Australian Broker 16.18

SEPTEMBER 2019 ISSUE 16.18

The (new) rules of engagement Putting the Mortgage Brokers Bill under the spotlight /16

The business builders How a new aggregation partnership will help SMEs ditch their banks /20

DAVID SMITH AND BRAD CRAMB Aussie Home Loans’ chief customer officer and GM of distribution take on mortgage mumbo jumbo /14

Caught on camera Celebrating the best in commercial broking at the CAFBA Awards /24

ALSO IN THIS ISSUE‌ From the forum Readers have their say on the Mortgage Brokers Bill /22 Housing market data The latest property figures from the Northern Territory /26 In the hot seat Greg Charlwood of Australian Invoice Finance on the importance of BDMs /30

NEWS

IN THIS SECTION

Lenders Financial results confirm fastest-growing lender /04

Aggregators Finance group outperforms competition /06

Technology Online lender launches business payment facility /10 p

Regulators APRA blasted for banking data changes /12

Market Older Australians carrying more debt /08

www.brokernews.com.au SEPTEMBER 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

26 SEPTEMBER

4 OCTOBER

11 OCTOBER

Finsure and LoanKit Victoria PD Day

Deadline to respond to NCCP amendment

MPA Major Banks Roundtable Live Stream

Running from 9am to 2pm, the day is kicked off by GM Simon Bednar as attendees sit down to learn about best practice, compliance, fraud and customer care. Concluding with a networking lunch, the event will showcase a number of lenders, as well as speakers from Macquarie Bank, Impact Consulting and ActivePipe.

Industry stakeholders have until 4 October to respond to the mortgage broker best interests duty and remuneration reforms, after the government announced it would introduce a new duty for mortgage brokers and reform their remuneration. Entry into force of the reforms is scheduled for 1 July 2020.

Join MPA editor Rebecca Pike as she quizzes leaders from the major banks during MPA’s next live-streamed roundtable. The discussion kicks off at 12.30pm, and industry professionals can register to watch it live on the MPA website, or access the recording afterwards at www.mpamagazine.com.au/tv.

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

18 OCTOBER

29 – 30 OCTOBER

30 OCTOBER

Australian Mortgage Awards

AFG National Broker Conference

MPA Non-Banks Roundtable Live Stream

The 2019 AMAs will once again see hundreds of mortgage and finance professionals flock to Sydney’s The Star to celebrate the industry’s best and brightest players over more than 30 categories.

The 2019 event will feature Urzila Carlson, Duke Music and Linden Furnell.

This is the first annual conference for AFG’s broker network since the aggregator announced its merger with Connective.

The 2019 edition is themed ‘AFG Next’ and will cover three focus areas: evolve, excel and experience. The agenda includes thought leadership sessions, education, professional development and networking.

For the second time in October, MPA editor Rebecca Pike will host a live lender roundtable, this time with a panel of nonbanks. Starting at 12.30pm, the discussion will cover trends and opportunities in the non-bank space and can be accessed via www.mpamagazine.com.au/tv.

tel: +61 2 8311 5831 fax: +61 2 9439 4599 subscriptions@keymedia.com.au

ADVERTISING ENQUIRIES

Simon Kerslake +61 2 8437 4786 simon.kerslake@keymedia.com.au Key Media Pty Ltd Regional head office, Level 1O, 1–9 Chandos St, St Leonards, NSW 2065, Australia tel: +61 2 8437 4700 fax: +61 2 9439 4599 www.keymedia.com Offices in Sydney, Auckland, Denver, London, Toronto, Manila, Singapore, Seoul

8 NOVEMBER

10 – 12 NOVEMBER

22 NOVEMBER

FBAA Gold Coast conference

COBA 2019: Stronger Together

MFAA Tas PD day and annual river cruise

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.

The MFAA returns to Tasmania for the first time since August, this time with its annual PD and river cruise day. Delegates will meet at the Hotel Grand Chancellor on Davey Street, and all association members are welcome to participate. Attending brokers will be awarded CPD points for their participation.

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.

50% off selected Resimac Prime Alt Doc risk fees Limited time offer! broker.resimac.com.au Effective for new applications lodged from Monday 19 August 2019. Terms, conditions and credit criteria apply. Offer may be changed or withdrawn at any time without notice.

Resimac Group Ltd. ABN 55 095 034 003. Australian Credit Licence 247829.

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NEWS

LENDERS NEW LOAN PRODUCT FOR RETIREES new drawdown loan facility is on offer from Household Capital that will meet “strong demand” for flexible solutions that enable clients to secure a regular income stream and a lump-sum payment for retirement. The Household Transfer loan also gives retirees the choice to receive their income fortnightly or monthly, at “highly competitive” interest rates. The lender estimates that 439,000 Australians intend to retire in the next eight months, despite average savings being well below the recommended level.

A

BROKERS BOOST LENDER’S BUSINESS BY 86% have been credited with driving an 86% rise in net profit after tax for Resimac. The lender also announced normalised net profit of $31.1m for the year ending 30 June 2019, up 19% from the prior year, and a statutory NPAT of $47.2m.

To capitalise on its popularity with the third party channel, CEO Scott McWilliam said Resimac planned to develop “a market-leading broker service proposition” with a strong emphasis on education.

CREDIT CARD LENDING AT 9-YEAR LOW Source: APRA, CommSec

Credit card loans to households – all lenders $43bn

$42bn

$41bn

$40bn

$39bn

$38bn

$37bn

BROKERS

“Our research suggests that some consumers are taking out home loans when cheaper alternatives may well exist”

Sean Hughes ASIC Commissioner

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January 2011

January 2013

January 2015

January 2017

FINANCIAL RESULTS REVEAL FASTESTGROWING LENDER IN AUSTRALIA In FY19, Tasmania-based Bank of us was the fastestgrowing Australian-owned lender, reporting $145m loan portfolio growth its “record-breaking” full-year results, a customer-owned bank has not only passed the $1bn benchmark in assets under management but has officially become the fastest growing Australian home loan lender in fiscal year 2019.

According to APRA banking statistics, Tasmania-based Bank of us exhibited 19.7% growth in mortgage volumes over the year to June. While HSBC, Bank of Sydney, and Bank of China each charted a higher rate of growth in Australian home lending, they are all foreign-owned.

The increase saw the loan portfolio of Bank of us grow by $145m over the year to reach $849m by year’s end.

IN

The additional revenue from the bank’s strong loan book growth saw the lender achieve an after-tax profit of $2.3m, up by over 40% from the year before.

According to CEO Paul Ranson, the growth was closely linked to digital advancements.

He said, “This year we implemented a new electronic loan processing system enabling us to handle 30% more loans with no additional resources, while maintaining a very high Net Promoter Score from borrowers of over 70.”

Bank of us is Tasmania’s only customer-owned banking institution and next year celebrates its 150-year anniversary. The bank underwent a rebrand in December

January 2019

2017, which saw it change its name from B&E building society to Bank of us. This was followed by an overhaul of its product portfolio and the launch of a no-frills mortgage product.

The wider simplification of its lending products was intended to make them more ‘un-bank-like’.

“We’re the oldest customerowned banking institution in Australia. Our original purpose was to provide housing finance to Tasmanians so they could build their own homes,” said Ranson.

“Now, we’re in the enviable place of being able to hold true to our original purpose and deliver a full range of competitive banking products and services.

“We believe that Tasmanians deserve the opportunity to bank with a locally owned and operated customer-owned bank. We intend to remain customer-owned, operating our business within Tasmania, and to maintain our focus on placing people at the heart of banking.”

NEWS

A G G R E G AT O R S AGGREGATOR ADDS SEVEN LENDERS TO PANEL has added seven new lenders to its panel. The lenders are OnDeck, SocietyOne, Bigstone, Scottish Pacific, VWFS, Judo Capital and Branded Financial Services. The aggregator also welcomed LFI Group as a provider of vehicle equity insurance for total vehicle loss and loan protection insurance. Director of aggregation and strategic partnerships Damian Mantini said, “Whether it’s an SME or larger organisation, we have specialist lenders on our panel that can provide a solution.”

