Australian Broker 16.22

NOVEMBER 2019 ISSUE 16.22

Getting ahead of the curve Pepper Money looks to support brokers with compliance /18

Judgment day for lenders How changing credit reporting forces finance providers to evolve /20

CAMERON POOLMAN The CEO of OnDeck Australia explains how his career path uniquely equipped him to become an ally of small businesses /14

Little ole Adelaide continues to perform City’s market offers investors excellent prospects heading into the new year /26

ALSO IN THIS ISSUE… A big deal How one savvy broker secured a ‘yes’ following a string of ‘nos’ /22 Caught on camera Better Mortgage Management celebrates company’s 20th birthday in Brisbane /24 Hot seat Lend co-founder and CEO Bill Baker on why he loves what he does /30

NEWS

IN THIS SECTION

Lenders Heritage preps for next stage of growth /04

Aggregators Loan Market grows panel of lenders /06

Technology New lender matching service a ‘complete solution’ /10 p

Regulators Fifo Capital stands up for reverse factoring /12

Market Significant step up in housing market growth /08

www.brokernews.com.au NOVEMBER 2O19 EDITORIAL News Editor Madison Utley Production Editor Roslyn Meredith

DATES TO WATCH

ART & PRODUCTION

Upcoming can’t-miss events

Designer Martin Cosme

14 – 28 NOVEMBER

19 NOVEMBER

1 9 N O V E M B E R

CAFBA end-of-year events

CEDA annual dinner

FBAA Adelaide Summit

CAFBA starts its roadshow of end-of-year networking functions on 14 November at WA’s Mosman Park Bowling Club. This gathering will be followed by similar events in Queensland (20 November), Victoria (21 November), and NSW (28 November).

The committee’s end-of-year celebration will be held at the Four Seasons Hotel in Sydney. It will include an address from Treasurer Josh Frydenberg covering the past year, the state of the economy and government priorities for the year ahead. Individual member tickets start at $297, while non-member tables can be purchased for $4,070.

Taking place at the Stamford Grand Adelaide Hotel, this FBAA event will cover how open data interplays with verifying applicants’ expenses; changes to credit reporting; and what these developments mean for brokers. MD Peter White will also provide a real-time update on the regulatory discussions being held with the government.

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

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Madison Utley +61 2 8437 4700 madison.utley@keymedia.com

SUBSCRIPTION ENQUIRIES

27 – 28

NOVEMBER

29 NOVEMBER

5 DECEMBER

National PD Convention

MFAA annual golf day

Ethics for Financial Services

This invitation-only event for FAST brokers and their staff returns to Sydney in November. It will tackle business diversification and growth opportunities, and provide updates on the industry, the economy and FAST itself, as well as information on enhanced business practices, the latest market trends and high-performing behaviours.

The MFAA will once again host a day of golf and networking at the Wembley Golf Course in WA, followed by end-of-year sundowners. The event includes refreshments, a buffet dinner, beverages and DJ entertainment. A mini golf option is available for those who’d rather not play a full 18 holes.

Melbourne-based Deakin Business School is offering an intensive three-day course in Ethics for Financial Services. Combined with “comprehensive” online learning materials, the course is intended to provide both theoretical and practical knowledge to fulfil new FASEA requirements.

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

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27 – 28 FEBRUARY

2 - 3 MARCH

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Australian Mortgage Innovation Summit 2019

Responsible Lending and Borrowing Summit

AFR Banking and Wealth Summit

RFi Group will be hosting the 10th annual summit in Sydney, covering everything from the aftermath of the royal commission to the “visibly turning” credit cycle. In addition to the two days focused on innovation and efficiency, the group will be holding its Australian Lending Awards.

To be held at the Radisson Blu Plaza in Sydney, Informa’s fourth responsible lending summit includes addresses from ASIC exec Tim Gough and Mortgage Choice CEO Susan Mitchell. Along with the other speakers, they will shed light on open banking’s impact on financial services and the industry’s recalibration following the royal commission.

Banking and wealth leaders, regulators, policymakers and stakeholder groups will gather to debate the future of financial services at the Sofitel Wentworth in Sydney. The 2020 summit will provide the opportunity to hear from “key industry leaders” during the implementation stages of many royal commission recommendations.

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

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NEWS

LENDERS BROKERS CONTINUE TO DELIVER AT AMP

SNAPSHOT OF THE MAJOR BANKS’ 2019 RESULTS Source: KPMG

Major Australian banks’ full-year 2019 financial results

its third-quarter update, AMP Bank acknowledged the support of the mortgage broker channel. Over the three months, its total loan book grew by $0.1bn to $20.3bn, an increase attributed to “ongoing growth” from mortgage brokers even in subdued market conditions. AMP CEO Francesco De Ferrari said, “AMP Bank has again delivered exceptional value to clients, which is reflected in strong deposit growth and an increase in our loan book.”

in four major bank customers has left their bank or intends to move to a non-big four lender, accordiing to new research from comparison site Mozo. “Only 19% of Australians believe the big banks are doing what is necessary to stay afloat in the wake of the [RBA] rate cuts. The writing is on the wall for many borrowers, and now is the time to find the most competitive rate on the market,” said Kirsty Lamont, Mozo director.

Revenue

DATA CHARTS MIGRATION FROM THE MAJORS

Operating income decreased by 3.7% to

Earnings

IN

Cash profit after tax decreased by 7.8% to

Market share of residential mortgages contracted by 92bps to

$81.3bn

81.2%

Average net interest margin decreased by 8bps to

$26.9bn

194bps

ONE

“We expect system credit growth in the year to September 2020 to lift from 2.7% this year to 3%, largely driven by housing”

Brian Hartzer CEO, Westpac Group

4

www.brokernews.com.au

HERITAGE BANK PREPS FOR NEXT PHASE OF GROWTH Amid its physical expansion out of Queensland, Heritage makes plans to drill down on its business banking division non-major bank has announced plans to drill down on its business banking division in a concerted move away from the housing loans currently dominating its portfolio.

Heritage Bank’s balance sheet is currently more than 95% reliant on housing loans.

According to chairman Kerry Betros, the institution aims to triple the size of its business banking portfolio over the next three years in a process that will include revamping everything from product offerings to distribution channels – helping to bring greater diversification to Heritage.

“We currently have a relatively small business banking division, A

which specialises in looking after the needs of SMEs in southeast Queensland,” said Betros.

“We’ll maintain that focus on the SME sector, but we want to expand our reach and open up the Heritage experience to more small businesses.”

However, Heritage has stressed that the new strategy will not change its “absolute commitment” to the home loan sector.

In fact, the decision to expand the division is “great news for brokers”, says CEO Peter Lock.

“We’re definitely not looking to reduce our presence in the home loan market. In fact, we’re targeting growth in our loan volumes, through both the broker market

and our branches,” he said.

“We want to continue growing in size and strength so we can offer even greater competition in the banking sector.”

According to Lock, Heritage has identified an opportunity to build not only its business banking presence but also its traditional mortgage lending book.

“There is great potential here for Heritage to expand the customercentric approach that our home loan customers value so much to the SME business sector in a bigger way than we have in the past,” he said.

“A key way we believe we can do that is through the commercial broker market. We can build on the existing relationships we have with our broker partners to add in a commercial lending option and provide them with another alternative for business clients.”

Heritage is still finalising its business banking review and has not yet set a date for its entry into the commercial broking market.

NEWS

A G G R E G AT O R S FINSURE REPORTS ‘STRONG START’ TO FY20 has announced a record settlements total of $3.5bn for the September quarter. “Finsure is off to a strong start for the financial year, also closing the quarter off on a high by achieving record monthly settlements of $1.21bn, a 13% rise year-on-year,” said Finsure GM of aggregation Simon Bednar. “This brings the total aggregation loan book to $39.8bn, which is an outstanding performance in a subdued lending market environment.”

