Australian Broker 12.21

NEWS Association’s fee freeze The FBAA holds its fees steady P4

ANALYSIS What’s next for rates?

Experts on the RBA’s plans P10

OPINION Do it yourself Why self-serve credit repair could be complicated P14

OCTOBER 2015 ISSUE 12.21

SPECIAL REPORT Major aggregators A look at the market’s evolution P18

MARKET WRAP Spruiker in the crosshairs Politicians take aim at a well-known spruiker P23

JOHN MOHNACHEFF Liberty’s national sales manager on the new opportunity for non-banks P16

FORUM Calls for clarity A brokers asks APRA to get specific P27

2

NEWS

ASSOCIATIONS

REGULATION

HOME LOANS

FBAA launches new CPD partnership P4

Credit fraud heading online

BOQ credits brokers with growth P8

P6

BROKERNEWS.COM.AU

HOMEOWNERS LOOKING FOR A BETTER DEAL

EDITORIAL

SALES & MARKETING

Editor Adam Smith

Sales Manager Simon Kerslake

News Editor Julia Corderoy Journalist Maya Breen Production Editors Roslyn Meredith Moira Daniels

64%

70%

84%

Marketing and Communications Manager Lisa Narroway

CORPORATE

ART & PRODUCTION

Chief Executive Officer Mike Shipley

Design Manager Daniel Williams

Chief Operating Officer George Walmsley

Designer Lea Valenzuela

53%

Account Manager Rajan Khatak

Traffic Coordinator Lou Gonzales

Managing Director Justin Kennedy Publisher Simon Kerslake Chief Information Officer Colin Chan Human Resources Manager Julia Bookallil

of refinancers say they’re confident to compare and select home loans themselves

of owneroccupiers say they’ll use a broker

of first home buyers say they’re confident to compare and select home loans themselves

of people planning to take out a new home loan or refinance in the next year say they’ll shop around

EDITORIAL ENQUIRIES

Adam Smith +61 2 8437 4792 adam.smith@keymedia.com.au

SUBSCRIPTION ENQUIRIES

tel: +61 2 8O11 4992 fax: +61 2 9439 4599 subscriptions@keymedia.com.au

Source: Aussie Home Loans

ADVERTISING ENQUIRIES

Simon Kerslake +61 2 8437 4786 simon.kerslake@keymedia.com.au Rajan Khatak +61 2 8437 4772 rajan.khatak@keymedia.com.au

ROBO ADVICE COULD BE RISKY The past few weeks saw Yellow Brick Road tout the very public launch of its new robo-advice platform, Guru. The platform, which was piloted in June, was launched via The Celebrity Apprentice. The reality show tasked contestants with engaging the public at a suburban shopping centre and signing them up for a Guru session in a Yellow Brick Road branch.

“Eighty per cent of Australians don’t have a financial plan because they see it as cost-prohibitive and confusing. Guru provides a powerful introduction by breaking down those barriers, and gives simple solutions without the usual price tag,” YBR executive chairman Mark Bouris said.

But Adrian Frinsdorf, wealth advisory director at William Buck, says robo advice can be dangerous for unsophisticated investors.

“When it comes to finances, the consumers who are looking for cheap outcomes are usually those who can’t afford for things to go wrong – so unless you’re a sophisticated investor, my advice would be to steer clear of automated services.”

EASTWOOD SECURITIES

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, Toronto, Manila 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.

ASSOCIATION HAPPENINGS 4

BY THE NUMBERS

14.41% Fixed rate home loans accounted for just 14.41% of all loans written throughout the month of September, down from 17.41% in August. The result is a four-year low Source: Mortgage Choice

FBAA PUTS FREEZE ON FEES, DELIVERS CPD The FBAA had a pair of announcements for its members ahead of its annual conference in November. The association said it would put a freeze on membership fees, locking them in at their current rate until at least 31 October 2017.

“We want our most important stakeholders looked after, and this industry-first pledge is a small but really significant bonus for our FBAA members,” FBAA chief executive Peter White said.

The association also announced what it called a “landmark” education deal for mortgage and finance brokers. The FBAA said its partnership with CPD platform CPDone would allow the association to host videos, webinars and other educational assets for its members, as well as automatically record members’ completion of CPD activities. CPDone managing director Paul Eldridge said the

A rundown of the next fortnight’s events

OCTOBER

29 Peter White

cloud-based platform would allow FBAA members to track and manage all of their CPD activities, and even those with limited computer skills would find the system user-friendly.

WHAT THEY SAID...

Mark Bouris “Eighty per cent of Australians don’t have a financial plan because they see it as cost-prohibitive and confusing” P2

John Dickinson “I’m afraid that the notion that all credit providers will willingly investigate and happily correct a wrongdoing is a fantasy” P15

DATES TO WATCH

Cameron Kusher “Value growth has been strong for more than three years in Sydney and Melbourne, and investors may be becoming concerned about the longevity of the boom” P23

What: Evolution and Revolution as Brokerages Grow Where: Online The particulars: This MFAA webinar will explore strategies for managing growth in your business.

OCTOBER

30 What: Australian Mortgage Awards Where: The Star, Sydney The particulars: The industry’s premier awards event celebrates top performers. The night will be emceed by rugby league commentator Andrew Voss.

NOVEMBER

3

What: RBA rate decision Where: Sydney The particulars: The Reserve Bank has made something of a tradition of making rate moves on Melbourne Cup Day. With rates already at historic lows and the heat coming out of the housing market, will this year be a break with precedent?

REGULATORY ROUNDUP 6

WORLD NEWS

CREDIT FRAUD MOVING ONLINE

Fraudulent credit applications involving identity takeovers in Australia rose by 59% in the past two years

59%

UNITED STATES OF AMERICA

A 76-year-old former mortgage broker in California has been sentenced to three years in prison for his role in a Ponzi scheme.

Paul Sloane Davis was sentenced by US District Judge Charles Breyer. Davis was also ordered to pay $1.7m in restitution.

According to a 2013 grand jury indictment, Davis and a partner defrauded investors of funds they said would be used for bridge loans through their company, DM Financial.

Prosecutors alleged the pair had convinced 21 investors to fork out $2.4m over a period of three years, according to local publication SFBay. Some of that money was used to repay old debts; the rest was put towards living a life of luxury.

“A number of his victims were also elderly, and he stole the money of those individuals, leaving them without the retirement that he was able to enjoy while he was stealing $2.4m from them,” the prosecutors wrote, according to SFBay. Investors lost a total of $1.7m.

Fraudulent credit applications involving identity takeovers in Australia rose by 17% in the past 12 months

25% of Australians claim to have been a victim of identity theft

50% CALIFORNIA BROKER SENTENCED IN PONZI SCHEME

17%

50% of credit application fraud is now occurring online – up from 33% compared to last year

25% Source: Veda

REGULATORS HITTING LENDERS, PLANNERS AND BROKERS Regulators and courts have come down on finance professionals across the board this month. The Federal Court has taken aim at payday lenders, with the finding that Fast Access Finance Pty Ltd, Fast Access Finance (Beenleigh) Pty Ltd and Fast Access Finance (Burleigh Heads) Pty Ltd (the FAF companies) breached consumer credit laws by engaging in credit activities without holding an Australian credit licence.

Meanwhile, ASIC announced the banning of not one but

two former Commonwealth financial planning advisers.

Commonwealth Bank expressed its support of the bans, and said it had and would continue to help ASIC in its investigations.

Finally, the industry watchdog handed a lifetime ban to a former Aussie Home Loans broker who was convicted on three charges of making false statements, making false documents and using false documents in home loan applications. Aussie supported the ban, saying it had helped bring the behaviour to the regulator’s attention.

LENDER UPDATE 8

DID YOU KNOW?

LENDER NEWS

A rundown of the fortnight’s policy and price changes

RATES AMP AMP’s Essential Home Loan rate has been cut to 3.99%, while its variable Professional Pack Home Loan rate has been reduced to 3.99% for loans over $750,000 and with an LVR of less than 80%. The discounts are effective 12 October and will apply until 30 November 2015.

$218.7bn LENDERS RELYING ON BROKERS Brokers are an increasin gly important channel for the lenders, if recent news is any indication.

Two separate banks touted broker growth in their recent financial results. Newcastle Permanent reported a 31% increase in home loan approvals. Newcastle Permanent’s chief executive, Terry Millett, said 40% of the lender’s home loan approvals came through the broker channel. Millett said the lender would be looking to expand its relationships with brokers.

Bank of Queensland also put its strong results down to broker business. The bank reported a 7% increase in its home loan portfolio for the year to August, representing growth at 0.9 times system. BOQ chief executive Jon Sutton said brokers were a driving force in helping the non-major diversify its asset base nationwide and boost its housing portfolio growth. The mortgage broker channel accounted for 15% of BOQ’s housing settlements, up from 5% in 2014.

Figures from AFG show Bank of Queensland’s market share of AFG mortgages has more than doubled since the beginning of 2015. In August, 3.6% of AFG loans were settled through BOQ, up from just 1.4% in February.