PLATFORM FINANCE

PARTNERSHIP TO ENHANCE BUSINESS LENDING has partnered with Limba Loans, boosting the small business lending portion of its loan and financing portal. Limba joins the likes of SocietyOne, Moneyplace, Liberty Financial, ANZ and other lenders already on the Loanstoday platform. The new partnership will introduce fast, short-term loan options for between $5,000 and $100,000 to brokers already working with small businesses and those who wish to diversify into the small business lending space.

LOANSTODAY

FINANCE GROUP OUTPERFORMS THE COMPETITION Following upgrades to products and systems, BNK Bank, Better Choice and Finsure all recorded market share and bottom-line growth the integration of three businesses in a little over 12 months, an aggregation and banking group has confirmed that it “materially outperformed system and ASX-listed peers” in the last financial year.

BNK Banking Corporation delivered a net profit after tax of $3.6m after the merging of the staff, processes and products of BNK Bank, Better Choice Home Loans and the Finsure aggregation group.

BNK also reached a major milestone in June 2019 of $40.6bn in loans under management, an increase of 18.9% from FY18.

Aggregation business Finsure grew its number of loan writers by 16.7% on the previous year, FOLLOWING

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increased settlements to $12.6bn and saw its market share rise to nearly 4%.

Overall, the business grew cash and liquidity holdings by 111% to $98m to position for FY20 growth.

BNK managing director Simon Lyons said the successful financial results were driven by the post-merger scale, market share gains and accelerating loan book growth.

“This result has been nearly four years in the making, which has seen us invest in technology and smart people to improve processes and create efficiency,” he said.

Looking ahead, Lyons shared that the bank’s target market would continue to be “enterprising Australians”.

“These are customers who have unique needs and often, by nature of their employment or business arrangements, have complex or unusual financial affairs,” he explained.

“They are high-value customers, but often bigger banks have little capability to properly assess and understand their position. We aim to keep building our systems and processes and employ good people who can properly assist them with faster turnaround times than other banks, and in a more personal way.

“This is an underserviced market,” he added.

The results were released only weeks after Finsure confirmed the rollout of its new CRM platform, Infynity. The enhanced CRM creates a centralised platform for third party application integration, allowing brokers to connect with their own partners as well as a range of other service providers that have chosen to partner with Finsure Group.

“Ultimately, professionalism is about putting the customer first and then designing your business, processes and what you do around that” Stephen Moore CEO, Choice Home Loans

WE’LL BACK YOU TO SUCCEED

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We’ll connect you with the best people, platforms and processes. We’ll enable you to add capabilities that expand your business offering, diversify your revenue and strengthen your relationships with clients.

FIND OUT MORE ABOUT PLAN AUSTRALIA Visit planaustralia.com.au YOUR PARTNER IN PROGRESS Professional Lenders Association Network of Australia Pty Limited (PLAN Australia) ABN 99 086 490 833, as trustee for the PLAN Australia Unit Trust trading as PLAN Australia. PLAN Australia is a Credit Representative (No. 392535) of BLSSA Pty Ltd ABN 69 117 651 760, Australian Credit Licence 391237. A150237-0619TA

NEWS

MARKET NATIONAL HOME VALUES HIT TWO-YEAR HIGH CoreLogic August home value index results released on 2 September showed that national dwelling values increased by 0.8% over the month, the first monthly increase since October 2017.

“With housing credit restrictions easing and mortgage rates likely to reduce further, this rebound could potentially turn into a ‘v-shaped’ recovery”, said CoreLogic research director Tim Lawless. Housing values increased across five of the eight capitals over the month, but slipped lower in Adelaide, Perth and Darwin.

THE

FIRST HOME BUYERS DRIVE ACTIVITY SPIKE recorded its highest volume of transactions in August despite a seasonal slowdown, attributing the spike to first home buyers.

Guarantees can be issued for up to 10% of the purchase price, with settlement terms of up to 48 months. General manager Grant Bailey said, “It’s a seamless process. You’re always in the front of the queue because you don’t have to wait on anything.

It’s all done through the system.”

DEPOSIT POWER

“Having a diverse workplace encourages a wider range of skills and experience, and supports improved performance and a higher staff retention rate” John Mohnacheff Group sales manager, Liberty Financial

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OLDER AUSTRALIANS CARRYING MORE MORTGAGE DEBT Record-breaking debt is now held by those aged 55 and older, leading to more people being forced into longer working lives mortgage debt carried by Australians aged 55 years and older has ballooned by 600% over recent years.

The figures were released in a research paper published last month by the Australian Housing and Urban Research Institute (AHURI).

Between 1987 and 2015, average real mortgage debt among older Australians soared from $27,000 to more than $185,000, while ratios of mortgage debt to income tripled from 71% to 211%, according to AHURI. “Our research finds that back in 1987, only 14% of older Australian homeowners were still paying off the mortgage on their home; that share doubled to 28% in 2015,” said THE

professor Rachel ViforJ of Curtin University, the report’s lead author.

“We’re also seeing these older Australians’ mortgage debt burden increase from 13% of the value of the average home in the late 1980s to around 30% in the late 1990s when the property boom took off, and it has remained at that level ever since.

“Over that time, average annual mortgage repayments have more than tripled from $5,000 to $17,000 in real terms.”

Higher mortgage debt later in life presents challenges for the government and its retirement incomes policy. One of the “increasingly likely outcomes” of the trend revealed by the research is that Australians are being forced

into longer working lives.

The research also suggested that older mortgage holders were prepared to burn through their superannuation to bolster the wealth stored in their home equity by paying down their mortgages.

However, it highlighted that allocating a superannuation balance to paying off debt rather than towards sustaining income in retirement would increase pressure on the age pension system and do so at an increasingly rapid rate as growing numbers of Australians retire with significant debt still owed against the family home.

A week before the release of this report, AHURI published figures it concluded were proof that younger Australians feel homeownership is out of reach.

The Australian Housing Aspirations survey found that both emerging adults (18–24 years) and early adults (25–34 years) feel that homeownership is too distant a goal to be achieved without renting out spare rooms or sharing space.

MARKETING UPDATE

INTRODUCING THE CASE OF THE TRIPLE HURDLES… Aaron Milburn, Director of Sales and Distribution, shares how Pepper Money’s recent rate promotion was able to help a selfemployed customer with previous financial difficulties and unusual income.

Meet Geoff Geoff had previously gone into bankruptcy because one of his largest creditors closed and did not pay. He had lost pretty much everything – including his home. Despite this he worked hard, met all his obligations, and had been successfully discharged from bankruptcy for 12 months. He then decided to start a new consultancy business. Recently married, his new wife Lisa had a commission only job.

After 12 months he had a clean credit record and his consultancy business was ticking along nicely. Lisa had also been working hard and had received her commission payments for 12 months.

Having saved up a small but

acceptable deposit the couple were keen to see if they could look at buying a house. But the banks were telling Geoff he needed to wait up to 8 years to get a loan again.

Geoff was feeling pretty down; the bankruptcy experience had been hugely stressful. He felt he couldn’t move forward. Looking for other options, Geoff approached a broker. Thankfully the broker knew about Pepper Money and their approach to helping people in difficult circumstances.

Successfully jumping the hurdles Although Geoff had a history of financial problems, it was clear to Pepper he had run a good business. He had worked hard

to recover and had maintained a clean credit record. His consultancy business income fluctuated monthly but it was clearly stable, and although Lisa was on commission she had been earning a steady income.

With the deposit they had saved, a good savings record and their combined income levels, Pepper Money was able to help Geoff and Lisa buy their new home with a Near Prime loan. What’s more, Geoff and Lisa qualified for Pepper Money’s current rate promotion, available until 11 October for Prime and Near Prime loans – which meant they were also able to receive a discounted rate.

