Australian Broker 16.15

AUGUST 2019 ISSUE 16.15

Seeking solutions Examining the alternatives for borrowers who don’t fit the box /16

Is the price right?

With open banking, it’s all change for Australia’s credit bureaux /22

MARIO REHAYEM Pepper Money’s CEO Australia reflects on the non-bank’s recent expansions and what they mean for brokers /14

Lender Splendour Behind the scenes at Connective’s 2019 lender showcase /24

ALSO IN THIS ISSUE… A big deal Launch Finance director Steve Milligan picks up the pieces /20 Property market update Brisbane’s quiet decline /26 In the hot seat Vow GM Clive Kirkpatrick on hobbies, resilience and South African delicacies /30

NEWS

IN THIS SECTION

Lenders Heritage Bank reveals NSW expansion plans /04

Aggregators Concerns voiced over diversification drive /06

Technology ‘Smart bank’ processes first mortgage /10

Regulators New legislation to make banking code a reality /12

Market Market sentiment reaches new high /08

www.brokernews.com.au AUGUST 2O19 EDITORIAL Editor Melanie Mingas News Editor Madison Utley Production Editor Roslyn Meredith

DATES TO WATCH

Upcoming can’t-miss events

ART & PRODUCTION Designer Martin Cosme

21 AUGUST

30 AUGUST

12 SEPTEMBER

Doyenne Program: Women in Broking

CAFBA Conference and Awards

R U OK? Day

Pioneered by ANZ’s Simone Tilley, a series of events will take place between August and October to inspire and support female brokers in the industry. The first will see a new group of Doyenne women meet for a conversation lunch with Tilley and Katherine Bray before a hands-on afternoon working on profiles and thought leadership positions.

CAFBA’s annual conference and awards will 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. Early-bird tickets for the event are on sale until 1 July.

It’s a question that is often asked without waiting for an answer, but this September people across Australia will once again be encouraged to check in with their friends and peers. The aim is to inspire meaningful connections, and events will be held across Australia.

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

4 - 6 SEPTEMBER Annual Credit Law Conference Tackling how the industry has changed since the royal commission, this year’s credit conference will see financial services institutions, regulators, professional service organisations and industry associations collaborate to discuss the future of credit law at the Sheraton Grand Mirage, Gold Coast.

26 SEPTEMBER – 1 NOVEMBER Connective Conference 2019 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.

18 OCTOBER Australian Mortgage Awards 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.

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8 NOVEMBER

10 – 12 NOVEMBER

18 – 19 NOVEMBER

FBAA Gold Coast conference

COBA 2019 Stronger Together

Australian Securitisation 2019

Returning slightly earlier in 2019, the FBAA’s annual Gold Coast conference will once again take over the Sea World resort.

This year’s theme is ‘Challenge the Future’ and the association is due to reveal details of speakers and special guests over the coming weeks.

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, with the speaker line-up featuring APRA chairman Wayne Byres.

This two-day event will cover the domestic and global developments affecting Australia’s securitisation market. Last year, the speaker line-up included ASIC commissioner Cathie Armour; the Productivity Commission’s Stephen King; and RBA assistant governor Christopher Kent. Further details are due soon.

Fast money. Short term. $100k - $10million.

Real Estate backed lending.

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.

R R AT E S F R O M 8 .9 9 % PA R 2 DAY S E T T L EMEN T R U P T O 12 M O N T H T ER MS R B R O K ER ’ S C O MMIS SI O N PA ID AT S E T T L EMEN T

Credit Rep No. 512

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CONTACT US TODAY lending@aquamore.com.au www.aquamore.com.au

NEWS

LENDERS ANZ EDUCATION SERIES LAUNCHED broker feedback on education initiatives, a fortnightly webinar series by ANZ will launch this month as part of the bank’s “ongoing investment” in the broker channel. BDMs will partner with subject matter experts on a range of topics, with each session providing the opportunity for brokers to ask questions. Sessions will take place on 1, 15 and 29 August and participating brokers will be asked for their input to shape future editions.

FOLLOWING

NEW INTEREST RATE FLOORS Sourced 25 July 2019

6.00%

5.80%

5.60%

5.85%

5.75%

5.40%

5.50% 5.20%

5.30%

100% HOME LOAN FOR PROFESSIONALS lender Granite Home Loans has introduced a 100% home loan for owner-occupiers, freeing up eligible borrowers from having to save for a deposit or pay LMI. The loan is targeted at industry professionals who work in legal, medical, accounting/finance, IT and engineering jobs. Eligible applicants must have a tertiary qualification, three years or more of industry experience, and meet the minimum income threshold, which starts at $100,000 per year but varies across the states. The establishment fee stands at $3,500.

5.00% Macquarie

SPECIALIST

“The current interest rate environment does not warrant a uniform mandated interest rate floor of 7% across all products” Wayne Byres Chair, APRA

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www.brokernews.com.au

ANZ, NAB, Suncorp

CBA, Westpac, Adelaide Bank, Bluebay Home Loans, Auswide Bank, St. George, BankSA, Bank of Melbourne

HERITAGE BANK REVEALS NSW EXPANSION PLANS Country’s largest customer-owned bank to step outside of native Queensland as 59-branch network expands largest customerowned bank has announced plans to open branches outside of its home state of Queensland for the first time in the institution’s history.

Heritage Bank currently has 59 branches across southern Queensland, $10bn in total consolidated assets and 800 members of staff.

The bank is “defying both industry trends and a highly competitive market” with its plans to open two Sydney branches before the year’s end, one in the Castle Towers Shopping Centre in late October and the other at Westfield Parramatta in December.

The two locations are part of a longer-term strategy to open more AUSTRALIA’S

branches in Sydney, as well as in the Melbourne metropolitan area.

CEO Peter Lock said, “Opening branches in Sydney reflects our desire to increase our presence nationally and our belief that the Heritage brand can resonate strongly with consumers wherever they live.

“Heritage has been providing home loans to customers throughout Australia for 20 years via mortgage brokers, as well as through our Queensland branches. We already have thousands of customers in Sydney, and we’ve had an office in Parramatta for many years to support our broker team. We’re not totally new to Sydney and we do understand the market.”

While the increasing digitisation of the financial services industry has

Bank of Sydney

resulted in many banks scaling back their branch networks, Lock said the concern over branches becoming obsolete was “exaggerated”.

“People still want to come into a branch and talk face-to-face with an expert about the biggest financial commitments they will make in their lives, so branches will be around for many years to come,” he said.

The Castle Hill and Parramatta locations were selected following extensive research that showed the western and northwestern areas of Sydney were demographically suited to Heritage’s product offerings and philosophy.

“We’re about providing personalised service and great value, whether that’s for a young family trying to get the best deal on their first home or a retiree looking to maximise the return on their savings,” said Lock.

“We offer something special that we hope many more people will discover through our new branches in Sydney.”

NEWS

A G G R E G AT O R S INDUSTRY REACTS TO NEW CHOICE POST MFAA and FBAA both issued statements last month when consumer group Choice again blasted the standard of broker education and accreditation in a post on its website. MFAA CEO Mike Felton said, “If consumers were unhappy with their brokers, it would show up in our satisfaction surveys, or in complaints data.”