According to the latest banking statistics released by APRA, ANZ holds the smallest mortgage book of the four major banks, totalling $218.7bn. This comes on the heels of ANZ’s announcement that it will aggressively pursue home loan growth

Source: APRA

FAST FACT

ING Direct ING Direct has dropped the interest rate on commercial loans in response to growing investor demand for commercial property. New commercial loans of $2m or more will now have a discounted variable rate of 4.50%.

Bankwest The Complete Variable Home Loan rate for owneroccupier borrowers below 80% LVR has dropped to 4.08%, with a comparison rate of 4.49%. In addition, the Complete Three-year Fixed Home Loan rate drops to 3.95%, with a comparison rate of 4.92%.

ME Bank For a limited time, ME is offering a variable rate of 4.19% on new owner-occupier loans. The offer is available for owner-occupiers who apply from 1 October and settle with 90 days of the promotion’s closure.

Auswide Bank Auswide has cut its variable rate to 4.19% for a limited-time spring offer. The reduced rate is available for owner-occupier, construction and refinance purposes on new principal and interest home loans of $200,000 at LVRs of up to 90%.

PRODUCT

$8.2bn

Amount Macquarie paid to purchase motor vehicle financier Esanda Dealer Finance

Source: Macquarie

Bluestone Mortgages Bluestone has launched its new product, Crystal Blue, aimed at SME borrowers with clear credit histories: interest rates from 5.24% (comparison rate 5.40%) and maximum LVR of 80%.

POLICY

Thinktank Commercial Thinktank has lifted its maximum loan term for Quick Doc loans from 25 years to 30 years.

10

ANALYSIS WILL RATES DROP FURTHER BEFORE THEY RISE? Speculation is mounting that the RBA will be cornered to drop the cash rate further before the end of the year. So will rates drop again before they rise? Two senior economists at ANZ have argued that the RBA will drop the official interest rate to a new record low of 1.5%, due to the troublesome global economy and stubbornly high unemployment.

ANZ chief economist Warren Hogan and senior economist Justin Fabo, who previously forecast the RBA would keep rates on hold at 2% throughout 2015 and 2016, have claimed that worsening global conditions and weak growth in the non-mining economy will force the central bank to lower the cash rate further, Fairfax reported.

“Risks to growth in Australia’s major trading partners in Asia, and Australia’s terms of trade, are skewed to the downside, with China in particular facing several significant challenges,” the economists said, according to the Fairfax report.

“Governor Stevens has previously noted that growth in the non-mining economy needs to be above average for a couple of years to eat into spare capacity – at best it is currently around average with little prospect of improving much in our view. At the same time, mining investment has much further to fall.

“The economic backdrop we have outlined above points to greater risk that unemployment worsens rather than improves over the next 12-24 months.

Governor Stevens’ ‘path of least regret’ suggests he will need to cut rates again.”

Hogan and Fabo aren’t the only ones arguing that the RBA’s hand will be forced to drop the cash rate further.

According to leading financial advisory and investment group Cigna Wealth, the global economic slowdown, particularly in China, is a big concern for Australia and is the main reason why the RBA may decide to drop the official rate again before the end of the year.

Cigna Wealth’s managing director Kent Leicester says the recent report by the IMF – which downgraded Australia’s growth forecast to 2.4% in 2015 and forecast diminishing growth for commodity exporters such as Australia – highlights the need for lower interest rates.

“There is a growing view from economists that further rate cuts will be needed to drive the Australian dollar even lower to boost exports and to encourage international tourism and stimulate jobs growth,” he said.

“Although lower interest rates are not good news for some investors, they have helped borrowers and bolstered consumer confidence during challenging economic times.”

According to Leicester, a recent online survey by Cigna Wealth found 60% of respondents expected the RBA to lower rates again this year.

“The RBA still has more room to move than most other central banks around the world,” Leicester said.

An official cash rate of 1.5% would be the lowest ever seen since the RBA was given the power to set monetary policy independently of the government.

CASH RATE HIKES ON THE HORIZON? The run of record low interest rates is coming to an end. The head of treasury at ING Direct, Michael Witts, speaks to Australian Broker about the future of the cash rate SINCE THE Reserve Bank of Australia (RBA) began its current monetary policy easing cycle in November 2011 – when it unexpectedly lowered the cash rate by 25 basis points to 4.5% – the official cash rate has been trending lower, reaching historical lows.

However, speaking to Australian Broker, the head of treasury at ING Direct, Michael Witts, says the run of record low interest rates is coming to an end – and the market should prepare.

According to Witts, the evidence is in the sectors of the Australian economy the RBA has been particularly keeping its eye on – the stubbornly high exchange rate and the transition from a resources-led mining boom.

“Let’s step back a little bit and look at what the Reserve Bank of Australia has been trying to do over the last 18 months to two years. Obviously the investment phase was slowing down and the exchange rate was very high.

“[The RBA] was looking to try and engineer a transition in the economy from the investment phase in the resources boom to other sectors of the economy, in particular the housing and the construction sector. The logic behind that was and has been that when people build houses, they put light fittings in, they buy curtains and washing machines, etc. It has a much greater flow-on effect to other parts of the economy – and that has been working reasonably well.

CYCLE OF EASING

A look at the RBA’s rate cutting measures NOVEMBER

2011

DECEMBER

2011

The RBA begins its easing cycle, cutting the official cash rate from 4.75% to 4.50% The RBA cuts the cash rate to 4.25%

MAY

2012

JUNE

2012

After leaving the cash rate untouched through three meetings, the RBA slashes 50bps to bring the cash rate to 3.75% The RBA trims another 25bps to take the cash rate to 3.50%

OCTOBER

2012

DECEMBER

2012

The RBA cuts the cash rate to 3.25% The RBA ends the year with another rate cut, taking the rate to 3.00%

11

CONNECT WITH US Got a story, suggestion, or just want to find out some more information?

“Something that people have also lost sight of is that the Australian dollar is 50% lower than what it was 12 months ago. It was 93 cents in about August or September of 2014, so it has been a relatively sharp drop in a short period of time.”

Stop being so pessimistic Speculation has been mounting recently that the cash rate could hit as low as 1.5%, due to the troublesome global economy and high unemployment rate.

However, Witts argues that from a global perspective, Australia’s unemployment rate isn’t so bad. Plus, the raised unemployment rate – which currently sits at 6.2%, according to the Australian Bureau of Statistic’s

MAY

2013

AUGUST

2013

The RBA cuts the cash rate to 2.75%

The RBA cuts the cash rate to 2.50%

September figures – is not exactly as it seems.

“In a global context, the unemployment rate is actually low. Yes, it has increased a little bit but the rate of increase appears to have stabilised over the last six months,” he told Australian Broker.

“The actual unemployment rate is probably not a very good measure because within various sectors of the labour market, there is a very different picture coming through.

“I don’t think the labour market will drive the RBA’s decision one way or another.”

Again, when it comes to the global economy – particularly the closelywatched Chinese economy – Witts says it is all about perspective.

“Parts of the Chinese economy get the headlines but one thing to remember about the Chinese economy is yes it may grow below 7% in 2016, but the actual size of the Chinese economy is three to four times larger than what it was 10 years ago.

Hikes are coming So when should we expect the cash rate to rise? Witts says the tightening cycle will begin this time next year.

However, he says the peak in the cash rate is unlikely to get as high as it has in previous cycles.

“I think the peak in interest rates will not be as high as what they were previously… I don’t think you will see them much above 3% to 3.5% in terms of this cycle. It is very hard to say what a peak in rates is likely to be, but I don’t think we are talking above 5%,” he told Australian Broker.

FEBRUARY

2013

MAY

2015

After remaining on the sidelines for all of 2014, the RBA drops the cash rate to 2.25% The RBA cuts another 25bps to bring the cash rate to 2.00%

COMMERCIAL LENDING UPDATE

CHIFLEY SECURITIES PROVIDES A VIABLE ALTERNATIVE TO THE BANKS It has been almost one year since you launched Chifley Securities. How have you performed?

Our new non-bank finance group in the commercial property market, Chifley Securities, has seen very strong activity over the last year, with expectations that we will reach $500 million worth of loans by the end of 2015.

Our individual loans have ranged from $1.5 million to $36 million for projects ranging from individual shops to shopping centres. Our clients have included developers, hotel and gym owners, property investors and retailers.

Chifley’s lending pool has also grown to $700 million, with our individual lenders achieving average annualised returns of over 11.5 per cent.

What impact have you had on the broker market?

Chifley Securities now has 2,000 accredited brokers and has generated more than $2 million in fees to them over the last six months.

We are finding more brokers are coming to us as we provide a viable alternative to the banks, which are tightening their lending criteria and simply shutting down customers, especially property developers.

Brokers across the country are also being attracted by our average 1 per cent commission and the chance to earn rewards, like travel and holidays.

They are also participating in our professional education programs, with discounted prices for members of the Finance Brokers Association of Australia.

Are you seeing continuing growth in inquiries because of the banks’ tightening of lending?

Definitely, as many of our clients who are financially strong with good projects, have simply been rejected by the major banks.