Commenting on the decision to launch this rate promotion, Pepper Money’s Director of

Sales and Distribution, Aaron Milburn says, “The reality is, we know that the right rate can make all the difference for both the broker and the customer. We fundamentally believe in a broker’s ability to change people’s lives. That’s why we launched this promotion.

Because it enables brokers to help more families achieve their dream of home ownership.”

If you have a client you suspect may need a specialised Prime or Near Prime solution, contact your Pepper Money BDM or our dedicated Scenarios Team today at scenarios@pepper.com.au. All applications lodged under this promotion must be received by 11 October 2019.

NEWS

TECHNOLOGY

SPECIALIST LENDER’S NEW DIGITAL PORTAL has launched a digital loan portal, Introducer Connect, marking the start of a digital initiative to invest in the broker distribution network.

Through the portal, brokers can view real-time loan status, action dates and key loan data such as outstanding balance, available funds, LVR, repayments and terms.

RedZed head of sales Adrian Fisher said, “We are pleased to announce a gateway for simpler and quicker communication.”

REDZED

Aris Allegos, CEO, Moula

ONLINE LENDER LAUNCHES BUSINESS PAYMENT FACILITY “Data-driven business lending expertise” behind the launch of Moula Pay, designed to support a wider supply chain online business lender has launched a “buy now, pay later” product to fill a gap it has identified in the SME credit space.

Moula conducted a study of 500 business owners across Australia, which revealed that more than 40% took longer than 30 days to pay their dues, highlighting the need for extended payment terms.

At the same time, a significant portion of business owners indicated that they struggled to provide extended payment options in-house due to their own cash flow concerns, limited credit knowledge and overhead costs.

The new product, Moula Pay, steps into this gap to enable merchants to offer affordable payment terms to certain business customers.

AN

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The arrangement is designed to benefit all parties: merchants are paid upfront by Moula, and business customers have improved cash flow, with 12 months to repay the debt rather than one, and the first three months interest and repayment free.

Moula CEO Aris Allegos said, “We know how hard it is for Australian businesses to access funding to support day-to-day operations, and there’s opportunity on both sides of the merchant and business customer relationship with Moula Pay. “We’ve evolved our data-driven business lending expertise, creating Moula Pay to address SME payments pain points, effectively doubling support for good Aussie businesses by backing merchants and simultaneously getting behind their

good business customers as well.”

Moula Pay is available to businesses with an active ABN or ACN that have been operating for a minimum of six months and generate more than $5,000 in monthly sales. Approved businesses can purchase up to $250,000 worth of goods and services.

“Merchants [who participate] are able to outsource their credit management functions more cost-effectively than typically administering payment terms in-house. They’ve also opened the door to the significant pool of SMEs seeking to spend more on business purchases if they had additional funds and longer to repay,” said Allegos.

Moula suggests its new service can be used by businesses to get stocked as retailers, buy equipment, pay for services, or buy materials for projects. Established businesses, including wholesalers, manufacturers, retailers, trade and professional services, can apply to become an approved merchant.

NEOBANK GETS FULL BANKING LICENCE “100% digital” neobank Xinja has received its full banking licence from APRA. Xinja has been operating under a restricted licence since December but can now offer a transaction account via the Xinja app. Stash, a savings account, will follow soon with loans due for launch in the first quarter of 2020. Founder and CEO Eric Wilson said, “This is what banking should be. Hyperpersonalised services that leverage customers’ data in their interests.”

THE

NEWS

R E G U L AT O R S

ASIC’S BEGINS LITIGATION BLITZ is to take three banks to court over the coming months as its post-royal commission litigation drive begins. Major bank NAB will be hauled before the court for its Introducer Program, which saw 25 non-licensed reps accepting documents and information for 300 loans. The regulator will also sue Bendigo and Adelaide Bank and Bank of Queensland for their use of “unfair” contract terms for small business loans.

ASIC

APRA BLASTED FOR CHANGES TO BANKING DATA REPORTS Analyst says revised method of capturing data makes it nearly impossible to track trends

new monthly banking data has come under fire for its lack of transparency, with some in the industry saying it is “designed to hide, not inform”.

The regulator released the first edition of its new Monthly Banking Statistics at the end of August, replacing the old system and introducing changed metrics for data measurement moving forward.

Financial analyst Martin North has called the changes “rubbish”, noting that the revised method of reporting data makes it nearly impossible to track trends.

North said APRA’s new reporting thus served as a “series break” to begin a new bracket of data moving forward and distance the APRA’S

BROKER ACCOUNTABILITY PROJECT LAUNCHED has launched a ‘mortgage ASIC broker accountability’ initiative as part of its prioritised regulatory agenda for the next four years. The initiative is described as “Examining mortgage broker accountability for home loan recommendations, and whether those recommendations align with consumer requirements and objectives”. ASIC chair James Shipton said, “The public expects financial firms to treat Australians fairly and live up to the expectations of the community and the law.”

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figures from the past.

The altered Monthly ADI Statistics (MADIS) for July 2019 included an expanded data set covering domestic and foreign banks, building societies, larger credit unions and other ADIs. The first data revealed a significant shift from owneroccupied to investment housing loans. However, the regulator noted that the movement was expected due to a change in the definition of ‘owner-occupied’.

According to APRA’s glossary: “Owner-occupied are loans to resident households for the purpose of housing, where the funds are used for a residential property that is occupied or to be occupied by the borrower(s) as their principal place

of residence. The principal place of residence means the residential property at which an individual resides for the majority of the year.”

An APRA spokesperson explained, “The reference to ‘principal place of residence’ is a new reporting requirement. As such, loans previously reported as owner-occupied are now reported as investment.”

According to the MADIS report, the value of owner-occupied loans in July fell by 5%, while investment loans rose by 16% and total lending went up more than 2% to $1.72trn.

The new reporting methods were most clearly in evidence at the major banks, as Westpac showed the largest switch, with nearly $40bn disappearing from its owner-occupied loan book.

“This is meaningless,” said North. “Given the size of the changes, it is impossible to tell what is happening within individual lenders.

“Frankly, this is a joke, and I feel it is designed to hide, not inform.”

ASIC’S BUDGET ALLOCATION BY INTENDED ACTIVITY 2019–20 Source: ASIC

11% Registry

9% Engagements with stakeholders

2% Policy advice 29% Supervision and surveillance

43% Enforcement 1% Education

Proportion of 2019–20 estimated effort by activity

2% Guidance 3% Licensing

%

%

pa

pa

%

%

pa

pa

FE AT URES

SPECIAL REPORT

BATTLING THE MORTGAGE MUMBO JUMBO

As many as 79% of homebuyers say the buying process is harder than ever, but Aussie Home Loans is on a mission to reverse the trend. Chief customer officer David Smith and GM of distribution Brad Cramb reveal the details to Australian Broker Aussie Home Loans launched in February 1992, Australia was only five months out of a year-long recession during which GDP fell by 1.7%, employment soared above 11% and home loan interest rates hit 17.5%.

When the brokerage opened its doors, it did so while promising, “We will save you”.

“It was about saving people from the lack of choice and lack of competitive prices available in the market,” says chief customer officer David Smith.

It was a bold claim, but it won the hearts of millions, and the famous tagline is still in use today. However, WHEN

by finding the right deal in the marketplace for them,” Smith adds.

In creating its mission statement, Aussie has conducted extensive research around consumer sentiment and aspirations. The latest, which surveyed 2,000 people in July of this year, concluded that a significant confidence divide exists between genders, generations and even those who have and have not purchased property in the past. For example, 68% of first home buyers lack confidence when it comes to property purchases, and 79% believe that buying a home is harder than ever.

Other research concluded that 70% of people describe the home buying

“Our mission is today is ... about saving customers from complexity, confusion, or feeling like they’re on their own” David Smith, chief customer officer, Aussie Home Loans in the current climate it has taken on some additional relevance.