Meanwhile, the FBAA’s Peter White said the article revealed the consumer group’s “disturbing lack of real understanding about the broking sector”.

THE

MFAA HOSTS NATIONAL AWARDS IN MELBOURNE George Karam, commercial broker and director, BF Money

MFAA’s national awards concluded in Melbourne on 25 July, recognising 22 brokers, lenders, aggregators and fintechs from across the country. In addition, Kathy Cummings was inducted as an MFAA life member.

Association CEO Mike Felton said, “After a challenging year for our industry, it is phenomenal to be able to come together and shine a light on the positive influence of our members and the terrific work they do.”

THE

CONCERNS VOICED OVER BROKER DIVERSIFICATION DRIVE CAFBA board member urges brokers to upskill rather than upsell when it comes to expanding their businesses’ core operations

board member of the Commercial and Asset Finance Brokers Association (CAFBA) has voiced concerns about residential brokers diversifying into new areas of lending without seeking the right support.

George Karam, who is also a commercial broker and director of BF Money, said, “There seems to be a push, led at the aggregator level, to get more resi brokers writing more commercial transactions. In and of itself, I’m not opposed to that. My concern is that there’s too much of an emphasis on upsell and not enough emphasis on upskill. You need to upskill before you upsell, and I really don’t see enough of A

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that actually being done at a practical level.”

According to Karam, the issue is compounded as resi brokers are often pushed to diversify. This is done with an emphasis on how much money can be made by expanding into commercial, but without an adequate focus on brokers maintaining the standard of customer outcomes in the new space.

“What we’re seeing is brokers who are ill-equipped or underinformed to do this type of deal, so we’re inheriting more and more borrowers who need to be rescued from situations they shouldn’t have been in, which isn’t a good outcome. The more that happens, the more there is a need

to regulate,” he added.

Karam stressed that brokers can’t provide the right outcome for their customers without fully understanding the scope of possible solutions themselves. “[Commercial] is notably different than doing a home loan.

The amount of work that goes in, even before an application is discussed with a perspective lender, is significant. There needs to be a significant amount of upskilling in order to get into that,” he said.

However, gaining skills is only the starting point. Karam also advises brokers to become “part of that ecosystem”.

“Get to know the valuers, the surveyors and the lawyers that represent the lenders. Those relationships and access to those people are an essential part of delivering the right outcome, because the solutions are a lot wider than the lenders that sit on the panel of the aggregators,” Karam said.

“Without the ecosystem, you don’t know what you don’t know.”

“We’re in a compliance regime right now, but there hasn’t been a training option for all-round business acumen and coaching, the real how-to for running a small business” Michael Trencher Co-founder, Elite Broker Academy

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NEWS

MARKET SUBAGGREGATOR RESIDENTIAL LAND TEAMS UP WITH TAXRISE GROUP PRICES median price of residential land increased by 0.9% in the March quarter, despite a drop in demand leading to the lowest land sales on record. According to HIA chief economist Tim Reardon, the fall in sales can be attributed to a decline in demand for new homes as a result of the credit squeeze and the housing market downturn of the last two years. Despite the decreased demand, land prices have continued to increase, perpetuating the cycle.

THE

AUCTION RESULTS RETURN TO STRENGTH CoreLogic Quarterly Auction Market Summary released last month showed the strongest results in a year. Auction market commentator Kevin Brogan said, “All of the indicators are encouraging for anybody looking to list, but it just doesn’t look as if they’ve actually acted on it yet. We’re seeing the demand side, but let’s have a look at what happens when the supply side gets going. Until we do, it’s a bit of an unknown.”

THE

“A shortage of land is one of the reasons home prices increased over the past decade. Adequate supply is required to avoid a deterioration in affordability” Tim Reardon Chief economist, HIA

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HOUSING MARKET SENTIMENT REACHES NEW HIGH It’s a “good opportunity to start shopping”, says major bank’s head of homebuying, while new survey highlights differing attitudes to the ‘great Australian dream’ larger number of Australians feel that property ownership is achievable compared to in years past, according to the results of a new first home buyer survey conducted by CBA. According to the bank, 91% of respondents believed that property ownership was attainable for first home buyers. However, when answering the same question in 2018, as many as 20% of people said homeownership felt completely out of reach.

Addressing the “large shift” in sentiment, CBA’s GM of home buying, Dan Huggins, said, “This data suggests Australians are taking an increasingly optimistic attitude towards the property market.

“Over 90% of Australians said A

property ownership was achievable for potential first home buyers so long as they are willing to make sacrifices with regard to their spending.”

The CBA survey also found that 75% of respondents under the age of 30 still believe that property ownership is the ‘great Australian dream’, while 69% of those aged 30 and over said the same.

The responses revealed how property market sentiment varies across the country, with 74% of Victorians and South Australians linking property ownership to the great Australian dream as compared to just 64% of those in Queensland and WA. NSW fell in between at 70% in that category, but at 12% the state also recorded

the highest percentage of respondents who felt property ownership was unachievable.

The result is unsurprising as just last week a report celebrating improved housing affordability in Australia noted that Sydney remained “the least favourable market in the country”, with 1.8 times the average income needed to service a mortgage on the average home.

However, according to Huggins, now is a good time for first home buyers to pursue their property ownership ambitions.

“Interest rates are currently sitting at historical lows and, in many parts of the country, property prices have come off their peak, representing a good opportunity for homebuyers to start shopping for a property,” he said.

Meanwhile, ME’s second Quarterly Property Sentiment Report revealed that housing affordability remains a top worry: 93% of respondents agreed it was a serious issue, up from 88% in April.

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.

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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

TECHNOLOGY

EZIDOX BACKER ACQUIRES CONVEYANCING PLATFORM has acquired Titlexchange, a secure online service connecting property buyers and sellers to conveyancers. The technology will later be integrated with Ezidox, allowing the paperless exchange of documentation between multiple parties. “The industry is under stress – a clear frontrunner for automation, machine learning and artificial intelligence. Not to supplant people but to free brokers and others from work made for computers to process,” said Lakeba CEO Giuseppe Porcelli.

LAKEBA GROUP

‘SMART BANK’ PROCESSES FIRST MORTGAGE CEO revealed latest milestone to Australian Broker in the days following the bank’s launch, and further updates are on the way ‘smart bank’ that received its full banking licence from APRA last month has already hit another milestone, processing its first home loan.

86 400 CEO Robert Bell told Australian Broker that the bank had processed its first staff mortgage within days of receiving the banking licence and was now just “two or three months” away from the official launch of its home loan products – all of which would be distributed exclusively through the broker channel.

“The market might be a bit tougher, but in this type of market mortgage brokers play an even bigger role than they have in the past in helping Australians A

with what is one of the biggest financial decisions they will make,” said Bell.

The bank has already joined the panel of lenders at both Vow Financial and Specialist Finance Group and is hoping to partner with additional aggregators in the future.

“The focus has been on doing something really different in the broker space that’s just not there at the moment,” lead developer for 86 400’s home loan proposition, Melissa Christy, told Australian Broker earlier this year.

Bell also explained that the term ‘smart bank’ originated because 86 400 was designed to deliver banking through a smartphone.