We and other non-banks are filling the void with funding for land banks and the development of commercial properties.

Banks have simply identified areas of the country where they simply will not lend anymore, whether the numbers stack up or not.

We lend money without pre-sales and provide bridging finance for those looking to fund new projects.

Banks are also taking simply too long to provide bridging or commercial loans, while Chifley can come up with quick cash to resolve short term issues. Meanwhile we attribute value to development approvals, as opposed to the banks.

Joe Morello

What is the major difference between yourselves and traditional lenders?

Chifley Securities is filling a niche in the market by basing our lending decisions on existing asset values, risk profile and prospects on individual projects.

We are providing loans in the commercial property market ranging up to $50 million, with financing costs ranging from 8.5 per cent to 12 per cent a year, with very quick approvals and delivery of funds.

What are the latest developments affecting your business?

There appears to be a very strong trend in small to medium sized businesses being wound up by the Australian Tax Office.

Many of these businesses have shortterm cash flow problems with tax bills and no path to get out of the problem.

We are working with brokers in offering a service that allow these businesses – the majority of which are viable – to overcome the short term tax or other cashflow problems.

The ATO is jumping on businesses as the wind-up application threshold of $300,000 has now dropped to $30,000, with fewer deals now being done to manage slow payers.

Chifley is also paying out arrears where appropriate, to help businesses avoid the tragedy of liquidation.

What is the future of non-banks in this tougher economic climate?

Non-banks like Chifley Securities have a great future as the banks and other organisations, like the Tax Office, are getting tougher on developers and business people who may be facing short term problems but have no immediate answer.

We plan to work closer with more brokers over the next year to present our solution to them and their clients.

Chifley Securities will continue to offer attractive incentives and programs to support brokers seeking to grow their businesses.

12

ANALYSIS

BROKER QUESTIONS MARKET COOL DOWN Amid speculation of a cooling property market, a top Sydney-based broker has claimed there has been no downturn in his business and he doesn’t expect the market to pull-back any time soon.

Owun Taylor, owner and partner of Mortgage Choice Newtown, told Australian Broker that his business hasn’t been affected by growing speculation the Sydney property market has moved past its peak. In fact, he has plenty of clients still ready and willing to buy in the current market, suggesting that Sydney’s peak is still to come.

“We have had plenty to keep us going across all parts of the business – broking and financial planning. We still have plenty of clients with conditional approvals that haven’t found the right home, rather than being priced out. I know in talking to local area agents they are still getting properties ready to list,” he said.

Recent data has suggested that the Sydney housing market is beginning to experience a pullback. Figures from SQM Research reveal that a surge in property listings in the harbour city – where listings were up 7.6% over September – point to a cooling of the market.

“The Sydney surge in listings is another indicator now suggesting that the Sydney housing market is now slowing,” SQM Research head Louis Christopher said.

“Buyers should now find there is a little more choice out there compared to earlier this year.”

In addition to more property listings, Sydney’s auction clearance rate also dipped below 70% to its lowest September level in three years. According to figures from Domain, Sydney’s September auction clearance rates dropped to 69.8%, now sitting clearly below the 76.9% recorded in September 2014 and the lowest September result since 2012.

But despite what some data suggests, Taylor told Australian Broker that in reality, Sydney will continue to be the backbone of the Australian property market.

“I don’t see Sydney’s prices going backwards.

Property prices are going to be a great talking point for Sydney people for a long time. What I do know is Sydney is a global city, with just over one-fifth of Australia’s total population living in and around it,” he said.

“The simple economic rule of supply and demand predicts that prices will be at a premium compared to other cities. We have seen a very keen interest from the public to our renovation seminars and a lot more renovation loans completed this year.”

But that doesn’t mean Taylor – whose Mortgage Choice franchise has an in-house financial planner – isn’t protecting his business from market uncertainties.

“Nothing is guaranteed in life, be dynamic,” he told Australian Broker.

IS AUSTRALIA HEADING FOR A NATION-WIDE PROPERTY DOWNTURN? PERTH

-7% – -4%

Forecast Perth house price depreciation in 2016

8% – 13% Forecast Melbourne house price appreciation in 2016

What could Sydney’s tepid start to the spring selling season mean for Australia’s premier harbour city, the economy, consumers and brokers?

THE STRENGTH of Australia’s housing market has widely been touted as the backbone of the Australian economy, propping up its transition from the resources-led mining boom. However, has the housing market finally cracked under the pressure?

Whilst there have been

11.6% Combined capital city house price increase in the 12 months to September

substantial, yet differing, figures and forecasts released recently about the future of Australia’s housing market, one thing does seem certain: the heat is coming out.

Prices will go down Non-major lender, Macquarie Bank has

predicted that the nation’s property markets are in for two years of falling prices.

According to a report in the Australian Financial Review, a research note from Macquarie Bank’s wealth management division predicts property prices will fall by up to 7.5% over the next two years.

$613 ,000 Combined capital city median house price

13

CONNECT WITH US Got a story, suggestion, or just want to find out some more information? e: brokernews@keymedia.com.au

Forecast capital city house price appreciation in 2016

3% – 8%

5% – 8% Forecast Brisbane house price appreciation in 2016

4% – 9% Forecast Sydney house price appreciation in 2016

SYDNEY

MELBOURNE

Source: SQM Research

The note claims slow population growth and an oversupply of apartments will combine to cause the price adjustment.

“The combination of strong supply and weak population growth means that the housing market has a period of adjustment ahead of it,” the note read.

The lender’s research note also said the price correction period could last even longer, as it is likely to occur during a weak period in the broader economy.

7.3% Combined capital city apartment price increase in the 12 months to September

“The absence of factors that supported previous adjustments also suggests that the adjustment phase to the current episode may be longer, slower and more prone to shock than prior instances.

“Additionally, more may be required of prices, construction and rates to drive normalisation.”

However, the non-major claims that the extent of house price adjustment is “contingent upon the pace of retrenchment BRISBANE in the supply of new housing into the market”.

According to Macquarie Bank, construction levels will fall in the near future, with the number of new homes built to fall to 161,000 by June 2016 and then to 150,000 in the year to June 2017.

However, data from the Residential Development Outlook Spring Edition, compiled by CoreLogic RP Data and the Property Council of Australia (PCA), argues that the construction of new homes in Australia will peak in mid-2016.

“The expectations for low interest rates, reasonable ongoing foreign investment and an increasing population will continue to drive a fundamental demand for new homes to be built through 2016,” PCA residential executive director Nick Proud said.

Prices will go up, but very slowly In contrast, new research released by SQM Research claims that Australian

house prices are forecasted to rise in 2016, however they are going to rise at the slowest pace recorded since 2012.

SQM’s newly released 2016 Housing Boom and Bust Report forecasts that average capital city dwelling prices will rise between 3% and 8% for the full calendar year. This is down from the current 9.8% recorded for the 12 months to June 2015 and the slowest annual growth since 2012.

According to the report, the slowdown will occur predominantly as a result of a slowing Sydney property market, which is forecasted to rise between 4% and 9%.

However, other contributing factors, according to the report, include an ongoing housing market correction in the resources exposed capital cities of Perth and Darwin, APRA’s lending restrictions filtering through the market and a slower Australian economy with nominal GDP forecasted to rise between 1.2% and 1.7%.

Whilst SQM Research managing director, Louis Christopher, says the market will not record a fall in house prices over the year, the weakening global economy poses a key risk to the ongoing strength of Australia’s housing market.

Christopher says the Reserve Bank of Australia may still have some ammunition in the form of monetary policy to counteract this looming risk; however, he says cutting the cash rate will not handle the issue over the medium to long term.

$515,000 Combined capital city median apartment price Source: Corelogic RP Data

14

OPINION ARCA’S FACT SHEET The Australian Retail Credit Association’s fact sheet tells consumers that new credit reporting laws give them more control over their credit scores: “Increased consumer protection: The new system gives you more control over the information in your credit report. For example: Credit providers and credit reporting bodies are obliged to take positive steps to help you get incorrect information in your credit report fixed.

If your correction request is not resolved, you can access internal and external dispute resolution processes.

Credit providers and credit reporting bodies must respond to complaints within set time periods, and if a complaint remains unresolved or the response is unsatisfactory, you can speak to an external dispute resolution scheme or be referred to the Privacy Commissioner.

Credit providers risk very significant fines if they misuse the information in your credit report.

Credit providers cannot use information in credit reports to market products and services.

You have more options to help protect your personal and credit information if you have been, or may have been, the victim of identity theft or fraud.”

Source: ARCA

ANOTHER PERSPECTIVE ON CREDIT REPAIR John Dickinson of Clean Credit explains how consumers may face an uphill battle trying to repair their own credit I RECENTLY read an article about how the Australian Retail Credit Association (ARCA) had launched a fact sheet on how people could repair their own credit files if they felt an incorrect or contestable listing had been made against them.

As the director of a credit repair company, the only thought I had while reading this information was “if only it was that simple”.

While I applaud the ARCA for making this information available, I suggest it’s a very simplified view of the reality of repairing a credit file. I can assure you that the reality of this process for many can prove complicated, exhaustive and often does not end with a positive outcome.