“Our mission today is no different to what it was then. It’s about saving customers from complexity, confusion, or feeling like they’re on their own. We will save them from perhaps getting ‘expert’ advice from people who aren’t necessarily experts, as well, of course, as the more traditional approach of we will also save our customers some money 14

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process as negative and 29% are even delaying their purchase because of the perceived difficulty of the process.

A mere 20% from the sample planned to buy in the next year.

Further, when it comes to the role of the broker, the application process is viewed as the “hardest and most stressful part” of the home loan journey, and proactive broker communication is highly valued by customers.

The results form the backbone of a brand campaign launched earlier this month, which urges consumers to “battle the mortgage mumbo jumbo” by talking to an Aussie broker.

It is the first campaign since Aussie recruited CHE Proximity to handle its branding and communications as well as broker-to-customer marketing.

“We are really honing in on those customer insights, and we are going much more multichannel with our media strategy to get an even greater reach with the brand through this campaign. Bigger scale, better targeted,” says Smith.

It isn’t the first such campaign.

In September 2018 the brokerage enticed customers with a moneyback guarantee: if you’re not satisfied with your Aussie broker experience, you will get $100. Confident in the promise, CEO James Symond personally voiced the radio ads.

Adapting and responding Setting the future agenda for the business, Aussie is also in the midst of launching its latest three-year strategy, covering a period that will include further legislative changes, the next broker remuneration review and potentially a new government.

Given the unprecedented level of change that has occurred over recent months, who knows what else could be added to the schedule.

Regardless, Aussie’s focus is to sustain a customer-led business.

Taking a top-down approach

to the task at hand, Aussie will focus on meeting the needs of its brokers and franchisees. However, in today’s operating environment banks and financial organisations aren’t compared to their industry competitors but to the fast, easy, personalised service promoted by ride-share, food delivery and travel apps.

“Unlike the neobanks, many incumbent institutions need to update longstanding technologies and systems to meet these demands.

This can be a challenge for financial services and banking in particular, especially when the mortgage market is more difficult than ever. However, it’s also a major opportunity for progressive companies like Aussie,” says Smith.

The same message was shared by ANZ’s CEO, Shayne Elliott, when addressing Aussie’s annual broker conference in mid-August, and it will form the basis of a series of upgrades to Aussie’s broker platform as well as its loan products.

For example, having identified how customers feel about the application process, new technologies and online tools for brokers are now under development.

“A standardised and systemised way for brokers to manage their business is key,” says Brad Cramb, general manager of distribution.

“Understanding how and when to make contact as dictated by customer need is something we speak to our brokers about often. The best

In partnership with

From left: Aussie Home Loans’ GM of distribution Brad Cramb with chief customer officer David Smith

brokers operate with standardised processes and systems which are built around customers.”

The lender panel is also constantly adapting to market trends. This year, in response to local broker feedback, two new lenders joined the panel, Keystart and Homestart, in WA and SA respectively.

Competitive advantage With the government now fasttracking Commissioner Hayne’s recommendations, several key pieces of legislation are expected over the coming months, and Aussie has invested an “unprecedented amount of money” in creating a

about supporting this growth. We’ve developed support structures that will play well into this changing future and help our brokers grow their businesses and develop customers for life.

“Aussie is riding the wave of change,” says Cramb.

Over the past 18 months considerable work has been put into the risk and compliance framework to help brokers demonstrate that they are working in the customer’s best interests.

“Without this kind of broker support, it’d be pretty lonely and hard to operate out there,” says Cramb.

With its vertically integrated

“Our focus shifted from growth to sustainability. Our primary goal became doing the right thing by our brokers and stores” Brad Cramb, GM of distribution, Aussie Home Loans competitive advantage for its brokers and customers.

Elaborating, Cramb says the funds have been channelled into “quality assurance through systems, processes and people”, such as the broker Quality Dashboard. Supporting this, a Broker Excellence Program has been developed for ongoing education and PD. “Aussie is built on small businesses, and we’re passionate

ownership under the spotlight, the royal commission fallout hit Aussie particularly hard, and its network has contracted to almost 10% as a result, counting 900 brokers currently.

However, an “evolved” recruitment, induction and onboarding approach has been implemented, and in the first half of FY19 Aussie exceeded its target to open 10 new stores.

While recent attention has fallen on renewals and resigns, footprint growth is the next focus, with a pipeline of interested franchisees and a map of market growth pockets, which will see an emphasis on the eastern seaboard and South Australia, where Aussie’s largest store is located.

The next piece of the puzzle will involve a reallocation of resources to support “more tenured stores and brokers”, allowing them to scale their businesses.

“Our focus shifted from growth to sustainability. Our primary goal became doing the right thing by our brokers and stores in helping them grow and continue success in a time of uncertainty,” says Cramb.

Despite the challenges, in the months following the royal commission Aussie Home Loans recorded its strongest financial results in its history, with its loan book approaching $65bn. The book’s next phase of growth will no doubt be supported by the launch of two white label loans: Aussie Activate and Aussie Elevate.

“We understand that we had to evolve, and we’ve been undergoing this period of change and progression for the past 18 months. We used this time to reset, not rebuild, because what Aussie has built is distinct and successful.

We’re looking forward and see the opportunities to grow across the country – we’re open for business,” says Cramb. AB

KEY BUSINESS METRICS

1992

Aussie Home Loans opens its doors, promising “we will save you”

900

brokers in the network currently

11

new stores opened in the first half of 2019

24

lenders on the panel

3

own-branded products

290

specialist support team members

www.brokernews.com.au

15

FE AT URES

NE WS ANALYSIS

THE (NEW) RULES OF ENGAGEMENT

The draft Mortgage Brokers Bill gives the third party channel an unprecedented opportunity to shape the future of lending, but will the regulators listen? Australian Broker examines the proposals and what they could mean for brokers and borrowers

18 August, the government announced it would fast-track its response to the royal commission’s recommendations with a wave of new legislation that Treasurer Josh Frydenberg promised would be finalised before the end of this year.

Then, on 26 August the draft National Consumer Credit Protection Amendment (Mortgage Brokers) Bill 2019 and draft regulations were released for public consultation.

The contents are extensive (see box) and tackle top-line industry issues resulting from the royal commission, including the mortgage broker’s best interests duty and new rules around clawbacks.

The Bill would also enshrine three changes to mortgage broker remuneration: requiring the value of upfront commissions to be linked to the amount drawn down instead of the loan amount; banning campaign and volume-based commissions and payments; and capping soft-dollar benefits.

In total, 16 obligations are listed in the Bill, and many elements echo the recommendations of the Combined Industry Forum.

Contravention of any single obligation carries a maximum fine of 5,000 penalty units. The rules apply to both mortgage brokers and mortgage intermediaries.

In a letter to members, MFAA CEO Mike Felton said the proposals gave “legislative effect to reforms already implemented by the CIF”.

The association is now receiving “appropriate legal advice to assist in fully determining the impacts and potential unintended consequences”. It is also hosting ON

16

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broker roundtables and seeking feedback from its National Aggregator Forum.

The Bill’s reforms are scheduled

In response Dozens of industry players – including lenders, aggregators, associations and brokers themselves

“Why should the broker shoulder that cost? If a broker hasn’t done anything wrong, there shouldn’t be a clawback” Mark Haron, director, Connective to take effect on 1 July next year.

Yet, when it comes to implementation, the draft Bill and its supporting documents remain light on detail, clarifying several times that resulting legislation “will not have uniform application”.

– have stated their intentions to submit a response to the draft, among them the FBAA. “[Our submission] … will relate to the use of certain terminologies needing to be removed,” says FBAA managing director Peter White.

“Also, we will be looking at the maximum penalty units applied for breach of the best interest duty, how clawbacks impact best interest duty and acting responsibly in lending, and the three-year review needs to align with the agreed-upon focus to ensure we can have confidence in the future of our industry.”

Following his extensive liaison with government since Commissioner Hayne’s final report was released in February, White is confident the industry will be listened to.