FINSURE

LIBERTY HIGHLIGHTS VALUE OF MARKETING

LOAN MARKET RAPIDLY GROWS ITS PANEL OF LENDERS The recent addition of several new lenders has taken the aggregator’s total count to over 60 the announcement of the addition of Heartland Seniors Finance to its lender panel, Loan Market Group has diversified into the retirement sector, allowing clients to be serviced throughout their entire life cycle.

Heartland caters to the range of challenges faced by the aging population, with a specialisation in reverse mortgage solutions that help unlock over-60s’ equity in assets like their homes. Whether by helping to facilitate personal debt consolidation, home renovations, additional income, travel, medical expenses or the purchase of a new vehicle, the partnership with Heartland will provide Loan Market brokers with access to WITH

this growing population across the country.

The percentage of older Australians is rising, led by aging baby boomers. In 2017, the ABS reported that 15% of the nation’s population was aged over 65, whereas the subset is expected to account for between 21–23% of the country for the next 50 years.

“As clients get older, their focus shifts toward their health, travel, and even modifying their home to better suit their mobility. They require specialised solutions, and this partnership will open up more options for these important clients,” said Stephen Scahill, Loan Market’s chief commercial officer.

“Our lender panel starts the

journey with customers for their first home, car purchase, debt consolidation, through to investments and business loans, and now to their needs in retirement.

It creates true client-for-life relationships for our brokers.”

Heartland Seniors Finance head of distribution Jeff Murray said brokers were an “integral part” of the company’s business.

“As a specialist lender, it is important to partner with quality aggregators to broaden our reach,” he said.

“We are thrilled to be welcomed onto the Loan Market lender panel to further assist their customers achieve their financial goals later in life, and live a more comfortable retirement.”

Virgin Money Australia has since become the 61st lender to partner with Loan Market.

Scahill welcomed the latest addition, saying, “Virgin Money has game-changing attributes in its DNA, just as Loan Market does.”

managing director of an award-winning aggregation group has encouraged brokers to fully embrace and invest in marketing as an “essential component” of running a successful business. Brendan O’Donnell, MD of Liberty Network Services, said, “There’s so much information available online many people don’t even realise they can access this information without spending anything. They just need to make time to explore and assess what options are available to them.”

THE

“Consumers are sending a clear message they want the choice and transparency of a competitive home loan market in Australia, and mortgage brokers are delivering” David Bailey CEO, Australian Finance Group

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NEWS

MARKET HOUSING START-UP DELIVERS PEACE OF MIND Victoria-based start-up has launched a service intended to act as an “insurance policy” for home sellers in Australia. Brickfloor’s ‘Home Price Guarantee’ commits the company to buying a seller’s home for a competitive price. If the seller receives a higher offer from a third party, they can sell and keep 100% of the difference. If not, Brickfloor buys the home for the agreed price, minus a 2% fee. According to the company, this eliminates uncertainty around sale prices and empowers homeowners to buy first.

A

MILLENNIALS RIPE FOR BROKER SUPPORT as those under 35, millennials are the most rapidly growing segment of SME owners. They currently run over a third of Australia’s small businesses – and have plans to expand yet further. Xero research found that 30% of millennials are actively looking to grow their businesses, as compared to just 22% of older business owners. Further, 56% of millennials said they were actively searching for improved support from their financial advisors.

DEFINED

“While the broking industry went through a difficult period in February, brokers have remained focused on their clients and continued to deliver unparalleled service” Tony MacRae General manager, MyState Bank

8

www.brokernews.com.au

HOUSING MARKET TAKES SIGNIFICANT STEP UP In October, home values charted the highest month-on-month increase in well over four years

CoreLogic Home Value Index showed a 1.2% rise in national dwelling values over the month of October, delivering the fourth straight month of increased values and the largest monthly surge seen since May 2015.

While the growth continued to be centred in Melbourne and Sydney, dwelling values trended higher across most of the capital cities as lower mortgage rates and improved credit availability spurred on buyer demand.

Aside from in Perth, dwelling values were up across every capital city over the month.

Further, while just seven of the 46 capital city subregions recorded a rise in dwelling values over the 12 months ending October 2019, that “starkly THE

contrasted” with the 38 of the 46 that recorded a rise in values over the three months ending October 2019.

“Such a broad-based lift in values across the capital city subregions over the most recent three-month period demonstrates the depth of the current housing market recovery,” said CoreLogic research director Tim Lawless.

The recovery trend in Melbourne overtook Sydney’s in October, with dwelling values surging 2.3% higher over the month – the largest month-onmonth gain since November 2009. Melbourne’s housing values have recovered 6.0% since moving through a trough in May 2019, while Sydney values are up 5.3% from the recent May low.

“It’s becoming increasingly clear that the housing market rebound is gathering pace, both geographically and across the broad valuation cohorts, off the back of lower mortgage rates and improved access to credit, as well as an improvement in affordability relative to the market peak several years ago and consistently high demand via population growth,” said Lawless.

“Demand for housing is responding to stimulus measures, including mortgage rates that are now lower than anything we have seen since the 1950s and improved mortgage serviceability tests following APRA’s decision to adjust the minimum interest rate serviceability rules in July this year.”

However, despite the improved selling environment, new stock additions remain low for this time of the year.

“Buying and selling a home requires a high degree of commitment, which becomes much harder when there are doubts around household finances or job prospects,” said Lawless.

INDUSTRY UPDATE

BROKER EDUCATION HAS NEVER BEEN MORE IMPORTANT the mortgage industry continues to undergo dramatic changes, the importance of ensuring brokers are up to speed on new regulations and other matters challenging the financial services sector has never been greater, says leading aggregator Finsure Group.

Finsure’s National Learning and Development Manager Anthony Zveglic said providing high-quality education and training programs for brokers is essential as the industry heads into the 2020s.

Mr Zveglic said the Hayne Royal Commission put the broker industry under the spotlight and highlighted the need for brokers to be highly receptive to customer needs and educated, positive and persistent in being prepared to deal with future challenges and issues.

“Right now our industry will be getting prepared to deal with incoming new laws regarding best interest duty and remuneration reforms for brokers,” he said.

“In the coming year we will prepare for the possible outcomes, the implementation of the new laws, the transitional period and most importantly the training to ensure we meet the expectations of any new legislation.

“There will be greater responsibility in proper compliance execution, audit of applications being lodged/ settled and reporting from brokers, aggregators and lenders to the regulator.

“We expect aggregator technology will improve the efficiencies in the implementation of the new laws and supporting brokers with not only best interest duty, but compliance, reporting, marketing and customer retention.”

Mr Zveglic heads up Finsure’s Broker Academy, which the Group launched in 2016.

“In this role I educate, motivate and encourage participants who are new to the finance industry,” he said.

AS

Anthony Zveglic, National Learning and Development Manager, Finsure

“The 24-month mentoring program incorporates a Cert IV in Finance & Mortgage Broking, a Diploma in Finance plus a range of practical skills to equip graduates with all the expertise needed to maximise their chances of success over the long term. We also work in conjunction with some external providers to provide legal, accounting and property advisory services.

“Where this program differs from any other in the industry is the attention to detail. We don’t just provide the basic tools but ensure our mortgage brokers are completely prepared for their future mortgage broking career once they graduate from our Academy. Since 2016, we have graduated 68 brokers through the Finsure Broker Academy and currently have 66 participants enrolled.

“In 2020, I aim to have

more proactive contact for each Finsure Academy broker in all tiers. Most brokers that I have spoken to appreciate the regular structured contact.

