you’d known when you started out in finance?

There’s nothing wrong with being an accountant! In A my experience, there needs to be more focus on learning the ability to apply technical skills to understand the drivers of business performance and how to truly influence the outcomes delivered. You may know how to report what happened, but it’s what’s likely to happen that really matters.

Q

What are your top survival tips for working in finance?

I have four top tips: be focused on the customers’ A needs, whether that’s an internal or external customer; be willing to take considered risks and not be afraid to fail every now and then; be proactive and outcome-oriented; and don’t sweat the small things. AB

Q

30

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31

HELPING YOU HELP YOUR CUSTOMERS

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ANZ Business Any advice does not take into account your personal needs and financial circumstances and you should consider whether it is appropriate for you. All applications for credit are subject to ANZ’s normal credit approval criteria.

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