“I believe so on the premise that government listens to the industry and won’t push forward without considering the submissions they will receive,” he says.

Welcoming the proposals, NAB general manager of broker

THE BILL IN BRIEF Source: MFAA

Mortgage brokers must act in the best interests of consumers when providing credit assistance in relation to credit contracts.

Where there is a conflict of interest, mortgage brokers must give priority to the interests of their customers.

The value of upfront commissions will be linked to the amount drawn down (net of offset) instead of the loan amount.

Campaign- and volume-based commissions and payments will be banned.

‘Soft dollar’ benefits will be capped and clear regulations applied to activities that constitute such benefits, including entertainment and legitimate educational activities.

The period over which commissions can be subject to clawback from aggregators and mortgage brokers will be limited to two years. Passing the cost of clawbacks on to consumers will be prohibited.

Peter White, managing director, FBAA

partnerships Anthony Waldron says, “We were one of the first banks to make positive changes to several areas, including commissions, incentives and education, as outlined in the ASIC broker remuneration review.”

Meanwhile, AFG CEO David Bailey says, “We are confident the government understands the need to maintain a competitive lending market, and we look forward to engaging with policymakers to ensure the development of legislation is considered.”

Conflicts and clawbacks There is no objection to the idea that conflicts of interest are bad for the consumer, and the new rules around soft-dollar benefits reflect the proposals put forward by the CIF. However, clawbacks are dividing the industry, with many brokers questioning why it is necessary for them to shoulder the cost of a bank recovering its upfront expenses.

While some hope due diligence will help them avoid such a situation, others have highlighted that again it is the “middleman”

Mark Haron, director, Connective

being squeezed, rather than the lender.

With the possibility of a single clawback reaching into the tens of thousands, their points are valid.

However, if the draft provides any insight, it’s that the law will be explicitly clear on the broker bearing this cost.

That means brokers cannot pass on the cost disguised as a “client

Aaron Milburn, director of sales and distribution, Pepper Money

happened, the clawback should come back to the broker.

“If it’s something a bank or customer has done, then why should the broker shoulder that cost? If a broker hasn’t done anything wrong, there shouldn’t be a clawback.”

Interpreting principles Previously, the Productivity Commission, the CIF and the

“Problems occur when legislation is rushed, and the appropriate due diligence isn’t afforded because of lack of time” Peter White, FBAA managing director fee”, nor can they charge a refundable upfront fee to protect their margins.

In a broker webinar conducted earlier this month, Connective director Mark Haron said, “Clawbacks need to be structured more fairly. If it is occurring because of what a broker has done or a consequence of what has not

royal commission have all examined the best interests duty that emerged from the Future of Financial Advice (FOFA) regulations with a view to brokers potentially operating under a similar framework.

However, while FOFA is prescriptive, the best interests duty proposed in the draft Bill is not.

Essentially, that means all previous broker-specific research that has been conducted on this topic has so far been ignored.

The Bill states that the best interests duty “is a principle-based standard of conduct that applies across a range of activities that licensees and representatives engage in”.

That also extends to credit cards and personal loans packaged with the mortgage, as well as unsecured credit for any renovation work on the property.

“Consistent with [Hayne’s] recommendation … the duty does not prescribe conduct that will be taken to satisfy the duty in specific circumstances … It is the responsibility of mortgage brokers to ensure that their conduct meets the standard of ‘acting in the best interests of consumers’ in the relevant circumstances,” it reads.

While many brokers welcome the opportunity to prove the value they bring, this has become a sticking point: there is no clarification around how many loans should be presented to a client, and no clear definition of how “best interests” www.brokernews.com.au

17

FE AT URES

HAVE YOUR SAY Source: Treasury

In its guidelines for those who wish to submit a response, Treasury says, “Your submission is not automatically accepted and published. Treasury may take several weeks to consider and process your submission. said, “The banks would never be able to meet a best interests duty because they can only offer their own products. Brokers should wear the duty as a badge of honour.”

“If accepted, most submissions are published on Treasury’s website with the name of the submitter. If your submission is published, the information in it, including your name, can be searched for on the internet.

“You cannot withdraw or alter your submission once the committee has published it.”

Interested parties can submit responses to: ConsumerCredit@treasury.gov.au.

should be interpreted.

In the absence of hard and fast rules, associations and aggregators advise that brokers should take plenty of notes to ensure an accurate and verified record is kept of every conversation.

Brokers should also take reasonable measures to check they have all the borrower’s information before making any recommendations: check bank statements to see if other loan payments are coming out; document the recommendation process and conversation; and, much like in a high school maths exam, show your working out as well as your answer.

Advising brokers on how they should approach the evolving resi environment, White says they “should stay focused on doing the right thing by their clients, as they already do”.

“Brokers should stay diligent in the direction they want their business to take, remember compliance is king, and ensure they are providing clients with a good choice of loan options from the outset. The industry and aggregator will sort the rest out for them,” he adds.

Badge of honour Given that ASIC lost its responsible lending case against Westpac due 18

www.brokernews.com.au

to its misinterpretation of the law, the first test of a principle-based best interests duty in the courts will make for interesting viewing.

No doubt aware of this, ASIC is already moving to push its interpretation of what “best” should mean, publishing extensive consumer research only days after the draft Bill emerged.

When pressed by Australian Broker, chief commissioner

mean “low or competitive interest rates and/or the [low] cost of a loan”.

The remaining responses varied, with ASIC stating that “many related to flexible features”, including the ability to redraw or make extra repayments and, last on the list, being presented with a product that is suitable for their individual needs.

Sensing trouble ahead, Haron

“Taking learnings from other countries, such as what happened in Canada, also assists both regulators and the industry” Aaron Milburn, director of sales and distribution, Pepper Money Sean Hughes maintained that the timing was nothing more than coincidence, as the research work had commenced some months earlier.

The results show that, although brokers have long been bound by the unsuitability test, customers tend to prioritise price over “suitability”. Around 60% of 2,300 respondents to the ASIC survey said they expected “best” to

clarifies that the duty is about “best interests” and not best in terms of product.

He says, “Principle-based [legislation] is good from a conceptual perspective, but we need a more prescriptive structure.

We need regulatory guidance around that.”

However, that doesn’t mean he is opposed to the duty in and of itself.

During the Connective webinar, he

The last word In the royal commission’s final report, Hayne made a total of 76 recommendations, of which 54 were directed to the government and 40 required legislation.

The draft Bill is the first wave of that legislation, and its consultation period comes to an end in a little under two weeks.

“Brokers should take the opportunity to have their say.

Engaging with their industry associations and staying across the debate will help develop the most appropriate outcomes,” says Pepper Money’s director of sales and distribution, Aaron Milburn.

“Workable regulations come from proper consultation with the industry – lenders, brokers and consumers alike. That way, any unintended consequences can be identified and worked through.

Similarly, taking learnings from other countries, such as what happened in Canada, also assists both regulators and the industry.”

However, concerns remain over the speed at which the government is looking to pass the Bill.

White says, “Problems occur when legislation is rushed, and the appropriate due diligence isn’t afforded because of lack of time to completely understand the impact of what is being proposed.

“There is a balance between not wasting time and taking things to completion and ensuring the right amount of work has been done to come to an informed and appropriate outcome.” AB

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19

FE AT URES

BUSINESS TALK

THE BUSINESS BUILDERS

Supporting mortgage brokers to reach beyond resi, FAST has added a new alternative lender to its panel, OnDeck Australia.

CEOs Brendan Wright and Cameron Poolman explain why it’s a match made in heaven for SME clients one buzzword has dominated 2019, it’s diversification.

From customer bases to team composition and the range of services offered, business is anything but usual. But it isn’t just brokers stepping into new territory – lenders and aggregators are hot on their heels, too.

In a roundabout way, the trend can be linked to the royal commission and the large number of mortgage brokers wanting to diversify their specialisation – and income.