I would also like to grow the team to support more brokers that are joining the industry and to provide additional content to the existing brokers.”

Mr Zveglic said another area of focus for Finsure in supporting brokers will be in the area of compliance.

“Going forward, there will be more reporting, reviewing and support required for brokers,” he said. “This is also likely to lead to more information being shared between the regulators, lenders, aggregators and brokers, which will mean more insights and structured relationships that help drive and support better customer outcomes. Consequently, there will be continued investments into technology development,

systems, processes, monitoring, which in turn will flow into brokers and customers.”

Mr Zveglic said while brokers will continue to be key players in the home finance industry, they will also have to adapt to the changing market and shifts in consumer behaviour, and training programs will need to accommodate this factor.

“Customers are better informed now and have more options,” he said. “They expect companies to know their individual needs and personalise the experience.

They are information hungry and will make carefully considered decisions based on research and recommendations of their family and friends.

“We need to help brokers deliver a more personalised service and invest further in digital communications channels to help attract and retain customers.”

NEWS

TECHNOLOGY

FINTECH START-UP RAISES $12.5M Sydney-based fintech has received an investment boost from ANZ and software giant Salesforce in its latest fundraising efforts. Valiant Finance, a platform that connects small businesses with over 75 mostly non-bank lenders, secured $12.5m in its Series B equity funding round. “The capital from this round enables us [to] accelerate our platform road map and build partnerships with equipment dealerships offering point-of-sale finance to their customers,” said Alex Molloy, co-founder and CEO of Valiant Finance.

A

SME PLATFORM ADVERTISED AS COMPLETE SOLUTION One company looks to become the go-to resource for finance brokers as the industry approaches a ‘tech-driven shift’

lender matching service has announced the launch of a new platform created to help finance brokers better source funding for SMEs in the changing financial services landscape.

According to Lend.com.au co-founder and CEO Bill Baker, Australia’s $700m alternative lending market is about to undergo a “major transformation”.

“As SMEs increasingly turn to non-bank sources for loans, we predict the alternative lending market will grow to over $2bn by the end of 2021, commission rates for brokers will fall and the industry will experience major consolidation due to technology transforming the marketplace,” he said.

A

“The industry is on the verge of a seismic, tech-driven shift. Our vision is to capitalise on this trend and be the go-to platform for every finance broker in Australia.”

Currently, Lend estimates there are over 40 lenders servicing the 2.1 million SMEs across Australia.

According to Baker, Lend’s new platform will be the industry’s only “complete solution” for Australian SME finance brokers.

“The Lend.com.au technology will instantly provide the finance broker with the most suitable lender for their client’s business based on its business profile. [The] platform will also allow brokers to spend more time doing what they do best – servicing their clients’

needs – while promising to unlock business potential and profitability,” Baker explained.

Brokers are estimated to save up to four hours per client by using the tools available on the new platform, such as its single application facility, instant analysis of loan applications and best lender matching technology.

The platform will also introduce the “industry first” LendScore, a predictive modelling tool that can calculate the likelihood of a client’s loan getting approved by a lender.

“Throughout the development of the platform, we regularly consulted with brokers for their insights and feedback. Lend.com.au is a truly broker-driven platform,” said Baker.

“We will continue to undertake research on the best small business loans in the marketplace, keeping credit criteria up to date and onboarding new lenders. We will also continually invest in its platform technology to enhance the platform with strong input from brokers.”

VV GROWTH TREND IN CONSUMER CREDIT APPLICATIONS Source: Equifax

Consumer credit applications – indexed by type 1.6

Application volume index

1.5

Personal loan

1.4 1.3 1.2

Credit card

1.1 1.0

Mortgage

0.9 0.8

10

Mar 15 Jun 15 Sep 15 Dec 15 Mar 16 Jun 16 Sep 16 Dec 16 Mar 17 Jun 17 Sep 17 Dec 17 Mar 18 Jun 18 Sep 18 Dec 18 Mar 19 Jun 19 Sep 19

www.brokernews.com.au

BROKERS SCEPTICAL OF FAST FINTECHS has found that 84% of brokers don’t feel confident in their grasp of fintech lenders, some even saying they know nothing at all, despite around three-fourths of brokers agreeing that the sector will continue to grow over the next 12 months. “Fintech lenders … are not without risk, and the importance of getting advice from a broker or another third party cannot be underestimated,” said Linden Toll, CEO at invoice financer Apricity Finance.

RESEARCH

INDUSTRY UPDATE

PRIMING BROKERS FOR SUCCESS

With a brand new suite of products and a newly appointed Chief Customer Officer, Bluestone’s move into Prime lending is set to be good news for brokers the year is coming to a close and we’re moving into the festive season, there’s much to be celebrated at Bluestone.

In November, the lender announced a brand new set of home loan products, which includes its first-ever Prime offering. With new rates starting at just 2.99% (3.26% comparison), the new products were designed to be simpler, more competitive, and more aligned to the changing needs of the Australian home loan market.

“It was essential to us to design products that have the needs of our borrowers and brokers at their heart,” says recently appointed Chief Customer Officer James Angus.

“We have done away with a lot of unnecessary complexity both within our policies and processes, and we’re extremely pleased to see how enthusiastically our brokers have welcomed these changes.”

With over twenty years of financial services experience across Australia, Canada, and the United States, Angus joined Bluestone with a remit to ensure Bluestone is truly broker- and customer-centric in everything it does.

Looking to 2020, Angus says Bluestone will embark on a number of additional initiatives around process, product, and technology that will allow the lender to cut turnaround times, provide added convenience to brokers, and ensure a better and more consistent experience.

“As we are moving into the new year, we are determined to make sure that service levels will remain consistent or improve even as volumes grow due to our new Prime offering. High levels of broker and customer satisfaction will form a key performance target across all business units over AS

the coming year.”

At the core of Bluestone’s 2020 broker strategy lies the simple concept of “one”. Bluestone wants brokers to see Bluestone as being on one team with them, sharing one goal. “Our broker’s success is our success, and we want to move away from highly transactional relationships to deeper, long-term partnerships that take a holistic view of our brokers’ goals, circumstances, and pain points.” Angus says.

Additionally, with its new products spanning Prime to Specialist solutions, Bluestone

wants brokers to think of it as one lender who can provide home loans for borrowers across the whole credit curve.

“Our background in specialist lending means we are highly adept at understanding unique circumstances and providing solutions that fit them. Our new Prime loan means we can now help an even broader set of borrowers who are not well served by mainstream banking,” Angus says.

Importantly, while Bluestone’s primary customer base is continuing to move up the credit

curve, its method of case-bycase credit assessment over automated credit scoring means the lender will retain its ability to service more complex or unusual cases. Angus says, “This will be of great benefit to selfemployed borrowers, property investors, and anyone dealing with some level of complexity within their income streams or cash flow set-up. These customers will continue to enjoy individual assessment by our credit team, while also benefiting from the most competitive rates in Bluestone’s history.”

NEWS

R E G U L AT O R S

GOVERNMENT MOVES TO SUPPORT FINTECHS Senate has established a committee to conduct an inquiry into the fintech and regtech sectors in Australia.

The group will consider barriers to the uptake of new technologies and the effectiveness of current initiatives in promoting a positive environment for start-ups.

According to Rebecca Schot-Guppy, GM of FinTech Australia, this is a “watershed moment” for fintech. “[The issues paper] considers every point we have previously raised to lawmakers,” she said.

THE

FIFO CAPITAL STANDS UP FOR REVERSE FACTORING Following ACCC’s launch of an investigation into reverse factoring, Fifo Capital has protested against the assertion that the finance model is inherently risky supply chain finance specialist has rejected claims that reverse factoring is an invalid and risky form of business finance, after the ACCC launched an investigation into the practice.