“Neo bank means ‘new bank’, and we wanted to be more than just a new bank. We’ve done an enormous amount of research to understand consumers and how they bank today, and what we found is that Australians find banking very difficult and very stressful,” he said.

“When we designed 86 400, we always kept that as the problem that we needed to solve.

We thought the solution was to use smart technology.

“We thought the right place to do this would be on a smartphone where nine million Australians are already ruining their lives through a smartphone,” Bell added.

The 86 400 app was launched to a select group of beta users seven months ago. Since then it has been updated 26 times, refined and readied to be taken public when the licence was granted. The app will be live on both the App Store and Google Play in due course.

SME FINTECH ADOPTION Source: EY Fintech Survey 2019

10

25%

56%

46%

93%

89%

of SMEs on average have adopted fintech globally

of SMEs use a fintech banking and payments service

of SMEs use a financing fintech service

of SME adopters prefer to find a technological solution where possible

of SME adopters are willing to share data with fintechs

www.brokernews.com.au

Cameron Poolman, CEO, FAST

ONLINE LENDER EXPANDS AUSTRALIAN PRESENCE has joined the lending panel at FAST in an arrangement that will help facilitate more opportunities for the aggregator’s brokers who are interested in expanding into the SME lending channel. OnDeck CEO Cameron Poolman said the move was part of the lender’s rapid expansion of activity in the broker channel.

FAST CEO Brendan Wright said the aggregator’s network delivered more than $7bn in business lending solutions to clients annually.

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NEWS

R E G U L AT O R S

RECOMMENDATIONS FOR APRA RELEASED a report issued in July, the federal government made 19 recommendations for APRA (see box below), concluding that the regulator’s responsibilities had expanded and required additional clarity and further resources to be effective. According to APRA chair Wayne Byres, the report was “ambitious in its views of APRA’s future remit and required capabilities”. The report also said APRA was slow to offer guidance on new technologies and was often “not sufficiently cognisant of commercial perspectives”.

IN

NEW LEGISLATION TO MAKE BANKING CODE A REALITY The Australian Banking Association and FinTech Australia say Consumer Data Right legislation will enhance transparency in banking federal government introduced legislation last month that is “an important step to making the open banking reforms a reality”, according to the Australian Banking Association (ABA).

ABA executive director of policy Christine Cupitt said the legislation was critical to moving the Consumer Data Right reforms forward.

“Giving customers greater access to their data will make it easier and simpler to shop around for a better deal on a credit card, followed by home loans and other banking products,” Cupitt added.

The first stage of the open banking initiative, implemented THE

Susan Mitchell, CEO, Mortgage Choice

FURTHER CAUTION OVER BEST INTEREST DUTY CEO Susan MORTGAGE CHOICE Mitchell has said the industry must collaborate to shape the implementation of a best interest duty and that aggregators are key to absorbing some of the impact that would otherwise be felt directly by the broker. “It’s really important not to just pick up the financial planning structure and plunk it down. It might seem easy, but it won’t be in the long run,” Mitchell said.

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by the major banks on 1 July, has been linked by Treasurer Josh Frydenberg to “major improvements in the levels of transparency” across a wide range of banking products.

The federal government intends that by February 2020 consumers will have control over what data their bank shares, which secure third parties it is given to, and for what purposes.

Frydenberg said progress with the February launch was “well advanced”.

The government expects the reforms to not only lead to better prices but the creation of more innovative products and services customised to individuals’ needs, as well as more efficient processes

for businesses – all of which will result in savings being passed through to customers.

Rebecca Schot-Guppy, general manager of FinTech Australia, said she believed the reforms would have an “exponential and transformative” impact on the financial services sector.

“It is a key building block for fintechs looking to create new services that enhance competition and improve financial literacy,” she said.

However, Schot-Guppy noted that the true customer benefits of the reforms would likely not be felt for quite some time.

“This rollout is just the first hurdle of what will be a long process before consumers will see the true impact of this reform,” she said.

“If the UK experience is anything to go by, the consumer data right and open banking policies will require ongoing support and promotion for them to realise their potential.”

APRA’S COMMITMENTS TO CHANGE Source: APRA

Following government recommendations, the regulator has committed to:

√ Maintaining and building financial system resilience √ Leadership and culture √ Strengthening capability √ A strong outcomes focus in superannuation √ Enhanced communications

FE AT URES

SPECIAL REPORT

OPPORTUNITY KNOCKS

With a suite of new products and a foot in the New Zealand market, Pepper Money is helping brokers capitalise on new opportunities. CEO Australia Mario Rehayem reveals the details

PEPPER MONEY: FAST FACTS

2001

Pepper Money opens for business in Australia

2012

The non-bank lender moves into near prime

2015

Pepper’s asset finance business debuts

$2BN

Value of asset finance loans now on the book

2018

Pepper moves into commercial lending

$20M

Value of commercial loans written, June 2019

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international non-bank Pepper Money first entered the Australian market in 2001, the lender was fully focused on providing the residential lending solutions that others weren’t. Then the market started to change.

To avoid its Kodak moment, Pepper Money leveraged market reach, experience and expertise to embark on a strategic diversification drive that would see its credit solutions portfolio expand and its loan book swell.

In 2012, Pepper Money stepped into the near prime space, tactically positioned to complement its existing suite of non-conforming products. In 2013, identifying another gap in the market, the lender started to do prime mortgages differently by returning to what Mario Rehayem, Pepper Money CEO Australia, calls “old-school underwriting”.

In an age of algorithms and automated credit assessments it was a bold move, but it paid off.

Next came the 2015 launch of Pepper Money’s asset finance business, focusing on used cars, caravans and small-ticket equipment – a market that was either overlooked or mispriced by other lenders. From a standing start less than four years ago, its asset finance loan book currently stands at $2bn, with more than $110m originated every month.

Then late last year Pepper Money stepped into commercial lending, including real estate (CRE), another segment it notes is underserved in the current lending environment.

WHEN

The soft launch of the new division was followed in February by the news that commercial lending veteran Malcolm Withers would lead CRE operations for the non-bank.

“From 2015 we really started to refine our core businesses and now, with the launch of CRE, we’re going back to basics. We’re

“That’s probably one of the primary reasons why every time we launch into a new asset class or launch a new product, we not only become successful but we do so in a very short period of time. We spend a lot of time in the background before the launch, refining the product and the area we want to play in.”

Core focus While the deliberate nature of the strategy is evident, what those on the outside may not realise is that, rather than this being diversification per se, Pepper Money has actually expanded its core operations with each new launch. Today, Rehayem says brokers, too, can echo this strategy

“The Pepper brand has a fantastic reputation of delivering on its promises. We have a strong reputation for service and for how we treat our customers” Mario Rehayem, CEO Australia, Pepper Money giving every mortgage broker the ability to be in a position to write a commercial loan, rather than being pigeonholed as working for a specialist commercial writer,” says Rehayem.

Early performance indicators are strong. Currently at Pepper Money, CRE is performing at 140% of its projected growth rate.

In June 2019, approximately $20m in commercial loans were written and Pepper Money estimates CRE is worth in excess of $11bn a year Australia-wide.

“The Pepper brand has a fantastic reputation of delivering on its promises. We have a strong reputation for service and for how we treat our customers,” says Rehayem.

to emulate the same success.