This has led to a rise in brokeroriginated commercial lending, non-bank lending and specialist finance options for businesses. It has seen traditional banks become second choice and buoyed the alternative finance sector to the point where it can almost be considered mainstream.

“Each client business is looking to do different things. They could be looking to purchase inventory, refurbish their store or hire more staff. Accessing finance conveniently and quickly is important,” says OnDeck Australia CEO Cameron Poolman.

Capitalising on this demand, in July FAST recruited OnDeck to its panel of more than 30 lenders.

Adding to an already-diversified and extensive panel, the partnership arose from the need for the aggregator’s 1,254-strong network of brokers to get ahead on new marketplace dynamics, says FAST CEO Brendan Wright.

“We spent a number of years working through what a partnership would look like, and what sealed it was the need to deliver to brokers a short- and mid-term funding product,” says Wright.

“One of the things that has been IF

20

www.brokernews.com.au

core to FAST’s strategy and value proposition is providing brokers with diverse options to meet more of their clients’ needs. Alternative finance businesses like OnDeck obviously provide that and are highly important

the things it can fund and the flexibility of terms.

However, for Wright there was another element of this partnership that took equal precedence: OnDeck’s approach to clear

“[A client business] could be looking to purchase inventory, refurbish their store or hire more staff. Accessing finance conveniently and quickly is important” Cameron Poolman, CEO, OnDeck Australia in delivering access to finance in an efficient way for SMEs.” Client needs are complicated and varied, especially in business lending. They range from the size of the loan to the speed of its delivery,

communication when informing the broker of exactly how its clients’ needs are being met.

“OnDeck is very good in its processes and systems. They respect that the primacy of the relationship

sits with the broker, so they ensure that communication is with the client via the broker during application and importantly at renewal,” Wright says.

Supporting the process from start to finish is a sophisticated tech system.

OnDeck underwrites small business loans using its proprietary credit-scoring methodology, the OnDeck Score. The model that sits behind OnDeck Score uses thousands of data points to identify the financial fitness of potential borrowers, specifically looking at things like cash flow, credit history and various other business attributes. This allows brokers to provide appropriate offers to borrowers that it knows are within their repayment capacity.

Growth ideas Brokers who are yet to diversify from mainstream and resi lending could benefit from looking at the latest statistics.

Figures from the Australian Small Business and Family Enterprise Ombudsman confirm that small businesses – those with 19 employees or less – account for 97% of all Australian businesses by employee count. Medium-sized businesses account for 2.4%, and 0.2% can be classed as large businesses.

That means a broker can expect that anywhere between 20% and 25% of their resi-mortgage clients will also be SME owners.

“Talk to them; ask them how their business is going and the challenges they face,” says Poolman.

“I speak with SMEs every week,

INCREASED DEMAND FROM SMES FOR FINANCE FROM ONLINE LENDERS Source: Honeycomb

SME business loan sources Although banks are the most prominent source of business finance, there is growing interest among SMEs in finance from online lenders, with one in five likely to consider one in the future Bank (local or national) Personal funds (savings, super, etc.)

Specialist finance (working capital solutions, invoice discounting, export finance, etc.)

Online lenders Credit cards

61%

32% 15% 11% 30% 17%

Credit unions Family and/or friends Other

65% 73%

23%

27% 21% 13% 6%

24% 22%

20%

19%

8%

18%

13%

13%

5%

6%

7%

Considered in the past

Applied for in the past

Will consider in the future

Brendan Wright, CEO, FAST

and it’s the highlight of my week.

Whether they’re running a cafe, a restaurant, a retail shop or a smash repair, there are always interesting things happening. SME owners love to talk about their business, so having that conversation builds a fantastic rapport between broker and customer.”

While SME owners may love their work, they don’t always love their bank.

In a research exercise conducted in 2019, OnDeck discovered that 40% of SME owners have sought business finance in the past, with varying degrees of success. In fact, 23% of those questioned were rejected by a bank and, unsure of where to turn next, sourced funds through family and friends (33%) or a credit card (32%).

It paints a clear picture of demand for both funds and support.

“Traditional funders aren’t focusing on small businesses. They are looking at prime business, but not the general population of SMEs. There is a gap there in the market for online lenders such as OnDeck to provide finance

Cameron Poolman, CEO, OnDeck Australia

for these customers,” says Poolman.

Additional research saw OnDeck engage with brokers through a series of focus groups, during which they explained what they look for when pairing a client with a lender.

“Brokers are looking for speed of funds, flexibility in the models and policies, and the ability to meet the

already delivers $7bn in business lending solutions, and that figure will no doubt rise following its latest partnership.

However, despite having several non-bank and alternative business lenders on its panel already, the aggregator will continue to educate its network, with OnDeck on hand

“It has been phenomenally successful and appropriate that lenders like OnDeck keep the more traditional funders on their toes” Brendan Wright, CEO, FAST specific needs of their clients. They are also looking for competitive rates and broader lending requirements; they want open communication and they want transparency with the business developer,” says Poolman.

Building capability As one of the most prominent commercial aggregators, FAST

at future FAST PD days.

“We are already seeing a large uptake from a number of brokers to offer these services, and our role is to educate and support all brokers through that,” says Poolman.

“We have invested a lot in getting our business developers to walk brokers through what’s required for these types of loans

and the process you go through – really assisting the brokers and their customers.”

Hand in hand with education, Wright advises brokers to approach their own business expansion in the same way as they would with a client business – assess, research and respond.

“It’s about having capability to diversify. You can be a broker business with a growth idea, but you need to look at what must change in the business in order to enable that to happen,” he adds.

Diversification isn’t the only buzzword of 2019 – competition has also been a hot topic. With more lenders on the market than ever before, Wright says the emergence of non-traditional and non-bank alternatives presents a win-win for all parties.

“It has been phenomenally successful and appropriate that lenders like OnDeck keep the more traditional funders on their toes.

Competition creates opportunity, options, and, more importantly, innovation and growth,” he says. AB www.brokernews.com.au

21

PEOPLE

Get involved in the discussion Share your thoughts at

brokernews.com.au

FROM THE FORUM

Top comments from trending stories on brokernews.com.au

INDUSTRY RESPONDS TO MORTGAGE BROKERS BILL Treasury has released draft legislation outlining a best interests duty and remuneration reforms for mortgage brokers. While many in the industry are still working through the finer points of the NCCP Amendment (Mortgage Brokers) Bill 2019, several participants have weighed in, among them AFG CEO David Bailey, who said, “We look forward to working with the government on the detail.” Aussie’s chief customer officer, David Smith, said, “We look forward to consulting further with the federal “Raising the bar in the broking industry” – that bar must be on a fulcrum as the standards applied to brokers increase, with branch loans seemingly impervious to checks, balances, verification or even going through the motions of the same rigorous processes. Credibility comes with a level playing field – all channels should be required to meet the same lending standards and follow the same processes.”

Well said, Old Country Broker. It’s an absolute joke that we essentially have to quarantine our income for up to two years because our clients might do something beyond our control and without our knowledge that triggers a clawback. Can someone please name another occupation that is at risk of having their income taken back off them for a period of two years after they received it?

MikeT

Mountains Broker

This is all well and good, and I have no issues with the majority of the proposed reforms, but the issue of being able to pass on the clawback cost back to the clients remains a problem.

Those of us who don’t charge clients a fee are still exposed to clawbacks for up to two years as a result of issues that may well be outside of our control. If the clients are fully advised of the implications of selling/refinancing/whatever, etc., within the two-year period, and sign an agreement to this effect, where is the problem?

While policy may prohibit the cost of clawbacks being passed to consumers, you can charge customers a fee and provide them a loyalty reward back in two years. Brokers are just looking to be paid fairly, so I fail to see why it is unreasonable for a fee to be passed to a consumer when they change their loan within 12 months.

Matt Broker

We don’t charge a fee and never pass on a clawback. We advise the client, and 99.75% of the time it’s fine.