Drawing from its experience of having underwritten business in excess of $1bn over the past seven years, Melbourne-based Fifo Capital estimates supply chain finance will help underwrite the majority of SME enterprises in the coming five years.

“Supply chain finance is a product of today, releasing liquidity for millions of small companies and underwriting risk in a new and innovate way. It’s A

APRA LOOKS AT EXCEPTION FOR FIRST HOME BUYERS has proposed loosening its APRA requirements for authorised deposit-taking institutions to support the government’s First Home Loan Deposit Scheme (FHLDS). As the government guarantee is a “valuable form of credit risk mitigation”, APRA has suggested applying a lower capital requirement to eligible FHLDS loans that would enable them to be risk-weighted at 35% under APRA’s current capital requirements. Following a consultation period, APRA will issue its official response.

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time for a rethink,” said Fifo Capital CEO Wayne Morris.

Morris joined Fifo Capital after establishing supply chain finance and invoice finance fintech models for leading European brands such as Jaguar, Land Rover and EDF Energy.

Given his extensive experience, the CEO feels strongly that this finance model should be seen as a stimulant for SMEs rather than a risk.

He explained, “Financial products are developed because supply chains are becoming increasingly complex. Businesses aren’t confined to the factory gates any more; rather they’re dependent on a network of suppliers and partners to come

together in a tight, working collaboration.

“Put simply, cash is the glue that holds supply chains together, and supply chain finance is best used to help avoid small businesses waiting around to be paid by big business.”

Fifo Capital’s model of paying suppliers’ invoices early for a fee is on the rise in Australia, following the trends already seen in the UK. The company currently has over 3,000 businesses on its books, with supply chain finance accounting for hundreds of those.

It specialises in SMEs in the and construction and manufacturing industries, labour hire and importers/wholesalers.

According to Morris, supply chain finance is a “proven and strong” financial instrument, best utilised when it’s able to cascade down multiple levels of the supply chain so the burden and benefit of liquidity can be shared throughout.

VV SUPPLIER FINANCE FLOW Source: Deloitte

Purchaser

Goods/services and purchase invoice

Supplier

Purchaser submits the approved payable to the bank as part of the supplier finance facility Later payment at full invoice amount (including interest, if any)

Lender

Immediate settlement at discounted amount

FE AT URES

SPECIAL REPORT

A BUILDER OF SMALL BUSINESS

With an eye for opportunity, Cameron Poolman saw OnDeck Australia achieve 70% growth in broker-generated loans this year, proving that the CEO of the AMA Fintech Lender of the Year gets small businesses

understand how OnDeck is managing such rapid growth across both the broker channel and SME sector, it helps to know more about the background of CEO Cameron Poolman.

Soon after finishing an undergraduate degree in engineering and a master’s in business, Poolman applied for a role at Gray Eisdell Timms, an auction house in Lakemba in Sydney’s southwest. The recruiter warned Poolman that he was “too nice for the hard heads” running the business. In the 1990s, liquidators’ auctions were a tough game. Poolman gave himself six months.

He learned the trade in a hands-on way, meeting with clients and valuing and auctioning commercial assets. It provided Poolman with first-hand insights into what makes a business work – and what can lead to its failure.

TO

His commitment to get under the bonnet of each client’s venture is an ethos Poolman still applies at OnDeck – and he doesn’t do it from behind his desk. Every Friday he heads out on the road to visit at least two clients.

“It’s the most valuable time of my week,” says Poolman. “I get to hear our customers’ stories first-hand, hear if we delivered on what we promised and gain our clients’ perspectives on how we can do things better.”

Moving into e-commerce In the late 1990s, the auction business was changing as the internet took off.

Recognising that a business revolution was underway, Poolman approached the board of Gray Eisdell Timms, asking for $50,000 to set up a website – and so GraysOnline was born. Within three years it grew from a side venture operating out of a shed in Lakemba to an international

OnDeck head of sales Michael Burke (left) receives AMA award from FAST CEO Brendan Wright 14

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business with offices across Australia and New Zealand.

The success of GraysOnline led to Poolman taking over in 2005 and, subsequently, leading a management buyout – a process he admits was challenging.

“It’s tough negotiating with a bunch of experienced auctioneers when you’re in your 30s,” he recalls.

Even harder was convincing

decisions and deliver capital to small businesses online.

As Lakemba and Pitt Street are worlds apart, it came as little surprise that Poolman was set to shake things up.

SMEs’ reliance on brokers While he was quick to recognise that OnDeck was filling a gap in the SME finance market, Poolman also saw the

“The broker market is a significant pillar of support for Australian SMEs, making the growth of online small business lending a win-win for both brokers and their clients” Cameron Poolman, CEO, OnDeck Australia lenders to back him. In the end, Poolman secured over $10m in buyout funding from the banks, but the experience revealed how mainstream lenders viewed SMEs – an awareness that shapes OnDeck to this day.

By 2014 GraysOnline was one of Australia’s largest e-commerce groups. However, after running the business for 10 years, Poolman was ready to move on. He sold his stake and set out to prove his success with Grays hadn’t been a fluke.

A recommendation from a friend resulted in an equity share, in tandem with MYOB, in the Australian offshoot of US-listed SME lender OnDeck, a company pioneering the use of data analytics and digital technology to make real-time lending

need to grow engagement with the broker channel.

“The broker market is a significant pillar of support for Australian SMEs,” says Poolman. “Over half of SMEs turn to a broker for their capital requirements, making the growth of online small business lending a win-win for both brokers and their clients. But it’s not just about broadening their revenue streams.

“OnDeck’s engagement with the channel is aimed at allowing brokers to better service their SME clients, both in terms of providing more timely access to capital, while offering choice and flexibility for SME owners encumbered with security against their personal or business assets.

Poolman credits his time at Grays

In partnership with

Tools for brokers OnDeck shows its commitment to the broking community by offering support in a variety of ways. Extensive education is backed by practical tools, such as a suite of free white label marketing materials to support a broker’s push into the commercial lending space.

The same level of support is extended to SMEs. A considerable step forward was made with the 2016 launch of OnDeck’s Free Credit Score calculator. Since then, over 10,000 SMEs have checked their credit scores, and Poolman believes the calculator is also a useful tool for brokers to add value to SME clients.

“Our research tells us one in four SMEs plan to seek additional business finance in the future. We also know that one in two (53% of) Australian business owners don’t even realise that their business has a credit score. Yet credit scores can have a big impact on the availability and cost of finance,” explains Poolman.

“Brokers now have the opportunity to sit down with their clients and walk through their business credit score with them, offering value-add advice on simple steps that can be taken to improve the score.”

Cameron Poolman, CEO, OnDeck Australia

with building his understanding of how crucial it is to provide speedy assistance to SMEs to help them seize opportunities as they arise.

Adding value To ensure OnDeck is genuinely adding value to its broker partners, Poolman has expanded his business development team. Even with head count more than tripling in 2019, he remains deeply engaged in the recruitment process.

“I interview every person we bring into the business,” Poolman explains.

“Our culture, ethos and values are all based on a passion for small business. I need to be sure that, as we scale our business, we continue to foster those values – and that

every person who works here shares that same commitment to the small business community.

“Certainly for our broker channel, the experience that each OnDeck BD brings to the role gives brokers the confidence that we know our products and processes thoroughly, and that we are skilled at solving SME challenges.”

As Poolman sees it, transparency is critical to OnDeck’s success.

He explains, “When the royal commission was announced, instead of saying to my team, ‘This is what you need to watch out for’, our meetings focused on how we’d like to be treated as customers – and that’s with fairness and transparency.