“We are creating an experience that leverages off a mortgage broker’s core capabilities so that they can create their own strategy to reach out to their existing clients in new ways,” he adds.

Pepper Money’s loans are almost 100% originated through the third party channel, whether that be through commercial, asset finance, online or mortgage brokers.

Third party skill sets are therefore crucial to the lender’s ongoing ability to deliver its solutions in the marketplace.

As a result of supporting brokers in leveraging its credit solutions, Pepper Money has seen a surge in commercial lending accreditations nationwide, with more than 2,500

In partnership with

The same message was central to Pepper Money’s 2019 Insights Roadshow, which visited Adelaide, Perth, Sydney, Melbourne and Brisbane throughout June.

Focused on solution matching, the agenda was designed to help brokers understand and develop “best in class” approaches to the regulatory, digital, customer and business experience.

Mario Rehayem, CEO Australia, Pepper Money

brokers accredited at the time of writing. Further, Rehayem says the response from aggregators has been “overwhelming”.

Yet for all the new focus areas, he maintains that brokers should take a pick-and-mix approach to the new product solutions they adopt, in order to stay true to their brand and meet the needs of existing customers without overcomplicating things.

“The customer a broker naturally attracts will dictate the level of knowledge and skill they need.

For example, a mortgage broker who deals with your everyday Australian buying a home, or a self-employed customer looking to

buy their first CRE or investment property, would only really need to understand how to position a basic commercial loan with their customer base. It’s not a complex development loan for example,” Rehayem says.

“The best diversification strategy is to leverage off your own core skills, then consider your customer’s needs and you marry the two. That is why asset finance is also a fantastic extension of the natural ability of a mortgage broker.”

On that note, Rehayem advises that diversification shouldn’t be about taking on new focus areas and clients because of

recent market events. Instead it should be about meeting more of an existing client’s needs and focusing on the sustainability of the broker’s business – whether that’s by advising the client on a new commercial real estate investment or assisting them with the purchase of a new car to sit in the drive of their new home.

“Diversification really should only be part of the broker’s vocabulary when they truly understand their strengths and customer base. Many people enter into diversification tactics not understanding the true reason why they are doing it, which means they struggle with the why and the how,” he says.

New territory One thing brokers may struggle to emulate is Pepper Money’s geographic expansion.

In May, the lender made its first mark in New Zealand by partnering with Astute NZ under the Ascenteon brand, funding a range of loans under a white label agreement.

The portfolio initially comprised three residential products (prime, near prime and specialist) designed to meet the wide and varied needs of all types of residential borrowers.

“It’s still in its embryonic stage, but we have received an overwhelming reception,” Rehayem says.

As an unknown brand in a notably different marketplace, gains are welcome in any form. However, for Rehayem the latest development is all about leveraging Pepper Money’s distribution arm and a brand that already exists in New Zealand.

“We tend to gravitate to those particular segments of the market, and we have to make sure that when we put products together we are going to add value and really stick to our mantra of helping people succeed,” he says.

“We have been really strategic and tactical in selecting these unmet needs in the industry.”

With the backing of an international parent company and a finger firmly on the pulse of borrower demand here in Australia, when it comes to Pepper Money’s next move, nothing is off the table.

Rehayem says, “We never say never in our business! Our growth is controlled, but it has definitely been a wonderful journey to date.” AB www.brokernews.com.au

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BUSINESS TALK

SEEKING SOLUTIONS

Self-employment, illness and divorce are just some of the life situations that can see a borrower classified as specialist.

With the banks increasingly unable to meet the needs of such borrowers, Australian Broker examines the alternatives

SPECIALIST LOANS BY RESIMAC

Broad credit policy that caters to almost all borrower types, whether the self-employed borrower who does not have up-to-date financials, the shortterm self-employed, borrowers with credit defaults or poor repayment history, or a combination of these

Individual scenarios can be workshopped with BDMs

SPECIALIST LOANS

BY PEPPER MONEY

lending has long had a place in the mix of of options available to Australians sourcing credit, and that isn’t due to the royal commission. In fact, SPECIALIST

“Specialist lending caters to any borrower that fits outside of what are considered traditional lending guidelines” Daniel Carde, GM of third party distribution, Resimac since the mid-1960s a growing cohort of non-banks have been providing alternative credit solutions across the country to meet borrowers’ residential

banks’ investor lending caps, repricing of loans for risk, adjustments to loan serviceability calculations, and long processing and turnaround times.

Today, specialist lending has taken on a whole new meaning by bringing new and innovative solutions to a growing number of borrowers. Instead of imitating the solutions presented by major, non-major and second-tier lenders, non-banks are innovating their specialist lending solutions.

“Specialist lending caters to any borrower that fits outside of what are considered traditional lending guidelines,” says Daniel Carde, general manager of third party distribution at Resimac.

“This can be due to their employment type, length of time in a job, credit history or repayment history. It can even be something as simple as providing a larger loan at a higher LVR.”

THE SPECIALIST LENDING SPECTRUM From super prime loans through to prime, non-conforming and what the market calls specialist loans, the range of solutions varies depending on the lender. Here is an example of how each solution fits into the mix

Category Loans for self-employed borrowers and those who have experienced a life event resulting in past adverse credit

and commercial needs.

According to the MFAA’s 2017 Industry Insights Survey, several factors have driven this trend since 2013, including the mainstream

Source: La Trobe Financial

Description Highest bank-quality-grade mortgage security and borrower who is least likely to default

Super prime Avg LVR 64%; max 95% with LMI

Bank-quality-grade mortgage security and borrower Prime

Scenarios team can provide a fast-paced review of loans so a customer never leaves a broker’s office with a ‘no’ when it could have been a ‘yes’

Avg LVR 65%; max 95% with LMI

Non-conforming

Alternative credit borrower with some limited life events on credit file and requires manual underwriting which banks cannot do naturally Avg LVR max 80%

Specialist

Alternative credit borrower or specialist loan product (childcare centres, hotels/motels, aged care loans, construction/development commercial loans, etc.) with limited life events on credit file and requires manual/specialist product underwriting which banks cannot do naturally Avg LVR 75%

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SPECIALIST LOANS BY LIBERTY FINANCIAL Designed to appeal to a wide range of borrowers: customers with low deposits, imperfect credit, or who are self-employed

Specialty and low-doc range of loans spanning residential, motor, commercial, and SMSF lending

There are therefore multiple reasons why specialist lenders are an essential part of the broker toolkit.

“The number of borrowers needing a custom solution is growing,” says John Mohnacheff, group sales manager at Liberty Financial, which has been active in the specialist space for 22 years.

“Specialist lending is about providing tailored solutions to customers’ individual circumstances. By looking at the whole picture, we’re able to support a wider range of borrowers and help more customers.”

It’s not just a shifting of the goalposts that has driven the steady increase in demand. Another factor is that borrowers themselves are changing.

With the rise of the gig economy and self-employment, the banks have struggled to keep up with how best to assess a borrower’s serviceability and risk unless they fit into employment models that are fast becoming antiquated.

As a result, many self-employed borrowers now fall into the specialist category by default.