The guide suggests that if a consumer raises a complaint with a credit provider or credit reporting agency, they will willingly conduct a detailed investigation and, if appropriate, volunteer to remove the offending listing with no resistance. While this approach may yield results in some situations, I can assure you that for the most part it’s just not that easy.

The article went on to warn people about credit repair companies and spoke of large fees and empty promises. Over the past few years the credit repair industry has been under the spotlight and has been highly criticised by many, including industry bodies such as the ACCC and ASIC.

Some have even gone as far as to say there is no place for the industry at all. It’s interesting that many of these comments are coming from credit providers such as the banks, and credit reporting agencies such as Veda Advantage. Given credit repair companies cause these organisations work by demanding their clients’ interests are protected, one wonders what their motivation really is. Do they want to protect the public or themselves?

I’m the first to admit that some of this criticism is warranted as unfortunately the industry does have

Credit providers can often become defensive when questioned about a default they have listed its share of questionable practitioners and there is no doubt that consumers have been misled and overcharged at the hands of unscrupulous operators.

However, it’s important to keep this in perspective as the same can be said for most industries; we only need to look at the legal or accountancy profession to see that.

Let’s look at the reality of credit repair…

To have a default removed from a credit file, one must first know on what basis to challenge the

THE NEGATIVES OF POSITIVE REPORTING ARCA’s fact sheet concedes that the new credit reporting regime could have downsides: “You may not receive credit when previously you would have been approved: The new information on your credit report will contribute to a clearer picture of your current financial situation, so credit providers may be able to see if some consumers have more credit than they can afford. A poor credit history may be more obvious.

“Late or missed payments may show up on your credit report: Previously, only a default or a serious credit infringement could appear on your report, whereas now a late payment may appear on your report.

“These changes will take time: Some credit providers don’t use credit reports at all to make their credit decisions.

Others will continue to use the current ‘negative’ credit reporting system. Credit providers that hold an Australian credit licence may adopt comprehensive credit reporting, but may do so at different times.”

Source: ARCA

15

John Dickinson is the director CLEAN CREDIT PTY LTD

listing, and to do this one must understand the laws around credit reporting. While few consumers understand these laws, it would be fair to assume that credit providers would. Unfortunately, this is not always the case. It is not uncommon for a credit provider to ‘dig in’ and defend its position, even if it’s wrong. We have even witnessed credit reporting agencies taking this attitude. One wonders where their allegiances lie – are they with the subscribers who pay them or the public?

Credit providers can often become defensive when questioned about a default they have listed.

I’m afraid that the notion that all credit providers will willingly investigate and happily correct a wrongdoing is a fantasy. There are many examples of credit providers becoming openly hostile when challenged, and this can often be an impossible situation for a consumer to deal with. With respect, I wonder if the author of the information published by the ARCA has ever tried to have a default removed from their credit file. I’m guessing not. I find that most people who suggest that the process is as simple as contacting the creditor or credit reporting agency have themselves had little direct experience and are quoting principle rather than fact.

While I am an advocate of industry Ombudsmen and endorse their efforts, the truth is their ability to motivate an unwilling credit provider to do the right thing and remove an incorrect default listing can be limited at best. Often significant pressure needs to be applied to the credit provider that listed the default, and the laws that have been broken should be clearly pointed out. The reality is this can be beyond many consumers and often they will give up from frustration and exhaustion.

Yes, there are credit repair companies that are misleading people and making promises they are unable to deliver; however, there are also companies that behave in an ethical fashion and work tirelessly to deliver their clients a positive outcome, which is often after people have tried themselves and failed.

While regulation within the credit repair industry is inevitable and I for one would welcome it, there must be care given to how it is introduced as it needs to protect the companies operating in the right way, while either forcing change or exit of the ones that are not.

When done correctly, credit repair offers many consumers a very valuable service and can quite literally change lives. It would be nice if people from outside the industry could acknowledge this fact rather than always condemning the whole sector based on the actions of a few.

TECHNOLOGY UPDATE

BEYOND BANK UNVEILS BRILLIANT EFFICIENCY TOOL A newcomer to the broker market, Beyond Bank, one of Australia’s largest mutual banks, is focused heavily on driving sales through the broker channel by providing a superior value proposition.

With 20 years’ experience under his belt, cultivating strong ties with the third-party sector, Beyond Bank’s head of third party, Darren McLeod, knows exactly what brokers want. He is now drawing from that well of knowledge to establish great service outcomes for Beyond Bank’s brokers and customers.

McLeod is also adept at bringing on board the best of the industry’s service providers to deliver the most efficient and competitive outcome for everyone involved in the residential loan scenario.

Electronic lodgement was on top of his list of priorities, and NextGen.Net’s ApplyOnline was his choice for the bank’s main interface with brokers.

“We’ve invested heavily in NextGen.Net technology, and document uploading is part of that,” McLeod said. “So naturally we opted to go with the ApplyOnline Supporting Documents service, which is great because it allows brokers to identify exactly what documents they need, upload them and validate that they meet our requirements.”

Beyond Bank has gone one step further. Keen to provide state-of-theart technology to the broker market, Beyond Bank will also manage its own internal processes for verifying documents online for loan approvals, using the ApplyOnline ‘Easy Verify Tool’.

NextGen.Net sales director Tony Carn says that while brokers aren’t always aware of the Easy Verify Tool, its extremely valuable functionality works in their favour and contributes to efficiency and fast turnarounds.

“The Easy Verify Tool enables an assessor [lender] to easily view supporting documents submitted by the broker, validate that it meets their requirements and quickly check that the supporting docs are accurate. It also empowers the lender to quickly communicate back to the broker regarding the status of the supporting docs,” Carn says.

Possessing this tool gives Beyond Bank technological sophistication and an edge that many other lenders lack, Carn says.

“The Easy Verify Tool is used internally within a lender’s own processes,” he explains.

“Often brokers get supporting docs in paper form. They then digitise them

and send them to the lenders, and in most cases the lenders print them off.

“With the Easy Verify Tool, documentation remains fully digitised. If there is a problem with the documents, the assessor – in this case, Beyond Bank – can quickly and automatically comment on the issues and send a backchannel message directly to the broker.

“It’s providing Beyond Bank with a tool that quickly and easily verifies supporting documents and approves the loan much faster.”

Carn describes the functionality as “a quick, cost-effective, nimble solution”, sourced through NextGen.Net, which effectively means that lenders no longer have to try to build an equivalent themselves.

“Beyond Bank is well positioned and equipped to deliver great service outcomes for brokers,” Carn says.

“They’ve just launched onto the broker market and our Easy Verify Tool – which ApplyOnline makes available to all lenders – helps put them in a box seat, because it minimises the time to verify supporting documents.

“Notably, it enables Beyond Bank to differentiate itself from other service propositions,” Carn maintains.

For McLeod the significance of using one platform is “an efficiency matter”.

“We wanted it all in one place and in one system, so we get the application form electronically and the supporting data is attached to that. Ultimately, that makes it a lot easier for us, for brokers and for customers,” he says.

Tony Carn, Sales Director, NextGen.Net

16

COVER STORY AN OPPORTUNITY FOR CHALLENGERS Liberty’s John Mohnacheff sees APRA’s recent moves as a gift to non-bank lenders APRA’S SABRE-rattling about investment lending

TAKING OUT THE GONG Liberty took first place in MPA’s recent Brokers on Non-banks survey. Brokers responding to the survey tipped the areas they saw as most important in choosing a non-bank lender.

Most - Least important

Service category

Score

1

Turnaround times

4.5

2

BDM support

4.3

3

Credit policy

4.3

4

Product range

4.0

5

Interest rates

3.9

6

Online platform & services

3.7

7

Cowmmission structure

3.6

8

Communications, training & development

3.6

9

Product diversification opportunities

3.4

10

Marketing & brand awareness

3.2

Source: MPA

has certainly had its desired effect on banks. Lenders have pulled back significantly on their investment lending, with some raising rates and lowering LVRs and some pulling out of the market altogether. But while the warnings over investment lending may have been greeted with gloom and doom by banks, Liberty national sales manager John Mohnacheff said nonbanks have been its beneficiaries.

“APRA was certainly very kind to us. It is wonderful for non-banks,” he said.

And the boon to non-banks hasn’t just come in the form of increased investor activity, Mohnacheff said.

“The interesting thing about it though is that it’s made a lot of brokers consider doing business outside the big four, and though we’ve seen an increase in activity on the investor side, it hasn’t been all investors,” he said.

As brokers seek a new home for investment clients, Mohnacheff said non-banks are moving to front-ofmind for a broad array of consumers.

“I think brokers are starting to say, ‘There’s an opportunity out there for me to explore alternative lenders’. We’re getting a wonderful spread of business.

We’re getting a flow-on of good prime business, and a lot more custom business flowing from that as well,” Mohnacheff said. “Brokers that have never used us in years are suddenly going, ‘Liberty? Why not?’ We’re no longer being perceived as a lender of last resort.”