“Too often financial institutions

gauge their success on customer satisfaction scores. It can be easy to feel the business is running well based on 90% satisfaction. But this fails to address the 10% of customers who feel they may have been treated unfairly. It comes back to taking the time to know your customers, and it’s one of the key drivers behind my weekly visits to OnDeck clients.”

However, OnDeck was prioritising transparency well before the royal commission.

“We successfully drove the adoption of the SMARTBox™ loan comparison tool, which uses plain English to explain the pricing metrics for small business loans,” says Poolman.

Eyes on the prize While OnDeck Australia was named Fintech Lender of the Year at the 2019 Australian Mortgage Awards, Poolman isn’t about to rest on his laurels.

“It was a fantastic accolade for the entire team at OnDeck, and it helps alert the broking community to the possibilities offered by fintech lenders that take a very different – and more efficient – approach to the loan application and assessment process.”

But Poolman admits he has his eyes on a bigger prize.

“Ultimately, we’re focused on the twin goals of helping brokers grow their businesses by diversifying into SME lending, and allowing Australia’s small businesses to reach their full potential through faster, easier access to capital.” AB www.brokernews.com.au

15

ondeck ontop Thanks to you.

16

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You’ve come onboard.

Now we’re on top.

We’re proud to be recognised as Fintech Lender of the Year.

Thank you to the brokers who’ve embraced us and the small businesses that inspire us to stay on the front foot.

To come onboard Visit ondeck.com.au/ausbroker Call 1800 831 294

www.brokernews.com.au

17

FE AT URES

BUSINESS TALK

GETTING AHEAD OF THE CURVE

Aaron Milburn, Pepper Money GM of mortgages and commercial lending, explains how the group is ideally positioned to help brokers thrive in the incoming era of heightened compliance mortgage broker’s knowledge and ability to source the right loans for their customers makes them an integral part of the lending landscape. The 60% of Australians who turn to a broker for help finding the right home loan can’t be wrong.

That said, 2020 looks to be a watershed year for the mortgage broking industry. A key recommendation from the royal commission was to implement a best interest duty for mortgage brokers, with a civil penalty provision.

Commissioner Hayne wrote in his report that: “… mortgage brokers should still be bound by the same duty due to the ‘advisory role’ they play, taking into account the borrower’s ‘objectives, financial situation and needs’.

“Borrowers look to mortgage brokers for advice about how to finance what is, for many borrowers, the most valuable asset they will buy in a single transaction. And brokers not only give advice about what they think is best for the borrower, they submit the loan application on the borrower’s behalf and, to the extent the terms are negotiable, negotiate the terms of the loan for the borrower”.

A

What is a best interests duty?

The government is working towards introducing a best interests duty for mortgage brokers when providing credit assistance – currently scheduled to come into effect on 1 July 2020.

Under the duty, brokers would be expected to understand and articulate their customers’ objectives, consider a range of lending solutions, and recommend the products that match the need.

It boils down to offering a loan 18

www.brokernews.com.au

that is not only affordable but meets the client’s specific needs, and ensuring it’s done in a compliant manner. It’s not always about the cheapest price; it’s about what will work best for the customer’s circumstances. Sometimes this may be as simple as a speedy turnaround

The question we pose is: can technology play a key role in preparing your business to operate under a best interests duty regime?

Leading the race in 2020 Over the years, Pepper Money has encouraged brokers to ensure they

“A good broker has nothing to fear from the best interests duty, and a smart broker will already be aware of the role technology plays” Aaron Milburn, GM of mortgages and commercial lending, Pepper Money time or size of the loan. If a conflict arises, the needs of the customer should always be prioritised over those of the broker. We know most brokers are already looking for the best solutions for their customers, which means the issue becomes recording and demonstrating that is the case.

have the appropriate systems and processes in place to better serve their customers and protect their businesses.

Moving forward, understanding what it means to act in the best interests of the consumer and demonstrating that you are doing so will become even more crucial.

For some brokers, this might mean adopting an entirely new end-to-end approach, spanning from training staff on the changes to adopting new tools and templates to improving record-keeping.

As far back as 2012, Pepper Money was giving away recording devices at industry events to help brokers protect their businesses with more accurate record-keeping.

If a broker properly documents their customers’ circumstances, objectives, and reasons for the recommendations they are making, they should feel confident about the regulation changes.

However, introducing new technologies to assist in servicing customers can solve pain points beyond those related to compliance.

Pepper has consistently invested in technology to easily connect customers’ life situations to its loan solutions. Our technology focuses on delivering better service to both customers and brokers.

The Pepper Product Selector (PPS) tool is an example of this.

It arms brokers with the insights and expertise to give their businesses a winning edge.

Pepper strives to remove friction from its processes with tools like PPS, helping brokers offer customers home loan solutions even when other lenders have said ‘no’.

When PPS was first introduced, it was designed to challenge the

HOW TO ACCESS PEPPER PRODUCT SELECTOR

PPS

Access seeker bureau report

+

Handful of simple questions

=

Indicative offer bestfit Pepper Money product (including rate and fees)

In partnership with

allow brokers to manage their customers’ expectations.

Knowledge is power Brokers who stay on top of the changes in the industry will surely benefit from making sure to adapt early. Those who ignore the debate may find themselves behind the eight ball once the incoming regulatory changes materialise in a way they weren’t expecting. The good news is there are steps that can be taken now to prepare for the future.

Educate yourself We encourage brokers to stay abreast of the discussions across the industry to predetermine the direct effects of pending regulation on your specific businesses. If you’re concerned about the changes, reach out to your industry association.

1

Create relationships with the right mix of lenders Best interests duty means you may have to be familiar with a broader mix of lenders who can assist your customers in getting the loan they needs. Broadening that group now will ensure you’re not caught unaware later.

2

Review your existing processes and make necessary changes Will your current processes and systems allow you to accurately collect, prioritise and store a customer’s situation, needs and objectives? Do they allow you to effectively and efficiently match and communicate the recommended loan product? Considering how you will demonstrate compliance with future best interests requirements should start now.

3

Aaron Milburn, general manager of mortgages and commercial lending, Pepper Money

notion that non-conforming lending was ‘too hard’, when in fact the broker’s loan assessment remains the same. Brokers no longer need to consult a product guide or become an expert on Pepper’s cascading product model.

PPS identifies a specific home loan product, interest rate and fees, and provides an indicative offer (where applicable) for any client in less than two minutes – across Pepper’s prime, near prime or specialist product offerings.

The broker simply answers a limited set of questions about their customer. PPS runs a soft credit

check (known as an ‘access seeker’) at no cost to the broker and matches the customer’s credit history with the information provided, to immediately return a Pepper loan solution, including an indicative interest rate and associated fees.

In a world in which a customer’s best interests come first, PPS will be an invaluable tool that will help make brokers more efficient and knowledgeable in sourcing best-fit solutions for their clients, the first time.

Often a customer working with a mortgage broker expects to obtain a

loan at the low rate they’ve seen advertised, when in reality their circumstances or needs mean it isn’t available to them. That’s where Pepper’s 5 Step Process helps the broker successfully position an alternative home loan with a customer who may not have been expecting this type of solution.

Pepper Money has invested heavily in demystifying and simplifying alternative lending for brokers through a local BDM presence, a dedicated scenarios team, and a range of broker tools like PPS, which

At Pepper Money, we believe a good broker has nothing to fear from the implementation of a best interests duty, and a smart broker will already be aware of the role technology plays in ensuring customers’ needs are prioritised and delivered differently in the future. AB www.brokernews.com.au

19

FE AT URES

OPINION

JUDGMENT DAY FOR LENDERS

Comprehensive credit reporting will soon leave unprepared finance providers with unprofitable business models while it spurs those ahead of the curve to further success, says credit and risk consultant Andrew Tierney

news that most consumers can now benefit from comprehensive credit reporting should come as a wake-up call to finance providers who have yet to embrace the digital era.