Exactly. This isn’t what is in the best interest for the consumer; this is what is in the best interest for the banks! Once again, the government looks after the big businesses (banks) and puts the squeeze on the small operator (brokers are generally small business operators). To remove any potential pass-on costs (disguised as something else), then clawbacks need to be outlawed full stop.

Tamc

Broker WA

Old Country Broker

22

government and regulators to ensure a great outcome.”

Treasury has also invited brokers to give input on reforms outlined. When enacted, the Bill will require mortgage brokers to act in the best interests of consumers and tackle conflicted remuneration within the industry. However, the draft and its associated documents are light in detail around the actual implementation of the changes, clarifying several times that the legislation will not have uniform application.

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PEOPLE

CAUGHT ON CAMERA The second CAFBA Annual National Conference and Awards night took place last month at Melbourne’s Grand Hyatt under the theme ‘Innovation and Change’. The conference speaker line-up featured co-founder and chief creative officer at Karrikins Group Dominic Thurbon, who explored the challenges facing the industry and helped delegates look towards the future. The conference was followed by the black-tie CAFBA Awards Dinner, which saw Michael Basile from Phillips Basile Equipment Finance take the trophy for Broker of the Year, while Greg Moylan and Mark Caddy were recognised for their contributions to CAFBA, and Barry Clarke, director at Equipment Lease and Rental, took home the Service to the Industry award.

24

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25

DATA

NEW SOUTH WALES

NT SPOTLIGHT

Sydney’s correction phase is starting to abate After the market correction, it’s time for Sydneysiders to look to the future, says Tim McKibbin, CEO of the Real Estate Institute of NSW. “With the election and royal commission behind us, the recent RBA interest rate cuts … the fundamentals are in place for growth in property prices,” he says. However, an increase in property stock across the city has slowed the rental market.

According to CoreLogic data, the median rent as of June 2019 was $580 per week. This, along with increasing dwelling supply, means vacancy rates have been going up.

“Sydney’s vacancy rate is climbing and will most likely continue to do so for the next six to 12 months,” predicts Open Corp director Matthew Lewison. “There is a solid pipeline of existing development projects and homes still under construction.” Nonetheless, Lewison also notes that reduced credit availability could significantly limit the amount of new housing stock coming on to the market.

Area

Type

Median value

Quarterly growth

12-month growth

Sydney

H

$888,000

-4.2%

-6.8%

NSW Country

H

$465,000

-1.1%

0%

Sydney

U

$686,000

-2.1%

-3.4%

NSW Country

U

$405,000

1.3%

2%

VICTORIA

High-demand suburbs driving demand in Melbourne Melbourne appears to be finally recovering from the decline that has affected Australia’s property scene.

“There is no doubt that buyer confidence is returning to the Melbourne property market. We are seeing more and more bidders at auctions – certainly more than the one or two we were seeing regularly just a few weeks back,” says Antony Bucello, Vic state manager at National Property Buyers. “We are expecting the auction clearance rate to continue to increase – now all we need is for stock levels to increase to [meet] demand.”

One Melbourne suburb that has been encouraging investor activity is Frankston. There are 8,000 enterprises based here, and Mayor Michael O’Reilly is aiming to make it “the epicentre of innovation, growth, industry, modernity and thinking”. Infrastructure projects in the works include the expansion of Frankston Hospital, the new Frankston station, and the redevelopment of Chisholm TAFE and Monash University.

Area

Type

Median value

Quarterly growth

12-month growth

Melbourne

H

$692,000

-2.2%

-3.6%

VIC Country

H

$367,000

0.3%

3.6%

Melbourne

U

$545,000

0%

0%

VIC Country

U

$272,500

0.8%

-2%

26

www.brokernews.com.au

THE TURNING POINT The weakest market in the nation is set to approach neutrality, presenting a key opportunity for first home buyers to take advantage of reasonable prices is still one of the worst performers in the country, although property prices are expected to see some small growth in the year ahead.

“I’m anticipating that the Darwin market will even out again a little. I think there is capacity within NT to move into the positive growth environment,” says Results Mentoring director Brendan Kelly.

“I reckon that we’ll see more growth and less decline, enough to take it to a low single-digit growth environment for 12 months from now.”

CoreLogic data indicate that while Darwin prices were still dropping in the June 2019 quarter, regional pockets of the NT have moved into the black, with dwelling values rising by 0.2% in the month of June.

This area was one of only three markets to report positive growth during this period, alongside regional SA and Hobart. In terms of rental growth, rents slipped by 0.3% in Darwin over the June quarter; however, the city retains its crown as the top-yielding market in the country, with an average rental return of 6.02% – significantly higher than that of Hobart, which was in second place at 5.25%.

CoreLogic’s Quarterly Rental Review for June notes that while investors have traditionally looked for properties with capital growth potential, investing for cash flow from rental yield is an attractive prospect given the current low interest rates in this city.

As movements in the rental market surpass the rate of change in property values, rental returns are expected to steady in the next few months. With Darwin approaching the bottom of the market, it could be the right time for first home buyers to grab a slice of the pie while prices are becoming more and more reasonable. AB THE TOP END

HIGHEST-YIELD SUBURBS IN NORTHERN TERRITORY Suburb

Type

Median price

Quarterly growth

12-month growth

TENNANT CREEK

H

$211,000

11%

36%

PARAP

U

$267,500

-17%

-24%

MUIRHEAD

H

$445,725

-9%

-28%

KATHERINE

H

$312,000

21%

13%

BAKEWELL

U

$235,000

-15%

4%

KATHERINE EAST

H

$330,000

2%

17%

DARWIN

U

$352,500

-6%

-17%

THE GAP

U

$290,000

1%

-2%

MOULDEN

H

$300,000

-2%

-1%

BAYVIEW

U

$390,000

5%

-29%

BRAITLING

H

$430,000

-3%

-3%

MARRARA

U

$282,500

-5%

-4%

OPPORTUNITIES AND KEY INFRASTRUCTURE

6%

$37bn

Average rental return in Darwin, the highest yield in the country

Investment in LNG project – one of the world’s largest resource projects

SUBURB TO WATCH: ROSEBERY Median price (houses) $493,112

Median price (units) $261,537

12-month growth

3-year growth

5-year growth

Indicative gross rental yield

-8.3%

-6.7%

-15.5%

-7.3%

12-month growth

3-year growth

5-year growth

Indicative gross rental yield

-20.7%

-30.1%

-35.5%

-7.5%

SOUTH AUSTRALIA

Area

Demand for skilled workers pushes up housing market prospects The City of Churches is the perfect example of how easily the tide can turn as it stands tall over its peers in the wake of the countrywide downturn. “One of the main reasons is that there is a significant amount of infrastructure construction going on," says Peter Koulizos, program director of the Master of Property at the University of Adelaide's School of Architecture. "There are major road and rail construction projects underway which are employing much skilled labour, both on the ground and in the offices.”

The defence contracts that Adelaide has won in recent years are expected to attract highly skilled employees to the city. Adelaide is also recognised as the home of the biggest biomedical precinct in the southern hemisphere, drawing medical researchers and practitioners seeking well-paid positions. This availability of work is a big contributor to enhancing property demand as the population swells and requires more living space.