The non-bank has also seen a windfall from the recent MPA Brokers on Non-bank survey, Mohnacheff said. Liberty topped the list of non-banks recommended by brokers, and Mohnacheff said the award has given the lender reputational capital in the third-party space.

“That has helped create the picture that Liberty is a good alternative to the majors.”

Moving beyond mortgages Mohnacheff said one of the lender’s goals was to help brokers look beyond residential mortgages for revenue streams.

“When we look across our structure, we play in four very distinct areas: residential mortgages, the motor vehicle finance space, the commercial space and, sitting across residential and commercial, our real strength in SMSF lending. So we’ve got this wonderful plethora of products that we can bring to the market,” he said. “We’re working very heavily with the broker space to make them aware that we’re not just here to do a mortgage, but that we can help their customer

with car loans, with commercial loans, with SMSF lending and we’ve got a few more tricky products up our sleeve that will be coming out as well. It will be a broad finance offering to the broker market. That sparks their attention.”

The key to helping brokers make the transition, Mohnacheff suggested, is education.

“We’ve got nearly 40 BDMs across Australia. We have residential mortgage BDMs, commercial BDMs, motor finance BDMs. Brokers may believe that these are difficult things to do, but we’re educating brokers that the one thing all these areas have in common is that you’re lending money. Brokers are finance specialists. They’re not just home loan specialists.

And that creates a broader relevance of brokers to the consumer market. It’s not just a one-trick shop. It’s almost a department store of finance. All that changes is the asset. The fundamentals of lending do not change,” he said.

One thing that does change, however, is the way people interact with the home loan process. This means brokers need to pay attention to technological innovation, Mohnacheff said.

“I think brokers should also embrace technology and all the innovation that will be coming from smart, niche non-bank lenders that can provide products and access to data quickly through mobile networks,” he said.

“I really want brokers to think, ‘Am I playing in the technological age?’ If you’re not, embrace it because more and more stuff will be coming to you to give to your customers.

It’s the future.

And watch this space because there’s a lot more funky stuff coming.”

18

SPECIAL REPORT BROKERS STAYING PUT

AFG Size of loan book:

107bn

Connective Broker numbers As of 30 Sept 2013

1,381

As of 30 Sept 2014

1,887

As of 30 Sept 2015

2,746

% increase 2014

37%

% increase 2015

46%

FAST Proportion of brokers offering service outside residential finance

MAJOR AGGREGATORS

60%

Finsure Percentage growth in broker numbers over the last two years

The role of aggregators is shifting as the industry matures, and major aggregators are innovating to stay ahead of the game

63%

AGGREGATION STARTED as a relatively

PLAN

1,300 Membership

Source: MPA

simple concept. Rather than banks having individual agreements with brokers, brokers could combine their market power to get a better deal and access to more lenders.

But as the market has evolved and become more sophisticated, the role of aggregators has evolved with it. Aggregators now are no longer just a panel of lenders and

a clearinghouse for commissions. Instead, they work to be technology providers, business coaches and educators.

Australian Broker talked to several major aggregators about the changing state of the market, and how they’re responding.

An evolving role Connective CEO Glenn Lees agrees that the role of aggregators is more than

providing access to lenders and paying commissions.

“That’s not enough anymore. We need to help our members achieve their business goals, to help them do better in business than they did yesterday. After all, we’re all in constant pursuit of improvement,” he said.

Lees said Connective was focused on providing cost effective aggregation services, but that the company also sees its role

19

as a business facilitator for its members.

“We therefore support our ‘value-for-money’ proposition through excellence in innovative broker support services in the areas of IT innovation, broker training and education, marketing support and services, multiple income diversification opportunities, and broker and compliance support,” he said.

PLAN CEO Phil QuinConroy said aggregators could help brokers stay ahead of the technological curve.

“While brokers currently enjoy an unprecedented

50% market share of the mortgage market, brokers who want to stand

Aggregators provide the best value by assisting with this adaptation process.

At PLAN Australia, we do this by providing market leading IT systems as well as a dedicated support team that helps our members leverage these systems and integrate them to improve and grow their businesses.”

And when it comes to technology, Finsure’s John Kolenda said a CMS isn’t enough.

“Aggregators can no longer just provide a CRM platform, commissions processing and a monthly newsletter,” he said. “We built our business on delivering a ‘complete solutions’ philosophy throughout the organisation to assist brokers with their individual needs that will help them grow their businesses.”

FAST’s Brendan Wright said that as aggregators evolve, it’s important that they closely listen to brokers’ feedback, and pointed to a panel discussion the aggregator held at the MFAA Convention to engage with brokers.

“It’s important to note that while as an aggregator we are an adviser to serious business owners, we also believe it is important for aggregators to engage in dialogue with their brokers and learn from them as well.”

And AFG’s Brett McKeon said aggregators

revenue have a higher stake in safeguarding that revenue.

“Transaction linked aggregators are volume driven only with no interest in protecting or preserving broker commissions as they do not share in it and are not remunerated by it.

“If broker revenues or commissions are compressed their revenues are not affected.

The f low on from that is that there is little incentive for that type of aggregator to support their brokers, there is more incentive to support the manufacturers, or to build the business to a level where they can sell out to them,” he said.

“Broker revenue linked businesses are incentivised to preserve their brokers’ income streams and they invest heavily in building more efficient systems to boost those revenues.

AFG’s track record in this space is evidenced by our significant and market-leading investment in systems, compliance and business support we provide to our brokers.”

Drawing a new generation The economics of scale has traditionally been aggregators’ raison d’etre.

As such, it’s important for aggregators to attract new brokers. As the industry ages, it’s equally important that aggregators don’t merely shuff le brokers

“Aggregators can no longer just provide a CRM platform, commissions processing and a monthly newsletter” – John Kolenda, Finsure out in an increasingly complex, crowded market need to be willing to adapt their businesses in line with technological advancements and industry trends.

are evolving into two separate models: those that are linked to transactions and those that are linked to broker revenue. He argued that those linked with brokers’

between one another, but draw new entrants to the industry.

Kolenda said Finsure had achieved most of its growth through simple word of mouth referrals.

WHAT BROKERS WANT

MPA’s Brokers on Aggregators survey asked brokers to rank the importance of aggregator services Accurate and on-time commission payments

4.60

Quality of lending panel

4.49

IT and CRM support

4.44

Communication with brokers

4.39

BDM support

4.27

Compliance support

4.19

Training and education

4.03

Marketing support

3.75

Additional income streams

4.48

White label offering

3.11

Lead generation

2.82 Source: MPA

SPECIAL REPORT 20

A POINT OF DIFFERENCE Each aggregator tries to offer brokers a unique value proposition. Here are some of the things major aggregators see as their key points of difference:

AFG “AFG is also the largest employer of service support and business and sales support personnel Australia wide and we are the only business of our type that has true operating independence.”

Brett McKeon, managing director, AFG

CONNECTIVE “Connective’s main point of difference is our unique business model, which operates on a fair and transparent flat monthly fee, as opposed to the commission sharing structures of the other ‘traditional’ aggregators.”

Glenn Lees, CEO, Connective

FAST “Our focus is on providing opportunities for brokers to meet more of their client needs to go beyond the home loan solution, such as business loans, asset finance and commercial property funding.”

Brendan Wright, CEO, FAST

“Finsure doesn’t see the need to invest heavily in advertising to brokers.

We choose to invest as much as possible back into our organisation to continuously improve our offering. We simply rely on executing to our business partners and by delivering on our promises we hope to attract brokers that want greater value from their current aggregator.”

Quin-Conroy said PLAN sought growth through helping its existing brokers grow their businesses.

“One particular area of growth for us is in supporting groups who either write significant volumes or who want to leverage their size and scale to write more significant volumes. We are the only aggregator with a dedicated group for larger businesses, and we will continue to focus on engaging and recruiting this sort of business over the next 12 months,” he said.

McKeon pointed to AFG’s place in the market as a draw card for brokers.

based Mercury IT platform as a selling point to new members.

“Mercury has been developed so it can evolve continually in order to always place our brokers ahead of the curve,” Lees said.

Of equal importance, though, is simply listening to brokers, Lees said.

“We listen to brokers, and importantly, act on what they say. Every quarter we survey our membership to find out how we can better support them. We look at this data and use it to inform the decisions we make in terms of investment, projects and resourcing.”

Wright said FAST had seen strong growth through its reputation as a business and commercial finance expert. He said the aggregator was also focused in growth in diversity.

“We are committed to supporting a more diverse industry through advocacy of female brokers. FAST believes that a diverse

“We listen to brokers, and importantly, act on what they say” – Glenn Lees, Connective

FINSURE “Finsure provide multiple business solutions where brokers can get all of their business needs met via our range of in-house services in conjunction with our trusted network of service partners.”

John Kolenda, managing director, Finsure

PLAN “PLAN Australia differentiates itself from other aggregators because it gives brokers the best tools to help them evolve their businesses: market leading technology and access to top-quality professional development.”