However, what starts out as bad news for borrowers can be viewed as a prime opportunity for brokers.

“Many people are taking on less traditional modes of employment such as part-time, contract, casual or self-employed work. There are more opportunities in this space than ever before,” Mohnacheff says.

“Specialist lending can help brokers diversify in order to grow their business because specialist lending appeals to a more diverse and expanded group of customers.”

As Carde explains, there are also those borrowers who have blemishes on their credit file, for example a borrower who experienced a previous loss of employment but is now gainfully employed and wants to purchase a home. Others may have fallen into financial hardship after a relationship breakdown or illness.

“Their credit file will typically exclude them from a traditional loan. Specialist lending policies cater to this borrower type, and after a period of time the borrower could refinance to a more traditional prime loan,” he says.

“With an ever-shifting lending landscape, offering specialist lending gives the broker the opportunity to help more borrowers more of the time. In simple terms,

who can benefit from a specialist lender that brokers may not have previously written or considered,” says Aaron Milburn, director of sales and distribution at Pepper Money.

Growing demand The growing demand for specialist solutions is broadly driven by two types of borrower: those who approach a broker requesting help in accessing specialist lenders, and those who think they still qualify for a mainstream bank loan but actually don’t.

Either way, the upshot for the broker is the same.

“The key is to understand the borrower’s situation in detail and to be able to communicate that clearly to us as the lender. The more

“The key is to understand the borrower’s situation in detail and to be able to communicate that clearly to us as the lender” Steve Lawrence, vice president, head of major clients, La Trobe Financial it expands the broker’s toolkit as specialist lending policies are typically broader in terms of their risk profile.”

The bottom line is that specialist lending is far broader than many brokers may realise.

“It’s not limited to people who have had a credit event. Investors, the self-employed and families, to name a few, are all potential clients

information we have upfront, the quicker and easier we can provide a solution,” says Steve Lawrence, vice president, head of major clients at La Trobe Financial.

Any applicant with a complex credit history – that is, some level of impairment – generally falls into the specialist space, and this requires manual underwriting.

In other circumstances there can

All aspects of the customer’s financial situation are considered

Brokers also have direct access to the Liberty underwriting teams, to find creative solutions for tricky financial scenarios

SPECIALIST LOANS BY LA TROBE FINANCIAL Alternative solutions across residential and commercial property, including multiple borrower types such as individuals, corporates and trusts (including SMSFs)

Loans for a variety of purposes, including debt consolidation, equity release and construction

Products include the Parent to Child (P2C) loan, the First Home Owners’ Specialist Loan, aged care loans, construction development loans up to $25m, and larger commercial loans up to $35m

La Trobe Financial also operates Australia’s single largest retail Credit Fund with over $3.6bn of private investment AUM which makes it a remarkably diverse lender covering a $8bn balance sheet

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FE AT URES

Daniel Carde, general manager of third party distribution, Resimac

also be unique properties or risk factors to consider in terms of the asset being purchased, such as childcare centres, hotels or motels, aged care loans or construction development commercial loans that require specialist underwriting skills to get approved.

When working on such deals, Lawrence offers four key tips: listen carefully and keep an open mind; ask for the whole truth and nothing but the truth about a borrower’s financial objectives and position; complete ‘reasonableness tests’ on stated income and expenses; and educate clients on their current and future options.

Although specialist loans fall outside of the traditional lending environment, they are still subject to rigorous compliance, especially given the complicated lending history and employment status of many specialist borrowers.

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“Where a loan is determined to be specialist, the same responsible lending obligations and compliance requirements apply to the assessment regardless of borrower or loan product offered,” Lawrence says.

Steve Lawrence, vice president, head of major clients, La Trobe Financial

makes these obligations scalable – that is, what each party needs to do to meet these obligations in relation to a particular consumer will vary depending on the circumstances – specialist loans take much more time because of

“Many people are taking on less traditional modes of employment ...

There are more opportunities in this space than ever before” John Mohnacheff, group sales manager, Liberty Financial “Legislation requires that the broker and lender consider separate obligations to make reasonable enquiries of the borrower and take reasonable steps to verify such information. Whilst the legislation

their complexity, and need complete manual underwriting.”

Further, Lawrence says, in complex scenarios legislation anticipates that it is reasonable to expect the level of enquiry made by

both the broker and lender to be scaled up, meaning lenders ask many more questions.

Capitalising on specialist Having the ability and experience to write specialist loans is one thing.

Capitalising on the rise of specialist lending solutions that have been designed to meet the needs of a growing segment of borrowers is a whole different ball game. However, it’s one that can pay dividends.

“A self-employed borrower may not have a consistent income, but when provided with a workable solution they often become a broker’s biggest advocate. They are much ‘stickier’ clients with more regular finance needs,” Milburn says.

“With guidance and support from their broker on the alternative options available, these clients tend to remain loyal and readily refer [other] potential clients.”

Pepper Money has been actively

John Mohnacheff, group sales manager, Liberty Financial

encouraging brokers to step beyond their comfort zone for some time. It’s a strategy rooted in both the trends that define lending currently and the need for a broker to deliver five-star service – that is, by presenting alternatives before their client knows an alternative is required.

“Pepper Money strongly believes that every Australian deserves to know their financial options when it comes to getting a loan, and always encourages brokers to get out of their comfort zones,” Milburn says.

“Those brokers who only recommend traditional lenders whilst economic and credit conditions are continuously evolving put both themselves and their clients at a disadvantage.

That’s why we believe brokers have a paramount role to play in educating clients about their options with non-bank and specialist lenders.”

Many brokers still believe that using a specialist lender for a client is challenging, but that isn’t the case. As Milburn explains, the broker’s loan assessment remains

Aaron Milburn, director of sales and distribution, Pepper Money

a specialist customer. Often in these cases, a broker will be approached by a client who expects to obtain a loan from a household name at an interest rate similar to

“Brokers who only recommend traditional lenders whilst economic and credit conditions are continuously evolving put both themselves and their clients at a disadvantage” Aaron Milburn, director of sales and distribution, Pepper Money the same; the only difference is the conversation a broker must have with their client.

For example, it’s difficult to manage a customer’s expectations when they don’t yet realise they are

what they’ve seen advertised.

“We understand this challenge.

That’s why Pepper has invested heavily over the years to demystify and simplify alternative lending for brokers. Spending just one

hour a week learning another lender’s credit policy makes this process easier,” Milburn says.

The circumstances and trends driving specialist lending have existed in one form or another for years – what is happening now is that societal changes are driving more people to fit into the specialist category than ever before. As rates of self-employment, divorce and illness are unlikely to decrease, this trend is equally unlikely to change any time soon.

In tandem – and as is customary in a free and open market – more solutions providers are stepping into the space to meet the needs of this growing segment of borrowers.

The heightened competition created as a result is essential for a functioning market, but it is also creating an unparalleled opportunity for brokers to make the seemingly impossible possible for their clients. AB www.brokernews.com.au

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PEOPLE

Have an interesting deal?

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

Melanie.Mingas@keymedia.com

BIG DEAL

going to cost $9,000 in fees and would land the couple with an interest rate of 9.24%. Regardless of the figures, the clients were on the verge of accepting.

