Australian Broker 17.06

APRIL 2020 ISSUE 17.06

CHRIS ANDREWS AND CORY BANNISTER La Trobe Financial’s Chris Andrews and Cory Bannister discuss the current crisis and how they’re supporting brokers through this trying time /14 ALSO IN THIS ISSUE… Opportunities in diversification Thinktank’s CEO on whether it’s a good time to diversify into commercial /16 Beyond COVID-19 Three industry experts discuss the key challenges for brokers and lenders in the years ahead /18 Banks institute range of responses to COVID-19 Rapid action to off er fi nancial support through this unprecedented time /4

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How COVID-19 could impact the property market Extreme uncertainty and economic fragility mean market activity unlikely to lift /10

Fintechs: Awareness and adoption remain biggest challenges OnDeck CEO explains the challenges facing fi ntechs in the current climate /20

Opinion Verimoto’s CEO on transitioning from a manual to a digital world /23

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NEWS

IN THIS SECTION

Lenders Banks institute range of responses to COVID-19 /04

Associations Brokers to be ‘directly’ impacted by COVID-19 /06

Market property market How could feel eff ects of COVID-19 /10

Regulators Brokers urged to read ASIC’s best interests guide /12

Technology Do your ‘due diligence’ in preparing for open banking /08

www.brokernews.com.au APRIL 2O20 EDITORIAL

SALES & MARKETING

Editor Victoria Ticha

Sales Manager Simon Kerslake

News Editor Madison Utley

Global Head of Communications Adrijana Monevska

Production Editor Roslyn Meredith

DATES TO WATCH

Upcoming can’t-miss events

ART & PRODUCTION Designer Jommel Ramos

12 MARCH Virtual Open Banking World Congress 2020 Open banking is the dawn of a transition from traditional banking and financial services to becoming the heart of an emerging cross-sectoral data-driven ecosystem. In this online summit, participants will hear from senior innovators taking the next steps in the open banking journey. This is a free-to-attend virtual congress with Q&A and virtual networking.

Recorded sessions are available on demand.

1 1 J U LY Sydney Property Expo Developers, agents and real estate industry leaders will be exhibiting with 100-plus developers and exhibitors at this expo. The benefits of the local region, the current property market, new projects, investment opportunities, future trends of the property market and key issues impacting the sector will be discussed.

The event will be held at the ICC Sydney Convention and Exhibition Centre.

1 6 J U LY MFAA National Excellence Awards The MFAA National Excellence Awards celebrate MFAA members who display exceptional practice in mortgage and finance. The awards focus on core values such as customer service, professionalism, innovation and ethics – not just transactions. This event will be held at an as-yet-unannounced located in Victoria.

Production Manager Alicia Chin Traffic Coordinator Kristine Jamir

CORPORATE Chief Executive Officer Mike Shipley Chief Operating Officer George Walmsley Managing Director Justin Kennedy Publisher Simon Kerslake Chief Information Officer Colin Chan Human Resources Manager Julia Bookallil

EDITORIAL ENQUIRIES

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

SUBSCRIPTION ENQUIRIES

6 SEPTEMBER

16 OCTOBER

28-30 OCTOBER

FinTech Summit

Australian Mortgage Awards

This annual FinTech Summit will bring together the influential, disruptive and innovative technology companies that are redefining financial services across all areas of fintech, including the rise of neobanks, fintech-bank partnerships, open banking, CDR, AI-driven banking, and the growth of ‘banking-as-a-service’.

It will be held at the Ashurst office in Martin Place, Sydney.

This year’s Australian Mortgage Awards, the leading independent awards event for the mortgage and finance industry, will recognise excellence and highlight the outstanding work done by individuals and their companies. Winners of the Australian Mortgage Awards 2020 will be announced at the awards ceremony, to be held at The Star Sydney in Pyrmont.

AFG Next’s National Broker Conference AFG Next is offering brokers and industry professionals an immersive two days of thought leadership, education, professional development and networking.

Find out what’s next for your industry, your business and the year ahead. All parts of this year’s event will focus on three key themes: evolve, excel and experience.

The event will be held in Melbourne.

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

ADVERTISING ENQUIRIES

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

05-06 NOVEMBER Future of Financial Services Conference ST Media’s flagship event and the largest of its kind in the southern hemisphere, Future of Financial Services will set the digital agenda for 2021 and beyond. It will examine open banking, customer experience, AI and machine learning, data analytics, digital transformation, the emergence of neobanks, and much more. It will be held at the ICC Sydney Exhibition Centre.

2

11 NOVEMBER

APRIL 2021

Future of Banking: Live

AltFi Australasia Summit 2021

The world is changing rapidly, and it is hard to keep track of all developments. This event aims to provide an ecosystem for the pioneers of digital banking. It will be educative and meaningful for anybody who is interested in challenger banks and the future of banking.

Originally scheduled for April, the event has been moved to November. It is due to be held at the Museum of Contemporary Art in Sydney.

This event has been rescheduled for next year. Join over 350 industry leaders to explore the twin themes of alternative finance and fintech at AltFi’s largest event yet. The full-day event will examine the opportunities and challenges facing both disruptive newer players and established names looking to bring to the market genuinely radical new products. It will be held at Doltone House, Jones Bay Wharf, Sydney.

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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Let’s chat. 13 11 33 Approved applicants only. Lending criteria apply. Other fees and charges are payable. Liberty Financial Pty Ltd ABN 55 077 248 983. Australian Credit Licence 286596.