Phil Quin-Conroy, CEO, PLAN

He said the company had a strong balance sheet, which provided business security, and could also supply income generating solutions to raise its members’ revenues. In addition, he pointed to the aggregator’s investment in technology and its BDM and support team, as well as its tier one infrastructure. Ultimately, though, he said AFG’s draw came down to its track record.

“We have been in business for more than 21 years and are still number one.

“We have a stable management team and experienced teams in each state to support our brokers.”

Lees said Connective prided itself on its cloud-

collection of viewpoints can have powerful and long-lasting benefits for business performance and success and we are highly focused on helping grow the presence of female brokers in our industry.

As part of this commitment, FAST hosts an annual national event series specifically for women in the finance industry – Women in Business.”

Growing brokers’ businesses Aggregators are increasingly taking on the role of being a business partner to brokers. Rather than merely focusing on growing their ranks, they help brokers grow their businesses. McKeon said AFG had invested

21

in a variety of tools to help brokers develop. He pointed to the company’s FLEX program, as well as its suite of tools for mobile devices and desktops.

McKeon said AFG also offers marketing support, training and mentoring services, and a range of back office support services. But he said one of the most significant tools was the aggregator’s Business Intelligence platform.

“BI is an interactive reporting tool our brokers can access 24/7 within FLEX. BI displays data on lodged and settled deals, commission payments, portfolio growth, trail reconciliation, prospect opportunities, and customer statistics and marketability; all the key indicators required to let each broker know about the health and growth of their business.”

Lees pointed to Connective’s dedicated broker support managers assigned to every state.

“Our BSMs provide brokers with personalised support and specialised training from day one of joining Connective.

They assist with seamless transitioning upon joining, work with the broker through an induction process, then identify and provide the specialised training required for brokers and staff, ensuring optimal efficiencies from

the outset,” he said.

He also pointed to the aggregator’s Connective Learning education platform, as well as its compliance support.

Kolenda said Finsure looked to tailor its support to brokers’ individual business needs and goals.

“As each broker has different personal and business goals we start by helping them put together and document a business plan.”

Examples of the support the aggregator can provide include branding, lead generation, recruitment, marketing and outbound calling to client databases, Kolenda said.

“Finally, Finsure offers a number of commission structure options, aimed solely at maximising a broker’s profitability.

We offer brokers the choice of a competitive f lat fee model, a f lexible percentage model or a scalable transaction based model,” he said.

As an aggregator focusing on the SME market, FAST helps brokers to build new revenue streams, Wright said.

“To support our brokers to build new revenue streams, we provide a high touch support model and award-winning Partnership Managers.

Our PMs spend two days every week focusing solely on strategic development

BROKERS STAYING PUT

MPA’s Brokers on Aggregators survey found that most brokers are unlikely to leave their aggregator in the next 12 months

5%

74%

Very likely

Very unlikely

6% Likely

5% Possibly

How likely are you to leave your aggregator within the next 12 months?

10% Unlikely

Source: MPA

of brokers’ businesses.

Our Partnership Managers are supported

by Support Officers, ensuring brokers always have access to personalised support, which our brokers really value.”

And Quin-Conroy said PLAN focuses not just

on ongoing training, but in delivering that training in a way that suits its members’ individual needs.

“We recognise the need to provide training in different formats to ensure it is accessible to all of our brokers, and run

face-to-face PD days, host a national conference and offer online tutorials and webinars. In 2015 we also launched our inaugural Commercial and Asset Finance Digital Summit, which offered 12 live stream webinars across two full days.”

22

MARKET WRAP MARKET TALK

HAVE APRA’S MOVES COOLED SYDNEY AND MELBOURNE? There’s debate about whether APRA’s attempts to take the heat out of the Sydney and Melbourne markets have been effective THE HEAD of one of Australia’s largest developers

believes the enforced slowdown of lending to investors has reduced the risks two major real estate markets were facing.

APRA mandated earlier this year that lenders should not allow investor home loan growth to exceed 10% per year.

Stockland chief executive Mark Steinert believes that move has prevented markets – in particular Sydney and Melbourne – from being hit by a wave of housing oversupply.

“A lot of the supply that potentially could cause a problem is not going to be built this cycle because developers won’t get the funding,” Steinert told The Australian.

But Todd Hunter, founder of buyer’s agency wHeregroup, believes APRA’s moves are too late to have any real effect on the health of those markets.

“It takes 12 months to three years to go through the approval and DA stages, so the APRA changes might keep some developments that would come online in a few years from happening, but that’s about it,” Hunter said.

“But there’s already a lot of stock coming online now, and it’s going to miss the boom anyway. It’s too late to say the changes are really going to do anything.”

Hunter said there were other challenges facing the markets that were more pressing than oversupply.

“Low interest rates can only sustain a market for so long,” he said. “At some stage it becomes a question of affordability as well, and that’s what we’re seeing now.”

And one housing analyst believes it’s still too early to call time on the nation’s biggest property

markets, with a new report showing Sydney and Melbourne house prices experienced strong growth in the 12 months to the end of August.

The report, compiled by OnTheHouse.com.au analyst Eliza Owen, shows that house prices in Sydney grew by 21.65% over the 12-month period, while in Melbourne house prices grew by 9.27%.

Unit prices in Sydney grew by 14.33% over the same period, while in Melbourne prices were up 5.24%.

Though unit prices grew year-on-year, over the month of August it was a different story, with Sydney prices falling 0.62%, while in Melbourne prices were down over the month by the slightest margin of 0.01%.

The decrease in Sydney is the first the city’s unit market has experienced since February 2014.

But Owen said it would be premature to call the end of their boom.

“Monthly growth figures can be volatile, so I think it would be too early to say their boom’s over.

Quarterly data from the next few months will be more worthwhile, and it will be interesting to see what trends it shows,” Owen said.

“In spring we typically see higher rates of capital growth compared to winter, so what happens during the next month or two should really show what the two markets are doing,” she said.

While she was unwilling to say that Sydney and Melbourne were in a slowdown, Owen said there were currently some signs emerging that have historically indicated a slowdown could be on the horizon. “The signs that are present at the moment are ones around the structural framework of housing.”

BUILDING LOBBY BACKS CALLS FOR REFORM Australia’s new treasurer Scott Morrison’s call for national leadership to solve the country’s housing affordability problem has been praised by a major residential building association.

The treasurer’s recent remarks about the importance of a bipartisan and rational approach that involves state and territory governments has been backed by building association Master Builders Australia.

“The problems surrounding housing affordability and their solutions are well known, but the missing piece has always been a positive national agenda for reform,” CEO of Master Builders Australia Wilhelm Harnisch said.

“Master Builders therefore welcomes the treasurer’s pointed reminder that the housing market is in need of reform, and his plans to do something about it.

“The core of the housing affordability challenge, as identified by the treasurer, is the lack of supply in meeting the demands of a growing population, and that a regulation modernisation agenda is needed to improve competitiveness and efficiency.”

According to Harnisch, structural reforms to boost housing supply have to be at the core of improving housing affordability, including reforms to planning, development and approval processes, and the cutting of excessive infrastructure charges.

“This is where national leadership is imperative, because the constitutional responsibilities lie with state governments.

National leadership will rely heavily on working cooperatively and collaboratively with state and territory governments through COAG and other processes,” he said.

“Boosting the supply of both private and public housing is essential to ensure more Australians can have access to appropriate and affordable housing; structural reform is the answer and not removing negative gearing.”

STILL GROWING

Sydney and Melbourne’s price growth for the 12 months to August

Sydney

Melbourne

21.65% 14.33%

9.27% 5.24% Houses Units

Source: OnTheHouse.com.au

23

LENDING FIGURES SHOW INVESTORS WORRIED

MARKET TALK

REGULATORS, POLLIES TAKE AIM AT SPRUIKER A controversial land banking scheme has had liquidators appointed after a grilling from politicians THE FEDERAL Court has appointed liquidators to oversee eight companies associated with controversial property spruiker Jamie McIntyre and the 21st Century real estate group.

The decision is part of legal action related to land banking schemes in Victoria brought

by ASIC against McIntyre, the 21st Century group and others.

The court passed the orders appointing Simon Alexander Wallace-Smith and Robert Scott Woods of Deloitte as provisional liquidators for Archery Road Pty Ltd, Bendigo Vineyard Estate Pty Ltd, Secret Valley Estate Pty Ltd, Kingsway South Holdings Pty Ltd, Melbourne Tarniet Estate Pty Ltd, Property Tuition Pty Ltd, Education Holdings Pty Ltd and Sourcing Property Pty Ltd. The provisional liquidators have been ordered to provide a report to the court, ASIC and the respondents by 19 November 2015 detailing the solvency of the companies and the schemes, any money owing to investors, and the likely return to creditors of the companies.

The court also passed injunctions preventing the eight companies, as well as Jamie McIntyre and Dennis McIntyre, from

promoting five land banking schemes in Victoria.

The schemes are Botanica, Secret Valley Estate, Oak Valley Lakes Estate & Resort, Bendigo Vineyard Estate & Resort and Melbourne Grove Estate.

Jamie McIntyre, Dennis McIntyre and the companies all agreed to the court’s orders.