Picking up another broker’s bad deal is a challenge in itself, but when the self-employed client is also about to change jobs, the situation becomes far more complicated. Launch Finance director and finance manager Steve Milligan explains Location: Perth metro

THE FACTS

Loan size and term $945,000 for 30 years

Client Couple in their late 40s

Goal To buy their “forever house”

Aggregator PLAN

THE SOLUTION

During the process of assessing who to lodge the next application with, it was suggested the client get a second opinion, which was when one of their friends referred them to Launch Finance.

We had initial discussions about their situation and requirements, during which it became clear that these had to be assessed through a commercial lender. We then did an extensive fact-find, including cash flow forecasts, business planning and liaising with the client’s accountant on interim figures to date.

Residential lenders look at historic income for self-employed applicants, but commercial lenders can sometimes fund a loan based on forecast income – this was clearly their strongest and lowestcost option.

The new business meant the clients had additional finance requirements that they had been funding through their personal cash flow, so we also managed to build this into the deal.

THE TAKEAWAY

and go out alone. However, he was going to be dealing with mostly the same clients and referrers in the same industry he had always worked in.

THE SCENARIO

It’s an increasingly common situation: a client who requires a broker with residential and commercial lending experience is referred to a broker with only residential experience.

In terms of customer outcomes, these situations cause poor results, potential delays and additional costs for the client, not to mention an even bigger headache for the broker who is eventually drafted in to fix things – in this instance, me.

These particular clients emigrated to Australia 20 years ago and have been self-employed since they arrived. Clear self-starters with respectable earning capacity, they were looking to buy their “forever house”, the place they could really lay down roots and prepare for the next phase of their lives down under.

The male applicant was a partner in a firm and responsible for bringing in far more income than his shareholding percentage was returning. As a result, he decided to sell his stake in the business 20

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The key thing to remember in a situation like this is that brokers need to know lending policies inside out. It often isn’t enough to simply stick with the same major lenders or the same types of deals – it’s bad for customers and it’s bad for business.

To get this deal over the line I drew on years of knowledge, as well as my experiences of similar deals, to be able to get the result we were all hoping for.

New developments in lending policies and bank scrutiny made it a fairly long process, a trend that’s here to stay given the increasing complexity of the lending environment

Steve Milligan Director and finance manager, Launch Finance

Despite the continuity, this is where the problems began. Because the applicant had gone out alone and started a new company for the new business venture, he was considered a start-up.

The client was referred to a broker with no commercial experience who submitted the first application through a normal residential lender. Inevitably, the application was declined. The broker then came up with another option that was

That said, it wasn’t all easy. New developments in lending policies and bank scrutiny made it a fairly long process, a trend that’s here to stay given the increasing complexity of the lending environment currently.

However, with perseverance and specialist knowledge of the market, we got the desired outcome in the end and the clients now live – and work – in their dream home. AB

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OPINION

IS THE PRICE RIGHT?

With its traditional business models under threat, it’s all change for Australia’s credit checking regime. However, as credit and risk consultant Andrew Tierney says, credit bureaux can thrive if they rethink pricing and embrace open banking

Australian credit checking regime is facing a wake-up call.

Open banking and the availability of relatively cheap real-time statement data is set to test the viability of the business model that credit bureaux have used in Australia for some time.

Unlike in the US and UK, in Australia individual credit searches have always been pricey. While you may get away with paying as little as 50 cents in the US, or under a pound in the UK, the cost of a credit report here typically falls between the $3 and $6 price point.

For the full cost of acquisition, this can rise to $10 to $15.

This situation has prevailed for many years but is unlikely to continue unchanged for much longer. The advent of open banking means that finance providers could soon get inexpensive statement data from a consumer’s bank account at the touch of a button. For the first time, real-time access to a borrower’s account is possible.

Unlike a credit score, which by its very nature is ‘historic’, open banking data is far less likely to present a false picture of someone’s financial status.

It gives an up-to-the-minute insight into what is happening in a person’s life right now. It’s a very handy tool that is more fit for purpose when checking issues such as affordability and product suitability.

With opening banking, a finance provider can get a deep transactional history from the client’s bank, perform modelling around it, and then determine whether a loan product can be afforded.

And because bank statements direct from the bank do not lie, fraud risks are reduced dramatically.

Furthermore, open banking data is relatively cheap. Depending on the technology provider used, its marginal cost could be close to zero.

So, it is little wonder that many are doing the maths and working out that they can reduce, or even remove, credit search costs by opting for open banking data. Not having a credit file may mean some cases are turned down, but given the comparatively high per-case cost of credit reports, overall savings are likely to be much greater.

And with everyone having to set aside ever larger amounts of money for compliance as a consequence of the royal commission, any area of saving is likely to be leapt upon by CEOs looking

THE

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However, there is a way through this challenging landscape if the credit bureaux are willing to adapt swiftly. It involves rethinking pricing and widening their customer appeal.

They should accept that the model that sees customers paying up to $15 for the cost of acquisition will soon be unviable.

The availability of real-time transaction data basically means that the perceived value of credit reports has been diminished. The finance providers still paying for them at the current price are not going to be doing this forever. Those that take advantage of the cost reductions offered by open banking may come to be seen as having a competitive advantage.

For credit bureaux the key is to hold on to their existing customers by offering credit files for considerably less than they have been. Costs should be brought down to be more in line with US and UK models.

Bureaux data is still valuable, even in the age of open banking. A credit report, in addition to all the transaction information obtained via open banking, provides a much more comprehensive picture of a prospect. So why not price it right so that it can be used alongside open banking?

If this happens, it is more likely to be

The signs are already there that the status quo is being challenged, with some of the credit bureaux having to cut costs and manage margins

Andrew Tierney Credit and risk consultant

to boost return on investment.

The landscape is therefore changing fast for the big Australian credit bureaux, and they are going to have to adapt.

The signs are already there that the status quo is being challenged, with some of the bureaux having to cut costs and manage margins. The big Australian credit bureaux must be asking themselves how much longer their current client base will habitually continue to accept the existing terms of business.

My answer to this question is: not long, if the bureaux continue as they are.

used more routinely and in greater volume than it is at the moment.

Although the income per search would come down, overall sales volume would be likely to rise.

The US and UK markets show that credit bureaux can thrive, despite the banking revolution. These markets have demonstrated that, by tapping established open banking and decisioning tech providers, who are ready and waiting to engage, and by changing their pricing, credit bureaux can continue to flourish. AB

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PEOPLE

CAUGHT ON CAMERA Connective brokers came together across five capital cities for the aggregator’s 2019 Lender Splendour event series, which took place in May. Lender Splendour provides brokers with direct access to Connective’s lender partners spanning residential, commercial and asset finance. Benefiting from informative presentations and engaging panel discussions, more than 1,000 brokers took advantage of the opportunity to improve their product knowledge, build relationships with lender BDMs, and share ideas with peers from across the Connective network.

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BOOK YOUR TABLE NOW

Tim Schneider

Choice Aggregation: 2018 winner – Bankwest Best Aggregator BDM

Friday 18 October 2019 The Star Sydney

Event Partner

Award Sponsors

Official Publications

Organised by

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DATA

NORTHERN TERRITORY

QLD SPOTLIGHT

NT is one of three leading states in home value recovery House prices may be falling steadily across the country, but in a surprising turn of events the Top End is experiencing some positivity, with CoreLogic’s Home Value Index for May 2019 naming the NT as one of three states (along with SA and Tasmania) to record increased values.