$300m

$2.19bn

Amount to be spent by the US military on naval construction project confirmed in June

Value of tourism in the NT, which has new leisure projects in the pipeline

Type

Median value

Quarterly growth

12-month growth

Adelaide

H

$465,000

1.1%

2.8%

SA Country

H

$272,250

0.2%

2.8%

Adelaide

U

$337,000

0.3%

1.5%

SA Country

U

$190,000

-3.6%

1.3%

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DATA

VICTORIA

Brisbane

H

$535,000

0%

1.9%

QLD Country

H

$440,000

0%

-2.2%

Brisbane

U

$385,000

0%

-1.8%

QLD Country

U

$365,000

-1.3%

-1.3%

MEDIAN HOUSE AND UNIT PRICES

Low confidence trend reaches natural conclusion in Perth

$1,000,000

Quarterly growth

12-month growth

Perth

H

$477,500

-1%

-3%

WA Country

H

$325,000

-0.9%

-2.5%

Perth

U

$365,000

-2.6%

-6.3%

WA Country

U

$240,000

0.8%

2.2%

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Cleared

30

Uncleared

18

Clearance rate

62.5%

PERTH Total auctions

24

Cleared

7

Uncleared

7 50%

Houses

Sydney Melbourne Brisbane Adelaide

Perth

Hobart

$461,500

$330,000

$0

$430,000

$100,000

$355,000

$200,000

$471,057

$300,000

$540,000

$500,000 $400,000

$705,000

$600,000

$670,000

$700,000

$860,000

$800,000

Units

Darwin

3

Median value

80

$900,000

The outlook for Perth is highly positive for once, following the prolonged period the city has spent at the bottom of the market, according to the ANZ/Property Council Survey for the September 2019 quarter.

“Across the board, the results from this survey paint an encouraging picture of the outlook for property in WA. Our run of four quarters of declining confidence has come to an end, and all the key indicators are now pointing back in the right direction,” says Sandra Brewer, executive director of the Property Council WA. Consumer confidence in the market has risen nine points and now sits above the national average. Brewer notes that capital growth expectations are also on the rise in Perth.

“In the residential sector, we’ve seen a much more moderate but nonetheless important shift in expectations for capital growth in house prices in the coming 12 months, which have also returned to positive territory,” says Brewer.

Type

Total auctions

Clearance rate

WESTERN AUSTRALIA

Area

ADELAIDE

$420,000

12-month growth

$315,000

Quarterly growth

$449,500

Median value

$394,500

Type

Year-on-year results currently demonstrate lower auction volumes; however, clearance rates are up by 15–20 percentage points across the country.

There were 1,605 homes taken to auction across the combined capital cities this week, increasing on the week prior when 1,415 homes were auctioned. The higher volumes saw the preliminary clearance rate soften, coming in at 73.6% after the previous week returned a final auction clearance rate of 74.2% – the highest since April 2017.

Melbourne returned a preliminary auction clearance rate of 76.1% as volumes increased across the city (769 homes on the market compared to 662 the week prior). Meanwhile, in Sydney, 584 homes were taken to auction, returning a preliminary auction clearance rate of 78.9%, an increase on the 503 auctions held in the week prior, when the city returned a final clearance rate of 78.1%. Across the smaller auction markets, Adelaide was the best performer (62.5%), followed by Canberra (61.5%).

$530,000

Area

WEEK ENDING 1 SEPTEMBER 2019

$640,000

Over the 12 months to June, Brisbane’s rental market saw a turnaround, with rates on the up following a period of decline.

According to CoreLogic’s June Quarterly Rental Review, Brisbane was one of only two capitals to report an annual change in rents that was greater than the change recorded in 2018. The average yield also increased 0.2% during the same period.

For now, Brisbane continues to grab the attention of buyers who are priced out of more expensive markets like Sydney and Melbourne.

According to Herron Todd White’s Month in Review report for July 2019, a budget of $500,000 goes reasonably far in this state, and attached housing is an option in the middle- and outer-ring suburbs. Closer to the CBD, where oversupply has been an issue, this amount could get a buyer a good-sized unit.

The Gold Coast, Tweed Coast and Lower Logan also have a diverse range of properties at this price point, including acreage and units on the beach.

CAPITAL CITY AUCTION CLEARANCE RATES

$253,500

Brisbane boasts diverse property types at strong prices

Canberra

CAPITAL CITY HOME VALUE CHANGES Capital city

Weekly change

Monthly change

Year-to-date change

12-month change

Sydney

0.6%

1.6%

-2.5%

-6.9%

Melbourne

0.4%

1.4%

-2.5%

-6.2%

Brisbane

0.2%

0.2%

-2.1%

-2.1%

Adelaide

0.0%

-0.1%

-1.5%

-1.0%

Perth

-0.1%

-0.5%

-5.9%

-8.8%

0.4%

1.1%

-2.7%

-6.1%

Combined 5 capitals

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

BRISBANE CANBERRA Total auctions

29

Cleared

16

Uncleared

10

Clearance rate

Total auctions

118

Cleared

38

Uncleared

45

Clearance rate

45.8%

61.5%

SYDNEY Total auctions

584

Cleared

330

Uncleared

88

Clearance rate

78.9%

TASMANIA

MELBOURNE Total auctions

769

Total auctions

1

Cleared

482

Cleared

1

Uncleared

151

Uncleared

0

Clearance rate

Clearance rate

76.1%

TASMANIA

Hobart rents continue to climb, reaching Melbourne values While things may be slowing down in the Apple Isle, the state has already built a fairly strong local economy, which should keep it going. Strong internet connectivity has been a big part of this and Tasmania has 99% NBN connection.

“Launceston, Devonport and the regions up on the northwest coast are doing quite well now, particularly from a real estate perspective, and that’ll continue for quite a while,” says Adrian Kelly, president of the Real Estate Institute of Australia.

While Hobart remains reasonably priced for homebuyers, its rental market has continued to tighten, making the capital one of the more expensive in the country.

“Rapid growth in rents over recent years has seen Hobart become more expensive than Brisbane, Adelaide, Perth and Darwin and on par with the cost of renting in Melbourne,” reports CoreLogic research analyst Cameron Kusher.

Area

N/A

Type

Median value

Quarterly growth

12-month growth

Hobart

H

$485,000

0.7%

8.9%

TAS Country

H

$313,500

1.7%

7%

Hobart

U

$380,000

1.3%

9.1%

TAS Country

U

$250,000

0.1%

1.3%

All data sourced from CoreLogic.com.au

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29

PEOPLE

IN THE HOT SEAT

Greg Charlwood, managing director of Australian Invoice Finance, reflects on the things that have shaped his career to date, including a plumbing apprenticeship, a stint living and working in India, and an appreciation for quality BDMs

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

The greatest challenge for brokers is definitely coming to A terms with the range of changes that Commissioner Hayne recommended in his final royal commission report. A ban on commissions to brokers, in particular, would have been devastating for the industry. Commissions are a critical funding mechanism that keeps costs down for consumers, and I just can’t see consumers accepting out-of-pocket expenses.

Q

What was your first job?

After finishing school I decided to learn a trade. I completed a A plumbing apprenticeship, but when it came down to it I soon realised that plumbing wasn’t the trade for me. The next thing I knew I was involved in invoice finance and have been doing it for more than 30 years – it certainly is strange how life turns out.

Q

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

In a previous role I set up an invoice finance company in A India. The role involved a lot of travel to the region, and Indian food – as it is eaten in India – quickly became my favourite cuisine.

I would serve up a nice dry coconut chicken curry for Mike Felton, with dal makhana, basmati rice and naan bread. Lots of pickles too (of course!), and we would wash it all down with a few cold ones.

Q

What are your top survival tips for working in finance?

In this industry, I think it’s important to learn as much as you A can and listen to what people have to say. Stick to the rules, but always offer solutions when decisions are to be made. In the business world, building strong relationships with those around you is also key.

Q

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What’s one thing, personal or professional, that you hope to achieve before 2020?

I would like to continue to grow our sales team at Australian Invoice A Finance by adding more quality business development managers like those we already have working in the business. Building a line-up of quality BDMs is the greatest challenge in invoice finance and one of the most important factors in the success of our business. AB

Q

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31

100% offset

When we say 100% offset, we mean 100% of the time.

Not only on variable rates, but on fixed rates too.

And not just on a 1 or 2 year fixed rate term, but on any term to 5 years.

Get in touch with us today on 1300 791 679 or visit brokers.adelaidebank.com.au to learn more.

Don’t settle for a loan with a regular offset account when you can get the blinged up version at Adelaide Bank.

Adelaide Bank a Division of Bendigo and Adelaide Bank Limited ABN 11 068 049 178 AFSL/Australian Credit Licence 237879. (1347501-1347500) (08/19)

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