ASIC commenced investigations into the schemes in August as part of a wider investigation into land banking in Australia.

The watchdog claims there are currently around 100 investors who have committed to the schemes.

The orders come after politicians lashed out at McIntyre.

Appearing before a Senate inquiry into land banking schemes, McIntyre drew the ire of independent senator Nick Xenophon and Labor senator Sam Dastyari.

According to a Fairfax report, Senator Dastyari called McIntyre a “conman” during the hearing, while Senator Xenophon was less than impressed with McIntyre’s conduct.

“In my seven years in the Senate, you would have to be the most evasive witness I have had to deal with, and that’s saying something,” Senator Xenophon said.

A slowdown in lending for investment home loans could point to people believing there is a growing level of risk in property investment, according to one analyst.

Figures from the ABS revealed that August was the first time in 13 months that the value of new lending (excluding refinances) was greater to owner-occupiers than it was to investors.

According to the figures, August saw owner-occupiers account for $20.8bn worth of home loans, a 6.1% rise over the month and a 26.5% year-on-year rise.

Of that $20.8bn, $1.7bn was for the construction of new homes, $1.2bn was for the purchase of new homes, $6.4bn was for the refinancing of established homes and $11.5bn was for the purchase of established homes.

Investors accounted for $13.6bn in home loans during August, which is a 0.4% month-on-month decrease but a 12% increase over the past 12 months.

Over August, investors borrowed $0.8bn for the construction of new homes and $12.7bn for purchasing established homes.

CoreLogic RP Data senior research analyst Cameron Kusher said the changing lending landscape may be down to investors taking a step back from the market as they wait to see which way it moves.

“Value growth has been strong for more than three years in Sydney and Melbourne, and investors may be becoming concerned about the longevity of the boom while growth outside of these cities has been sedate,” Kusher said.

“Once you also consider a record-high pipeline of residential construction accompanied by a record-low rate of rental growth and historical low yields, perhaps a growing number of investors are looking towards other forms of investment they perceive as less risky at this stage in the cycle,” he said.

Kusher said the changes may also have been accelerated by lenders raising interest rates on investor loans in response to APRA’s push to slow investor lending growth.

Kusher also said APRA and the Reserve Bank would likely keep a close eye on the figures, and Housing Industry Association economist Diwa Hopkins said the regulators needed to be careful not to drive too many investors out of the market.

“Investors have played a key role in the current new-home building cycle, which has been a vital element of the broader economy as investment into other sectors continues to ebb,” Hopkins said.

“Regulators and lenders alike must be cognisant of this in the context of the APRA interventions in the residential lending environment.”

HOME LOAN BREAKDOWN

How owner-occupier home loans are being used (August)

$1.7bn

for the construction of new homes

$1.2bn

for the purchase of new homes

$20.8bn TOTAL

$6.4bn

for the refinancing of established homes

$11.5bn

for the purchase of established homes Source: ABS

24

MARKET WRAP

BY THE NUMBERS

10.2

Roy Morgan Research’s Business Confidence increased by 10.2 points in September (up 9.9%) to 112.8 Source: Roy Morgan Research

FUND MANAGER AWARDS MORE THAN $300K TO CHARITIES

FINANCIAL SERVICES

WHAT THE TPP MEANS FOR ADVISERS The controversial trade agreement could deliver some benefits to financial services The finance industry has praised a historic trade agreement that it says is a step in the right direction for the industry.

The Trans-Pacific Partnership, a trade agreement among nations that produce 40% of global economic output, was announced early this month. It was signed by Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, the US and Vietnam.

Financial services is one of the industries covered under the TPP, which should allow financial services firms to more easily target overseas customers and staff offshore branches, according to a Sydney Morning Herald report. Specific areas covered by the

agreement are investment advice and funds management services to pooled funds such as pension schemes, the SMH said.

Financial Services Council CEO Sally Loane praised the TPP, calling it a “positive step in the right direction” for the industry.

“When the TPP agreement is up and running, Australia will be able to trade in financial services on the same basis as a domestic provider in the participating countries. Regulatory restrictions in participating TPP countries will be removed for Australian firms, which will create more streamlined processes and transparency for licensing of financial services firms,” Loane said.

A fund manager has awarded more than $300,000 to community grants this month as part of a long-standing program.

Australian Ethical Investment says it has awarded grants this month to 18 charities and social businesses in projects as varied as animal welfare, conservation, women’s empowerment, renewable energy, addressing homelessness and alleviating poverty. The fund manager’s grant program, in place for more than 25 years, is part of the company’s commitment to donate 10% of pre-tax profits. The company says that, since the program began, it has donated more than $2m to organisations working for charitable, benevolent, and conservation purposes.

“Our company charter isn’t simply a guide for screening investments – it is the basis of our company culture. Underpinning it is a belief that we have a responsibility to do more than just make money, but to improve the world around us. The grants program is one way we are achieving this goal,” Australian Ethical managing director Phil Vernon said.

Vernon said the grant recipients had a variety of causes, but what they had in common was a dedication to bettering the lives of those around them. “Whether it’s supporting Indigenous health in the outback, caring for donkeys in Afghanistan, or creating jobs for refugees, there are so many inspiring people working hard to make a difference. We are proud to support these organisations and the great work they are doing.”

MANAGING THE MARKETS

ASIC’s market enforcement for the first six months of 2015

11 significant

enforcement outcomes

18,388 trading alerts

102

market surveillance enquiries

100+

164

industry meetings

matters under investigation at any one time

25 compliance

surveillances

14 risk-based

assessments Source: ASIC

FINANCIAL SERVICES COMPANY LAUNCHES NEW DIVISION A financial services research group says the creation of a new business division will strengthen portfolio construction capabilities for advisers.

Lonsec has announced the creation of its new division, Lonsec Investment Solutions. The company says the division will deliver packaged investment solutions for advisers.

Lonsec’s Lukasz de Pourbaix has been appointed CIO of Lonsec Investment Solutions. He says the post-FOFA environment has seen a significant increase in the regulatory and administrative burden on advisers.

“Investment Solutions aims to address these dual challenges by bringing together Lonsec’s established broad-listed and unlisted investment research as well as our proven portfolio construction capabilities. Importantly, Lonsec is not issuing financial products; we are enabling our portfolio capabilities to be accessed in a more efficient manner,” de Pourbaix said.

Lonsec has also promoted Veronica Klaus to general manager of investment consulting. Klaus has close to 20 years of research and investment consulting experience.

The company says the first priority of the new division will be to look at ways to broaden its suite of managed portfolios, both by increasing the number of managed account platforms its managed fund and listed model portfolios are available on, as well as exploring new portfolio solutions incorporating additional investment vehicles such as mFunds, LICs and ETFs. “Combining these product benefits with Lonsec’s research and portfolio construction expertise, and making them available to more financial advisers through more platforms, is one practical example of how Lonsec Investment Solutions can bring together Lonsec’s broad expertise to deliver real outcomes for financial advisers and their clients,” de Pourbaix said.

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26

SPOTLIGHT ONE YEAR ON

VIDEO SPOTLIGHT

CONNECTIVE’S BIG YEAR What a difference a year makes ... or not. Australian Broker reflects on the punditry, news and trends that made headlines 12 months ago

Darren Moffatt

20 OCTOBER 2014

Siobhan Hayden is named chief executive of the MFAA, replacing long-time CEO Phil Naylor

12 NOVEMBER 2014

Hayden takes to the road to hold national forums, at which she asks brokers to discuss the main industry barriers to success

20 FEBRUARY 2015

Hayden urges lenders to take on a more active role in educating consumers and mainstream media about the role of mortgage brokers

4 SEPTEMBER 2015

Hayden meets with APRA representatives to educate the regulator on the role and importance of brokers in the finance and lending market

$1M 7 MAY 2015

At the MFAA National Convention in Melbourne, Hayden announces a $1m consumer-focused marketing campaign

REVERSE MORTGAGES ON THE RISE A recent report from Deloitte revealed that the reverse mortgage market in Australia has grown to $3.7bn. Seniors First Specialist Finance director Darren Moffatt recently told Australian Broker TV that the reverse mortgage market had grown steadily over the past 18 months, with increased product choice and demand. Moffatt said this was a stark contrast to the climate of the reverse mortgage market immediately following the GFC. “It’s definitely a growing market. It was very flat there for a couple years after the GFC. I think people were unsure [and] obviously a bit timid.

A lot of the lenders that were in the market and promoting the product became dormant because of a problem with supply, so funding was difficult to come by. Essentially the market went down from 22 lenders to about four active lenders at that time,” he said.

But Moffatt said the market had significantly improved in the last year and a half.

“We’ve got more lenders in the market, more supply, and that’s tending to bring the borrowers out,” he said.

However, he said the reverse mortgage market wasn’t right for every broker; brokers had to determine if the sector was right for them and their clients.

“The first thing to know is reverse mortgages is not the way to make a fast buck. It’s not about making a fast dollar.

Reverse mortgages are really about helping people,” Moffatt said.