All four major banks are now providing credit bureaux with detailed customer transaction data relating to credit card usage, personal loans, mortgages and other financial commitments.

CCR is poised to reshape our industry.

‘Game changer’ may be an overused phrase – but in this case it’s accurate.

For this reason, it surprises me that there are a large number of credit providers still stuck in the analogue era, who show no signs of wanting to change. They aren’t benefiting from CCR and don’t seem to want to.

For example, while talking to a subprime lender just last week about what he was doing to meet this new challenge, he said his company already treated all applicants as subprime, with an interest rate that reflected the level of risk. He didn’t need transaction data direct from the applicant’s current account to help him make a decision, so why fix something that had been generating profits for as long as he could remember?

I can’t imagine how those with this mindset, determined to carry on as they have done, will still be in business in 10, maybe even five years’ time.

While many don’t see it at first, there’s eventually a light-bulb moment that arrives once you spell out how CCR is going to impact their business.

For the lender I mentioned, all it took was me pointing out that legislation requires lenders to use all the tools available to understand the risk a loan presents to the client. Without tapping

into CCR, is he really doing this?

What defence will he have for not utilising CCR when the regulator comes knocking on his door? Cost isn’t a factor.

There is no need for any major investment in back-office infrastructure or IT when you can tap into CCR and open data at little cost via platforms provided by tech companies.

Was he prepared for legal action that he could face, as a result of not fully checking affordability?

Further, there is the risk exposure that comes from not knowing the size that

THE

20

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to be a ‘no’ could become a ‘maybe’, then a ‘yes’. Because this decision will be largely automated, it will be possible to use true risk-based pricing for the first time, with loan terms designed specifically for a borrower.

Those that lag in this business are undoubtedly going to be left behind.

It won’t be long before they see a change in demographic in their pipeline.

The profile of hopeful borrowers they are used to dealing with will change, as previous ‘nos’ find they can go to more mainstream sources and become ‘yeses’.

CCR is poised to reshape our industry.

‘Game changer’ may be an overused phrase – but in this case it’s accurate

Andrew Tierney Credit and risk consultant

your liability could be in the future.

As we all know, the regulator has been moving the due diligence goalposts for us.

By the end of our talk, the time investment he was willing to devote to this had grown exponentially. Now, he is days away from taking full advantage of CCR. However, CCR should not be viewed simply as a big stick when it poses many more business benefits.

As recently calculated by Kevin James at Equifax, $20bn in extra loans could be granted to consumers over just one year by giving lenders granular detail on customers’ debt and repayment habits.

The real-time transaction history at the point of application gives lenders the data needed to allow loans that previously would have been turned down.

Suddenly, a slice of business that used

Why would borrowers be willing to pay a higher rate of interest when they can get a lower one that is specifically tailored to their situation?

Finance providers who stubbornly remain behind the times may also find the likely ‘nos’ will begin to target firms that do not use CCR or open data, because they know their transaction data will not stand up to the same level of scrutiny and they are more likely to sneak by to approval.

Those who do not embrace these changes are going to have the rug pulled out from underneath them in the not-too-distant future. Their business model that has always been profitable could lose its edge overnight.

If doubt remains, remember that none of us need to think very hard to come up with examples of analogue businesses that have long been left behind. AB

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21

PEOPLE

Have an interesting deal?

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

madison.utley@keymedia.com

BIG DEAL

Martin Mulder, business adviser at VHM Finance Partners, explains how he identified invoice finance as the solution for a construction company refused further credit by its incumbent bank

THE FACTS

Loan size Invoice finance facility of $1.5m

Loan term Ongoing

Client Commercial construction company

Goal To fund growth

THE SCENARIO

The commercial construction company in question lacked the required capital to fund its ambitious growth plans, but management wanted to capitalise on opportunities in the buoyant NSW construction market and grow revenue by 30% over the next 18 months.

However, the company was seeking finance at a time when the property market was contracting.

That contraction began in early 2018 but accelerated in July of that year. The business owners first went to their bank to request another $1.5m in working capital, but they were rejected due to their financial and security position. The bank didn’t believe they could service the loan at the time.

Bank policy meant funding decisions were also based on property market forecasts.

The bank said its decision had to be based on conservative valuations of property security. It therefore valued the owner’s residential property at approximately 20% less than what an independent valuer had estimated previously.

The company then came to me in a second attempt to secure bank funding.

I suggested looking at other assets within the business, and subsequently identified accounts receivable as a possibility.

While the incumbent bank had security on that asset, it wasn’t providing funding based on it. The company had $2.5m worth of outstanding debt that it could potentially obtain finance against.

22

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Location Bassendean, WA

Lender Australian Invoice Finance

THE SOLUTION

I approached Australian Invoice Finance (AIF) in November 2018 to determine whether it could provide finance against the company’s debtors. Given the business was unable to secure further credit with its primary lender, it was looking for a financier with a flexible mindset regarding finance for small businesses.

AIF analysed the company’s financial position and reviewed the balance sheet, profit and loss statement, positions

retention payments, a 12-month term, and a simple, effective security structure.

AIF also assigned a client manager to service the facility and help the client extract the full benefit from the facility.

The company’s management team questioned some of the terms and conditions, with each concern then reviewed by AIF, leading to an amended offer document that better reflected the cash flow needs of the business.

At that point, the company accepted the final letter of offer.

Prior to transferring funds to the client, AIF negotiated with the company’s existing credit provider, which held security, to determine how much money was available under the ledger. That way, the client could accurately allocate funding to the appropriate creditors, whether secured or unsecured, and ensure that all outstanding expenses were covered.

THE TAKEAWAY

AIF now funds the company on an ongoing basis. Being in a much stronger cash flow position, the client submits invoices once or twice a week and draws down money in a controlled manner in order to pay its creditors.

The improved cash flow has taken the business from a 60-day debt term to 15–20 days, multiplying cash flow three to four times.

It also immediately enabled the company to retain existing staff and more efficiently cover wages during the traditionally slow period over Christmas and New Year.

Following a SWOT analysis, the company determined that its improved

Given that the business was unable to secure further credit with its primary lender, it was looking for a financier with a flexible mindset

Martin Mulder Business adviser at VHM Finance Partners

of debtors and creditors, and the tax statement. It met with the company directors to gain a broader understanding of the corporate structure of the business and its related entities.

AIF quickly determined that it could provide funding against 85% of the outstanding invoices, giving the business a letter of offer detailing the terms and conditions under which the finance would be provided, including pricing.

The terms included a disclosed facility, funding within 24 hours of invoice, daily

cash flow position would enable it to buy larger quantities of stock at better prices.

Now, with invoice finance funding the business, the slow-paying debtors are not an issue as the new finance supports the purchase of stock on a regular basis on better terms, including larger creditor discounts.

More stable cash flow has also enabled greater reliability around business planning and allowed for a higher degree of certainty when launching and financing new projects. AB

www.brokernews.com.au

23

PEOPLE

CAUGHT ON CAMERA Better Mortgage Management (BMM) has capped off another year of achievement with the company’s 20th birthday celebration at Brisbane’s prestigious Blackbird restaurant on Friday 1 November.

In acknowledgement of their important role in the company’s achievements, BMM’s business partners and service providers joined staff in celebrating 20 successful years of operation.

BMM founder and managing director Murray Cowan said the 20th birthday celebration was an opportunity to pay tribute to all the people and organisations that had helped build the company into one of Australia’s leading mortgage managers.