Nonetheless, overall, Darwin remains the weakest performer of all the capitals, with property values falling 3.3% over the three months to May, pulling median dwelling prices down to under $400,000.

Since the mining downturn began, property values have fallen by nearly 30%. However, first home buyer activity is on the up as Darwin has become one of the most affordable markets in Australia. It also remains the capital city that offers the highest rental yields in the nation at an average of 6%.

Outside of Darwin, the most low-priced quartile of regional NT reported a strong price hike of 11.3% over the year to May 2019.

Area

Type Median value

Quarterly

12-month

growth

growth

Darwin

H

$480,000

-1.0%

-1.0%

NT Country

H

$400,000

-2.3%

-1.9%

Darwin

U

$300,000

-2.4%

-10.6%

NT Country

U

$320,250

-1.3%

6.8%

SOUTH AUSTRALIA

Adelaide steps into the spotlight as the only growth capital CoreLogic’s Home Value Index for May confirmed that Adelaide was the only capital to record growth over the month, while its peers were caught up in the national downswing. The conclusion of the federal election has also helped stabilise the market and increase confidence.

“We now have some certainty around the initiatives announced in the budget, a consistent commission structure for mortgage brokers, and the eventual stimulus for first home buyers in the form of a federal government deposit guarantee,” says Tim Lawless, head of research at CoreLogic.

The affordable quartile of Adelaide saw prices increase by 0.9% in May, while the middle of the market experienced 0.3% growth. However, the expensive quarter recorded a sharp 2.7% drop in housing values. The city’s housing affordability also increased in the March 2019 quarter, with the proportion of income required to make loan repayments each month falling by 0.3 percentage points to 26.9% year-on-year.

Area

Type Median value

Quarterly

12-month

growth

growth

BRISBANE’S QUIET DECLINE The Sunshine State’s property market has weakened across the board, creating a shock for many who thought Queensland would escape the national downturn looked to be on track for a strong recovery some time ago; however, values have been sinking recently.

Over the three months to May 2019, dwelling values slipped by 1.4%, as per CoreLogic’s Home Value Index for the month.

Negative results have been seen across both the expensive and affordable quarters of the market. Compared to a year previously, properties are much more difficult to sell now, even though Brisbane’s fall is not as noticeable as those of its more well-known peers.

“Although values have declined over the past year in Brisbane and regional Queensland, it has been a much more moderate decline than in Sydney and Melbourne,” says CoreLogic research analyst Cameron Kusher.

“Despite this fact, there has been a sharp spike in days on market, highlighting that selling conditions have become much tougher, despite values having only fallen moderately.”

In April 2018, houses took only an average BRISBANE

of 34 days to sell; 12 months later, such properties spent an average of 60 days on the market. The story is similar for Queensland's regional market, even star performers like the Gold Coast.

“In the post-Comm Games period we’re seeing this price growth slow. Listings are rising and hold periods lengthening as sellers hang on for better offers,” explains Antonia Mercorella, CEO of the Real Estate Institute of Queensland. The Gold Coast clung to positivity during the March 2019 quarter, but just barely, at a growth rate of only 0.8%.

Nonetheless, some suburbs still have what it takes to attract buyers.

“Suburbs such as Auchenflower, Northgate, Gordon Park, Hamilton and Clayfield all delivered double-digit growth for house owners – and not all of those are blue-chip suburbs. These are areas that are in demand and have the right house at the right price for many buyers,” Mercorella says. AB

HIGHEST-YIELD SUBURBS IN QUEENSLAND Suburb

Type

Median price

Quarterly growth

12-month growth

Beachmere

U

$90,000

-1%

-2%

Charters Towers City

H

$99,000

-18%

-31%

Kooralbyn

U

$110,000

2%

-11%

Mount Morgan

H

$84,000

0%

-14%

Blackwater

H

$121,500

34%

274%

Home Hill

H

$125,000

-16%

-19%

Bungalow

U

$130,000

-12%

-13%

East Innisfail

H

$155,000

-6%

-5%

Adelaide

H

$461,000

0.7%

1.8%

North Mackay

U

$135,250

4%

2%

SA Country

H

$275,000

0.7%

2.7%

Edmonton

U

$150,000

2%

6%

Adelaide

U

$345,000

1.2%

1.5%

Holloways Beach

U

$161,500

-14%

-15%

SA Country

U

$189,500

-1.4%

5.8%

Earlville

U

$175,500

2%

3%

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, OPPORTUNITIES AND KEY INFRASTRUCTURE

1.4%

$17bn

Decline in dwelling values in May 2019

Funding for infrastructure projects to be delivered across Brisbane by 2026

SUBURB TO WATCH: HOLLYWELL Median price (houses) $713,629

Median price (units) $687,075

12-month growth

3-year growth

5-year growth

Indicative gross rental yield

-10.5%

8.6%

14.2%

4.4%

12-month growth

3-year growth

5-year growth

Indicative gross rental yield

-13.2%

0.5%

11.6%

4.4%

AUSTRALIAN CAPITAL TERRITORY

Area

$944m

2020

Value of the metro project initiated by Brisbane City Council last year

Deadline to complete new BNE runway, the largest aviation project in Australia

Type

Median value

Quarterly growth

12-month growth

Canberra

H

$660.000

0.8%

2.3%

Canberra

U

$430,000

0.1%

0.6%

Canberra snatches Hobart’s crown as market strengthens Driven by 2.2% population growth, Canberra recorded 0.2% growth in property prices over the three months to May, upsetting Hobart to become the top national performer.

“With the lowest unemployment and highest average salary, demand is always there,” says Michael Kumm, president of the Real Estate Institute of ACT. “The resulting need for housing has pushed the government to make provisions for residential construction, particularly high-rise apartments. We are now experiencing an increase of unit development whilst reducing the size and number of single residential allotments.”

The rental market is gaining ground, but buying is becoming increasingly difficult due to affordability. “For the past 40 years, around 30% of the total residential market has been tenanted. This figure is now increasing, and in the past few years is slowly creeping up to 40%, partly due to the increase in government contractors and the superannuation guarantee levy making owner-occupied housing less affordable.”

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DATA

VICTORIA

H

$365,000

1.0%

4.3%

Melbourne

U

$535,000

0.0%

0.0%

VIC Country

U

$279,500

0.0%

-1.9%

MEDIAN HOUSE AND UNIT PRICES

Non-metro areas feel pinch but demand from universities could drive change

$1,000,000

Area

Type Median value

12

Cleared

2

Uncleared

5 28.6%

Houses

$200,000 $100,000 $0

$535,000

$300,000

$675,500

$500,000 $400,000

$662,000

$600,000

$830,000

$700,000

Sydney Melbourne Brisbane Adelaide

Perth

Hobart

Units

Darwin

Canberra

CAPITAL CITY HOME VALUE CHANGES Capital city

Quarterly

12-month

growth

growth

H

$885,000

-3.2%

-6.1%

NSW Country

H

$465,000

-0.6%

1.2%

Sydney

U

$685,000

-1.4%

-2.5%

NSW Country

U

$400,000

0.0%

0.0%

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Total auctions

$900,000 $800,000

Sydney

28

PERTH

Clearance rate

NEW SOUTH WALES

Newcastle has seen the most significant annual fall in unit prices, just above Lake Macquarie’s decline of 9.4%. Renting in Newcastle and Lake Macquarie has also become more expensive compared to a year ago.