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27

FORUM

CALLS FOR CLARITY FROM APRA A top broker has begged the banking regulator for more clarity surrounding constantly shifting rules

BEST FORUM COMMENT BROKERS NEED TO OFFER REAL CHOICE Non-bank lender Mortgage Ezy recently unveiled a new discount home loan product that will offer owner-occupier loans at rates of under 3%. Speaking exclusively to Australian Broker, the CEO of Mortgage Ezy, Peter James, unveiled the Reduce Home Loan Combo range. The new product range will offer consumers rates as low as 2.5% on owner-occupier loans when they settle their investment loan with the non-bank as well. While some brokers expressed scepticism, one commenter lauded the company for providing an alternative to the major banks.

“Thank goodness for some genuine alternatives to the banks. Funny how the very guys that tell hard done by stories of cross-channel conflict and banks taking commissions and trail line up to give the majors their business week after week. It is these guys I suspect jump to conclusions or bag new offerings like this without understanding how they benefit the consumer. I for one take my role seriously and continue to offer the best I can to suit individual needs. I hope this is the first of many non-banks making a comeback. We need to have real choice.”

Paul on 1/10/2015 at 7:28PM

BOQ’S BROKER BOOM Bank of Queensland recently credited mortgage brokers with its return to system-level home loan growth.

STEPHEN DINTE, founder and principal mortgage planner of Sydney-based brokerage Australian Mortgage Planners, told Australian Broker that APRA’s constantly shifting regulations – most recently the 10% limit on investment lending – are making the market needlessly difficult for brokers, while giving the banks a free pass to price gouge.

Steve McClure said BDMs also suffered from the confusion caused by a changing landscape.

“I agree entirely with Stephen Dinte. When BDMs aren’t receiving clear & complete information from their employers, it impacts the explicit service we can provide. Sure, good brokers overcome that, but the general uncertainty caused by APRA is detrimental to the bigger picture.

For this reason, I somewhat disagree with the concept that confusion and disadvantage of borrowers is good for the broking industry. We want a vibrant, healthy market rather than being clouded in uncertainty.”

Papery said it was impossible to keep track of all the changes, and brokers should focus on the information that’s most important to their clients.

“You can never keep abreast of every single change. The space we work in is fluid & changes all the time. You just need to know which lenders are going to have policies that suit your client the best, and importantly know each lenders’ niche areas when it comes to the really peculiar deals. Minor variations in interest rates are the least of our worries! And of course knowing how to source info when you need it.”

Regional Broker praised their aggregator for keeping them across lending changes.

“Our aggregator has been excellent in keeping us informed and spread sheeting the changes, any changes are up in our on line systems the next day.”

But Tim H said a constantly changing market was preferable to a stagnant one.

“I agree that the new guidelines put in by APRA are unclear and creating confusion, but to those brokers complaining about this, think of the alternative. A flat market with no policy changes and no reason for borrowers to look for better deals I don’t want to see.”

“I wasn’t around when they pulled their offerings from brokers last time. I wonder if they maintained trails to brokers after leaving the market. Perhaps some old timer can set us straight. But for me, if there is a risk to my income in the future, why would I? There is sufficient competition out there who haven’t pulled themselves from the market before who could be supported first.”

SEQ Broker on 9/10/2015 at 10:38AM

“Yes trails are still paid, and on time.”

Dave Robinson on 9/10/2015 at 1:30PM

ANZ LOOKS TO GROW MORTGAGES ANZ’s incoming CEO, Shayne Elliott, has announced that an aggressive home loan push will be his first priority.

“Perhaps ANZ would get a bigger market share if they moved their backroom onshore. It is incredibly frustrating dealing with an offshore service centre when trying to book settlements etc. At the same time they could look to expanding their dealings with non-resident borrowers to all their accredited brokers.”

Ian on 12/10/2015 at 9:43AM

“A big push into Sydney. And this will please APRA?” Bottom Line on 12/10/2015 at 9:51AM

28

COALFACE DEVELOPER CLIENTS: WHEN ONE DEAL LEADS TO MANY MORE Marshall Condon is thriving on the end-to-end construction finance services he provides to property developers MARSHALL CONDON started out as a broker with

FAST FACTS

Number of years as a commercial broker: 2

Number of support staff: 2

Number of commercial loans (FY15): 12

Value of commercial loans (FY15): $118,723,010 Source: MPA

Mortgage Choice and then went into management with the banks, before returning to the franchise giant to start his own branch in South Yarra.

Condon launched into broking straight out of school, then studied for his Bachelor of Business in economics and financial planning alongside his career over four years, before spending 12 months learning about business banking as a partnership manager at Bankwest.

But the call of broking led him to leave the banks and start a new Mortgage Choice branch in Melbourne, now in its second year. The opportunity to be his own boss also played a big part. “I always wanted to be self-employed, and I’d developed sufficient networks to [start my own branch],” says Condon. It was a welcome change from the cold calling and late-night appointments when he first started broking.

His business model is B2B orientated and has honed in on property developers specifically, providing the opportunity to generate many follow-on leads from a few sources. After assisting the developers in obtaining construction finance and the projects are underway, these leads come in the form of off-the-plan apartment buyers.

But the deals are not the only challenge, as being the sole broker, Condon says mastering time and productivity is crucial too. “The biggest challenge was time management – in terms of working on the business and working within the business,” Condon explains.

He estimates that about 60% of his time is spent out getting business, and 40% on doing the work. “But the fundamental part of broking is that you are getting to meet new people and helping them get their dream.”

Keeping busy with big numbers Last financial year Condon settled about $40m in residential loans, and this year he is looking to double that to $80m. “My particular focus is to certainly grow our residential side,” he says.

“We’ve got a good pipeline of potential clients to come; the construction deals I was doing last year – next year they’ll come to fruition and they’ll be out on the market for the purchasers”

The fun is in the challenge In line with the brokerage’s aim to provide an end-to-end service for property developers is helping purchasers secure the funds they need. Off-the-plan financing isn’t always easy. As Condon says, “valuations are always contentious and are not necessarily always reflective of the actual purchase price. We found that our biggest benefit to the developer is we can be that source of contact for those solutions for those clients that get stuck.”

And it looks like the effort put into the commercial side of things will pay off in good time. “We’ve got a good pipeline of potential clients to come,” says Condon. “So the construction deals I was doing last year – next year they’ll come to fruition and they’ll be out on the market for the purchasers.

“The reason why I do it and I enjoy it is because each different construction deal is different; they always have their different complexities, different locations, potential different builders, different equity structures, different pre-sale methods – all of these different things are adding to the total deal.”

That’s just one side – the other side reveals even bigger numbers. Commercially, he is aiming for over $200m, a giant step up from the $118.72m of last financial year, which secured him the fourth spot in MPA Magazine’s Top 10 Commercial Brokers list, but one he says they are well on track to achieve.

In the new financial year, Condon is planning to target the millennial crowd and to recruit staff that will bring a young, energetic culture to the brokerage and so help to attract that demographic. And for new brokers just starting out, he stresses the importance of good banker contacts.

“My advice would be to have a really good network of good-quality bankers and resources that you can rely on for these transactions, because it’s not the bank that you’re dealing with; it’s the banker – and you’re only as good as the banker at the end of the day.”

But at the end of the day, long construction loan deals and the fast pace of broker life can take their toll, so Condon makes sure to set aside time to revisit his country NSW roots, re-energising through some quality downtime and his passion for waterskiing.

29

PEOPLE CAUGHT ON CAMERA Vow recently held its annual conference in South Africa.

The conference included the launch of the aggregator’s new wealth advice tool, as well as the announcement that its network had grown to 1,000 brokers.

30

PEOPLE HOT SEAT

GERARD TIFFEN The Tiffen & Co director explains his most unique talent, how he got into the industry and dreams of being a beach bum What made you want to become a broker?

In Year 12, the careers adviser found me a few A days’ work experience on a building site. It was incredibly hard. I knew from that day that I wanted to be a leader, provide a service while positioned in an air-conditioned office away from power tools. I was first attracted to real estate, but shortly into my career I could see my passion was helping people finance their dreams and making them come true.

Q

If you weren’t a broker, what would you be doing?

Professional cyclist. If I could keep some A wealth, I’d give being a beach bum a red hot go.

Q

Who was the most unique client you had, and why?

In 2000, a pretty first home buyer entered A my office. After assisting her with a great deal and Government incentives grant, I married her. Four beautiful children later, she is still the one.

Q

How does working in Canberra differ from working in other Australian capitals?

I have the home town advantage being born A and bred in the ACT. Canberra is very connected and nothing works better than word of mouth advertising. As long as you do the right thing, Canberra is a great place for honest, quality business.

Q

Q A

What do you do when a client is difficult?

I refer them to Aussie Home Loans [insert evil laugh].

If you could run the country for a day, what would you do?

I would implement a census-style goal A setting task for every Australian.

Having clear goals is the secret to success.

Motivated Australians makes for a prosperous Australia.

Q

What do you see as the biggest challenge facing the industry?

I don’t think there is any single issue A within the industry at the moment. We are in a great business and things are good.

Q

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