24

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CAUGHT ON CAMERA

The NSW Connective State Conference rounded out the Connective State Conference program that ran throughout October. The conference featured keynote speakers Chris Helder, Janine Garner and Justin Dry, as well as Connective broker Peter Vassilis and NAB economist Alan Oster. The night celebrated the NSW Excellence Awards, which had a Halloween theme and rewarded the success of Connective’s NSW brokers.

Kin Wong, of One Lending Solutions, took out the NSW Broker of the Year award, iChoice was named NSW Brokerage of the Year (<5 Brokers) and Lendi won the award for NSW Brokerage of the Year (>5 Brokers).

www.brokernews.com.au

25

DATA

WESTERN AUSTRALIA

SA SPOTLIGHT

Perth the weakest capital city over most recent quarter Despite the national property market picking up following a prolonged period of decline, Perth’s weak economy has bogged its local market down.

According to the CoreLogic Home Value Index for August 2019, this capital was the worst performer among its peers over the quarter, edging out Darwin with 1.8% negative growth.

“This can be attributed to a mix of weak economic and demographic conditions overlaid with a tight credit environment,” explains Kate Forbes, national director of Metropole Property Strategists. “Perth values are now amongst the most affordable across the capital cities.”

BIS Oxford Economics’ Residential Property Prospects 2019 to 2022 report shows that price growth is also being limited by oversupply and low migration inflows. But Perth’s performance in the August 2019 quarter gives some hope for future growth. The CoreLogic Home Value Index indicated that the rate of decline slowed during that period, and the upper-quartile market recorded growth.

Area

Type

Median value

Quarterly growth

12-month growth

Perth

H

$472,500

-1.8%

-3.8%

WA Country

H

$320,000

-1.2%

-1.5%

Perth

U

$372,500

-1.3%

-6.3%

WA Country

U

$180,000

-5.8%

-5.8%

QUEENSLAND

Rental markets tightening in the Sunshine State A Queensland suburb has taken the top spot in CoreLogic’s Top Rental Performers list. Country town Blackwater was named the best rental market in Australia as of September 2019. Its rental returns are as high as 11.7% on average, while houses sell at a very low median of under $150,000. The market is now so tight there’s no more room for renters.

In fact, the Sunshine State dominated the Top Rental Performers report, claiming 42 out of 100 spots on the list. The Real Estate Institute of Queensland (REIQ) confirmed these findings in its Rental Vacancy Rate Report for the June 2019 quarter, noting that markets had tightened and were stronger than in the previous quarter. This indicates rising rental demand in this state.

The REIQ report highlighted the low vacancy rate of just 2.4% in Greater Brisbane. However, no Queensland rental market is tighter than Maryborough’s, which has seen vacancy rates fall to 0.3% in the March quarter from 1.6% in September 2018.

Area

Type

Median value

Quarterly growth

12-month growth

LIL OLE ADELAIDE JUST KEEPS GOING The city’s real estate market offers investors excellent prospects heading into the new year, with high-quality dwellings on offer confidence has remained strong in Adelaide given the major infrastructure works designed to boost the state’s economy.

“Little ole Adelaide doesn’t make the headlines, but it continues to do quite nicely. The major road and rail construction projects are creating employment, which is a boost to the South Australian economy,” says Peter Koulizos, program director of the Master of Property at the University of Adelaide’s School of Architecture and Built Environment.

Koulizos highlights the medical sector as a strong contributor, with the establishment of the Royal Adelaide Hospital, the SA Health and Medical Research Institute, and the University of Adelaide Health and Medical Sciences building set to draw professionals into this field.

The capital is also yet to feel the effects of winning the major defence contracts to construct high-tech ships and submarines for the government.

“Based on the major infrastructure projects, the performance of other major capital cities and the timing of the property cycle, Adelaide will be one of the best-performing capital cities in the next 12 to 18 months,” Koulizos predicts.

The recent positivity in the market has investors acting more wisely when it comes to buying the right property.

“In early August, we felt the desperation of investors wanting to jump into poor investment choices just to make a purchase, whereas now there is an air of calm and calculation,” says Katherine Skinner, director of National Property Buyers SA. ”With new stock hitting the market, buyers have more investment-grade property to choose from.

Quality dwellings are sold within days.

“We are expecting to see significant growth over the spring quarter in certain pockets within the metropolitan area, especially within the northeastern suburbs and inner west.” AB INVESTOR

H

$530,000

0.0%

1.9%

Median price (houses)

QLD Country

H

$430,000

-0.2%

-1.6%

$868,439

Brisbane

U

$380,000

0.0%

-1.3%

QLD Country

U

$365,000

-0.8%

-1.3%

www.brokernews.com.au

SA’s strengthening property market offers opportunities for buyers who do their research For buyers, Adelaide’s property market continues to receive positive feedback, but regardless of market conditions buyers should consider all of their options and do their research. After all, purchasing a home is no small thing.

Adelaide has historically been affordable in comparison to larger cities such as Sydney and Melbourne. In October, the median house value in Adelaide was around $430k, whereas it was almost $820k in Sydney and $650k in Melbourne. This could make Adelaide more attractive to investors and, with the cash rate at a historic low, it could create increased demand.

With the state government’s investment into renewable energy, the resources sector in SA is performing strongly, and there has even been a small population boost and some economic growth.

Combined with the changes in the lending sector, competitive interest rates and housing affordability, we have an exciting property market on our hands.

Bechara Boutros Co-principal, Aussie Prospect

SUBURB TO WATCH: SOMERTON PARK

Brisbane

26

BROKER PERSPECTIVE

Median price (units) $398,646

12-month growth

3-year growth

5-year growth

Indicative gross rental yield

-1.9%

7.6%

14.4%

2.9%

12-month growth

3-year growth

5-year growth

Indicative gross rental yield

3.3%

15.1%

13.7%

4.1%

HIGHEST-YIELD SUBURBS IN SOUTH AUSTRALIA Suburb

OPPORTUNITIES AND KEY INFRASTRUCTURE Weekly median

Gross rental

Type

Median price

Quarterly growth

12-month growth

advertised rent

yield

Peterborough

H

$72,500

-5%

1%

$165

12%

Port Pirie West

H

$95,000

-3%

-14%

$200

11%

Port Augusta

H

$150,500

8%

11%

$240

8%

12–18 months

$460,000

Time frame in which Adelaide is expected to become one of the best-performing capital cities

Median value of a home in Adelaide

Salisbury

U

$151,000

1%

-14%

$240

8%

Two Wells

H

$272,500

24%

-26%

$423

8%

Whyalla Stuart

H

$112,500

14%

32%

$170

8%

Smithfield Plains

H

$184,000

-2%

5%

$270

8%

Bordertown

H

$157,250

0%

6%

$230

8%

Elizabeth Downs

H

$175,000

-2%

-7%

$255

8%

$7.6bn

>$1bn

Value of tourism expenditure in South Australia

Amount SA spends per year on roads, ports and other productive infrastructure

Davoren Park

H

$173,000

-3%

-5%

$251

8%

Elizabeth South

H

$173,750

4%

16%

$245

7%

Muno Para

H

$220,000

-1%

-10%

$310

7%

AUSTRALIAN CAPITAL TERRITORY

Area

Type

Median value

Quarterly growth

12-month growth

Stamp duty exemptions, stable economy expected to boost demand As one of the premium property markets in Australia, Canberra maintains a steady growth trend supported by a strong economy. However, an influx of apartment supply has affected housing prices.

“House price growth in Canberra was minimal in 2017/18 and 2018/19, impacted by record unit supply and first home buyer incentives in NSW that may have drawn demand into adjoining regions,” says Angie Zigomanis, associate director of BIS Oxford Economics. “The median house and unit prices are each forecasted to rise by 10% in the three years to June 2022, although unit price rises will be weighted toward the end of the forecast period as the current supply pipeline is worked through.”