For this reason, Port Macquarie is becoming a good option for investors seeking a strong return, particularly as it’s more affordable for those on a budget. “One of Port Macquarie’s growth factors has always been the affordability of housing. It has typically been at 50–60% of Sydney’s prices – in particular for retirees, they’re able to sell in Sydney, relocate here ... [and] enhance their lifestyle,” says Paul Adams of Adams Marketing, which is behind a National Rental Affordability Scheme development.

“Recently, the university sector has established a footprint here, which means families can move to the region and if their children don’t want to or can’t afford to go away to university, there’s a university presence right here.”

54.3%

$405,000

VIC Country

Clearance rate

$651,000

-2.7%

16

$281,720

-2.1%

Uncleared

$500,000

$682,000

19

$375,000

growth

H

Cleared

$472,000

growth

Melbourne

58

$360,000

12-month

Total auctions

$483,000

Quarterly

ADELAIDE

$325,000

Type Median value

There were 854 homes taken to auction across the combined capitals this week, returning a preliminary clearance rate of 69%. The previous week saw 953 homes at auction, with the final clearance rate coming in at 64%.

It was the highest final clearance rate since April 2018. The final clearance rate has held above 60% for the last four weeks. Over the same week last year, auction activity was higher, with 1,178 homes taken to auction, returning a clearance rate of 52%.

In Melbourne, 352 auctions were held across the city, returning a preliminary clearance rate of 73.6%. In comparison, last week saw 388 homes taken to auction and a final clearance rate of 67.2%. Melbourne’s final clearance rate has held above 65% for the last three weeks, and it’s looking like this week will return a similar result. Over the same week last year, a clearance rate of 56.2% was recorded across 559 auctions.

$445,000

Area

WEEK ENDING 14 JULY 2019

$379,000

Melbourne’s price decline is easing up following the lightest drop in a year in May. According to CoreLogic data, values went down by only 0.3% and auction clearance rates in June were at approximately 60%.

Steps taken to address the issue of borrowers meeting serviceability requirements for financing loans are primed to boost market demand again, along with lower interest rates.

“One of the factors contributing to less activity in the housing market has been the challenges involved in accessing credit. While there are a variety of other policies that will continue to keep a lid on housing credit, a more practical assessment of borrower servicing capacity is certainly a positive for housing market demand,” says Tim Lawless, head of research at CoreLogic.

“Lower interest rates may not provide the same level of stimulus as we have seen in the past due to tighter credit policies, but no doubt will still provide some positive influence.”

CAPITAL CITY AUCTION CLEARANCE RATES

$540,000

Melbourne’s price decline eases, aiding the investment market

Weekly change

Monthly change

Year-to-date change

12-month change

Sydney

0.0%

0.1%

-4.3%

-9.6%

Melbourne

0.1%

0.3%

-4.0%

-8.8%

Brisbane

0.1%

-0.3%

-2.5%

-2.6%

Adelaide

-0.1%

-0.4%

-1.1%

-0.5%

Perth

-0.3%

-0.7%

-5.3%

-9.1%

0.0%

0.0%

-3.9%

-8.1%

Combined 5 capitals

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

BRISBANE CANBERRA Total auctions

36

Cleared

20

Uncleared

Total auctions

77

Cleared

18

Uncleared

42

Clearance rate

30%

8

Clearance rate

71.4%

SYDNEY Total auctions

318

Cleared

179

Uncleared

53

Clearance rate

77.2%

TASMANIA

MELBOURNE Total auctions

352

Total auctions

1

Cleared

209

Cleared

1

Uncleared

0

Uncleared Clearance rate

75

Clearance rate

73.6%

TASMANIA

Area

Hobart’s spectacular run could be coming to an end Corelogic’s Home Value Index for May 2019 indicated that Hobart’s dwelling values fell for two months straight, causing the first negative quarterly growth since 2016. Hobart has performed spectacularly for a few years, but over the three months to May it hit a snag and went into the red, while the decline slowed in cities like Sydney and Melbourne. “In cities where housing market conditions have generally been more resilient to a downturn, the trend is the opposite,” says CoreLogic head of research Tim Lawless.

This seems to tie into predictions by some – such as Real Estate Institute of Australia president Adrian Kelly – that Hobart’s growth will slow in 2019.

“We don’t get the peaks and troughs that Melbourne and Sydney get – we tend to be more flatlined. I don’t think we’ll see too much more proper price growth this year, but the demand will still be quite high,” Kelly explains.

N/A

Type

Median value

Quarterly growth

12-month growth

Hobart

H

$475,000

0.0%

9.5%

TAS Country

H

$314,500

1.7%

7.9%

Hobart

U

$380,000

4.6%

9.8%

TAS Country

U

$245,000

-1.4%

0.2%

All data sourced from CoreLogic.com.au

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29

PEOPLE

IN THE HOT SEAT

Clive Kirkpatrick, general manager of Vow, shares his tips for how brokers can thrive in the current environment, and reels off the South African delicacies he would serve to MFAA CEO Mike Felton

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

The greatest challenge is to get customers to service. We’ve had A some rate cuts, but not many, if any, lenders have implemented the changes released by APRA that allow lenders to service on a base rate plus 2.5% rather than the flat 7.25%. We have seen some lenders move on this, and this is good news. Additionally, I agree with Westpac’s position regarding forensic analysis of expenditure being forced upon lenders as opposed to some form of HEM or middle ground. I really don’t think the work the assessors are doing and the time it is taking to go line by line through a customer’s expenses actually improves the credit decision.

Q

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

I enjoy cycling (although my body doesn’t show that). I also A really enjoy dinner and drinks with friends (my body does show this).

Q

Q A

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

With Mike Felton being from South Africa, I’d serve biltong, boerewors, bobotie and pap.

What are your top survival tips for working in finance?

Resilience is key to survival. We go through ultimate highs and A ultimate lows dealing with customers and lenders, but that is what makes this such a wonderful profession. Brokers need to remain focused on what’s important, and that is providing a holistic solution to their customers. It’s so very important to have a deep understanding of your customer base. This will take a degree of investment in both time and money to ensure you have a contact program and do targeted marketing based on triggers such as interest-only expiries, car lease terminations, and so on. Brokers are given so much information by their customers because they are trusted, and we need to utilise this more effectively because the customer expects us to deliver more. Additionally, if you, as the broker, do not satisfy more of your customers’ needs they will seek out other providers and you will lose part or all of their business.

One lender recently told me that, of all the broker-derived business coming to them, 60% was being refinanced by another broker! As everyone knows, it’s getting more difficult to source new customers, so why would you allow them to leave you so easily? AB

Q

30

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Contact a NAB BDM or visit nabbroker.com.au

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31

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Call your ANZ Commercial Broker Manager to find out more.

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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