The implementation of stamp duty exemptions in the ACT, which took effect on 1 July, are anticipated to boost demand in the year ahead. The conclusion of the federal election period also returned stability to the state.

Canberra

H

$670,000

0.8%

2.3%

Canberra

U

$420,000

-0.2%

0.0%

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27

DATA

,

VICTORIA

Market stabilises as Melbourne recovers from downturn

CAPITAL CITY AUCTION CLEARANCE RATES

Over the past year, Melbourne has led the national downturn in the property market alongside Sydney – a decline fuelled by tight credit restrictions and an impending election.

“In general, investors were caught up in a perfect storm of ‘fear of the unknown’, with the federal election in the balance, the ongoing tightening of lending policies, and low interest rates,” explains Income2Wealth director Paul Wilson.

“Starting with Sydney and Melbourne, the ripple effect of these two factors saw a decline in buyers and the wind blown out of the sails of sellers as fewer properties were listed and the commentary from all the doom and gloom ahead became a self-fulfilling prophecy.”

However, things are now looking good across the board for Melbourne as the market stabilises and comes out from under the cloud of uncertainty.

4.3%

Melbourne

U

$539,000

0.2%

-0.5%

VIC Country

U

$280,000

3.0%

1.9%

MEDIAN HOUSE AND UNIT PRICES

Sydney market poised to close 2019 in a strong position

$1,000,000

Type

Median value

Quarterly growth

Sydney

H

$860,000

-2.7%

-7.2%

NSW country

H

$468,000

-0.7%

-0.9%

Sydney

U

$680,000

-1.5%

-3.4%

NSW country

U

$400,000

0.0%

1.3%

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Cleared

6

Uncleared

21

$500,000 $400,000 $300,000 $200,000 $100,000 $0

$575,000

$600,000

$741,000

$700,000

$710,000

$800,000

22.2%

Houses

$949,000

$900,000

12-month growth

54

Clearance rate

NEW SOUTH WALES

There seems to be nowhere for Sydney to go but up as it regains ground following its recent decline.

The Residential Vacancy Rate Report published by the Real Estate Institute of NSW for August 2019 showed the state’s rental market had hit its stride again, recording positive results for investors. In the Hunter region, vacancy rates were the lowest they had been for the year, while the rates in inner, middle and outer Sydney were stable for the most part.

“It’s positive to see Sydney’s rental market stabilising following a period of volatility. The early indicators suggest as we move into the warmer months we can expect vacancy rates to fall,” says Tim McKibbin, CEO of the Real Estate Institute of NSW. The number of construction projects in the pipeline bodes well for infrastructure development throughout the state, with many of these projects being funded by the state government, according to the CoreLogic Cordell Housing Index Price Report for July 2019.

Total auctions

Sydney Melbourne Brisbane Adelaide

Perth

Hobart

Darwin

Units

$440,000

1.4%

28

PERTH

$715,000

$370,000

50.7%

$309,000

H

33

$407,500

VIC Country

Uncleared

$387,500

-4.8%

34

$470,000

-1.4%

Cleared

$360,000

$682,000

115

$467,500

H

Total auctions

Clearance rate

12-month growth

Melbourne

Area

ADELAIDE

$322,000

Quarterly growth

$440,00

Median value

$400,000

Type

There were 2,375 homes taken to auction across the combined capital cities this week, up from 1,555 the previous week. Preliminary results show a clearance rate of 72%, which is expected to revise below 70% for the second week in a row. One year ago, 2,386 auctions were held across the combined capitals, with only 43.3% returning a successful result.

There were 931 homes taken to auction across Sydney this week, making it the second-busiest auction week of the year for the city. Preliminary results show a clearance rate of 81%, which will likely revise to the mid-70s over the week. One year ago, 844 auctions were held across Sydney, returning a final clearance rate of 42.1%.

$545,000

Area

WEEK ENDING 10 NOVEMBER 2019

Canberra

CAPITAL CITY HOME VALUE CHANGES Capital city

Weekly change

Monthly change

Year-to-date change

12-month change

Sydney

0.8%

2.0%

1.7%

-1.2%

Melbourne

0.5%

2.1%

2.0%

-0.3%

Brisbane

0.2%

1.0%

-0.9%

-1.1%

Adelaide

0.1%

0.7%

-1.0%

-0.7%

Perth

0.1%

0.0%

-7.0%

-8.2%

Combined 5 capitals

0.5%

1.6%

0.4%

-1.7%

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

BRISBANE CANBERRA Total auctions

112

Cleared

69

Uncleared

24

Clearance rate

Total auctions

142

Cleared

42

Uncleared

35

Clearance rate

54.5%

74.2%

SYDNEY Total auctions

931

Cleared

538

Uncleared

126

Clearance rate

81.0%

TASMANIA

MELBOURNE Total auctions

1,016

Total auctions

5

Cleared

559

Cleared

2

Uncleared

231

Uncleared

2

Clearance rate

Clearance rate

70.8%

TASMANIA

Affordability falls in Hobart as property prices rise Hobart has lost the top spot as Sydney reclaims the title of best property market in Australia. Over the August 2019 quarter, Hobart recorded only 1.0% growth to Sydney’s 1.9%. Hobart also lagged behind Melbourne, which saw 1.8% growth in the same period, according to the CoreLogic Home Value Index.

“Over the last few years, too many investors chased the Hobart ‘hotspot’ at a time when there was a lack of employment drivers, insufficient population growth and not enough infrastructure spending,” says Kate Forbes, national director of property strategy at Metropole Property Strategists.

Indeed, the Housing Affordability Report released by the Real Estate Institute of Australia indicated that, over the June 2019 quarter, price affordability fell in the state, with the proportion of income required to make loan repayments rising to 25.8%.

Area

N/A

Type

Median value

Quarterly growth

12-month growth

Hobart

H

$480,000

2.2%

7.8%

TAS Country

H

$310,000

1.2%

6.0%

Hobart

U

$361,500

2.1%

8.3%

TAS Country

U

$251,250

0.4%

0.4%

All data sourced from CoreLogic.com.au

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29

PEOPLE

IN THE HOT SEAT Bill Baker, co-founder and CEO of Lend, emphasises the importance of prioritising relationships in finance, and shares how building small joys into one’s daily routine can help ward off burnout

What’s one of your recent career highlights?

Getting the Lend platform to where it is A today. It’s been a three-year journey of working hand in hand with brokers to get their feedback and make sure we understand how to best support them. It has been phenomenal and very satisfying to have made it to this point and see brokers actively embracing the new platform.

Q

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

In the wake of the royal commission, A brokers need to develop a deeper understanding of the products they offer.

This has become even more challenging given that new lenders are entering the market and a wider range of products are available.

The Lend platform is helping to resolve this issue by taking the guesswork out of choosing the right product.

Q

What are your top survival tips for working in finance?

Relationships are key. Developing trust A with a client may take time, but establishing, maintaining and growing that bond is worth the investment. Plus, it’s necessary for understanding the needs of your customers, finding the right finance solution, and continuing to strengthen the ongoing relationship.

Q

30

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

We are aiming to be the go-to SME A marketplace for small business loans. It’s a big ambition, but one we feel we can achieve.

Our platform connects SMEs in need of finance with the most suitable lenders for them. We have simplified the process of getting a loan by helping business owners navigate the options available to them – giving them everything they need in one platform.

Q

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

To be honest, I really enjoy my job and A working in the SME finance industry.

It makes a big difference to enjoy what I do for a living and know I’m helping people.

I also take steps to avoid getting mired down in the daily stresses – a cluttered inbox, for example – and to stay focused on what matters. I try to get in a daily walk outside while I take my calls to help clear my head and regain perspective. AB

Q

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