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10/12/19 9:40 am 31/03/2020 12:22:30 PM

NEWS

LENDERS LENDER SLASHES RATES

BY UP TO 0.50% has reduced rates across its suite of residential home loans by up to 0.50%, in addition to announcing a special offer whereby upfront fees on near prime and specialist loans will be reduced by at least $1,835.

General manager of mortgages and commercial lending Aaron Milburn said, “Pepper has a diverse range of loan solutions to suit its customers’ differing real-life circumstances, and we’ve done everything we can to ensure our customers benefit fully from the RBA’s rate cut.”

PEPPER MONEY

MORTGAGE LENDER RAMPS UP BROKER SUPPORT an effort to ramp up broker support, Better Choice Home Loans has welcomed three new BDMs across Australia: Kathryn Whitney in Queensland, Sarin Karakozian in New South Wales and Travis Rawlins in Western Australia. “We’re very excited about these three key appointments as we continue our national expansion,” said executive director Allan Savins.

He said Better Choice would be appointing another two BDMs soon in response to increased demand from brokers.

IN

“We have a responsibility and commitment to support those affected [by COVID-19]” Marnie Baker Managing director of Bendigo and Adelaide Bank

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BANKS INSTITUTE RANGE OF RESPONSES TO COVID-19 From central banks around the globe to lenders across Australia, rapid action is being taken to help financially support people through COVID-19 and second-tier banks alike have been announcing new measures to help their customers through the challenges of the COVID-19 outbreak. For example, CBA has rolled out a range of measures to support both its retail and business customers.

“Australia has a strong and stable financial system and economy, and we recognise the important role we play to support our customers, our people, our suppliers and the economy.

We are assessing the impact on our operations on a daily basis,” said CEO Matt Comyn.

CBA’s 900 branches will remain open for business, and precautions are being taken at each location. The bank has also MAJOR

guaranteed it will “continue to process home loan applications quickly and efficiently”, encouraging mortgageholding customers facing hardship.

It is also reducing rates on business loans by 25 basis points, allowing for the deferral of repayments and waiving fees in certain cases; it will also provide additional resourcing and extended hours for commercial lending teams to ensure faster decision times.

“Commonwealth Bank’s strong financial position means Australians can have confidence in our ability to support the economy in this period of difficulty, through to a time of recovery,” said Comyn.

Suncorp Bank also announced financial assistance support for customers impacted by COVID-19.

CEO Lee Hatton said, “We understand

this is a difficult and uncertain time for people and businesses. We want our customers in any affected communities and sectors to know assistance is available and that we are here, ready to support them.”

Meanwhile, Bendigo and Adelaide Bank said it was looking to offer both short- and long-term support for business and consumer customers affected by the pandemic.

“Whilst the full-reaching human and economic impacts of COVID-19 are still largely unknown and evolving, we are working with the industry and government to manage the impact on our customers, staff, communities and partners. Health, safety and wellbeing will always be of paramount importance,” said Marnie Baker, managing director of Bendigo and Adelaide Bank.

“We have a responsibility and commitment to support those affected. In the same way that we have provided and continue to provide support to those affected by bushfires, we will continue to work with customers and their communities on an individual basis both today and in the long term,” said Baker.

www.brokernews.com.au

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31/03/2020 12:23:09 PM

New bank criteria left you high & dry?

La Trobe Financial offers common sense lending solutions to clients who may not qualify at a bank.

Our personal approach to assessment means we can be more open to your customers’ needs.

Send us a file today. Call 13 80 10 or visit latrobefinancial.com

La Trobe Financial Services Pty Ltd ACN 006 479 527 Australian Credit Licence 392385.

La Trobe Financial Asset Management Limited ACN 007 332 363 Australian Financial Services Licence 222213 Australian Credit Licence 222213. Terms, conditions, fees, charges and La Trobe Financial lending criteria apply.

To view our ratings and awards please visit our Awards and Ratings page on our website. This publication is for accredited broker use only and is not for distribution to consumers. Copyright 2020 La Trobe Financial Services Pty Ltd ACN 006 479 527. All rights reserved. No portion of this may be reproduced, copied, or in any way reused without written permission from La Trobe Financial.

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31/03/2020 12:23:48 PM

NEWS

A S S O C I AT I O N S FBAA GIVES BROKERS AN EXHORTATION managing director Peter White has called on brokers to check in on one another.

With the drought, bushfires and now COVID-19 likely to keep the media and public conversation focused on negativity and disaster for a long time, White highlighted that brokers’ mental health could suffer. He said, “The continual cycle of gloom and pessimism from the wider community, sorting out client problems, and the current need for more personal isolation is not a healthy mix.”

FBAA

RBA MAKES HISTORIC RATE CUT Reserve Bank slashed the

THE cash rate to a new record low

FBAA WARNS BROKERS WILL BE ‘DIRECTLY’ IMPACTED BY COVID-19 The association says brokers should prepare for a surge in demand from customers by adapting to meet their needs FBAA’s managing director, Peter White, has warned that brokers should expect the current coronavirus pandemic to “affect them directly on multiple fronts”.

While the situation may be unprecedented in some respects, he said, it wasn’t difficult to predict many of its potential effects, given the recessions and other major issues he had witnessed in his 41 years in the industry.

“Firstly, every broker must have the technology and knowledge to be able to transition to an online model,” White said.

“With Skype, Zoom, FaceTime, Facebook Messenger and numerous THE

other platforms available, this is easy and inexpensive.

“Brokers who are not prepared to go online will be impacted financially, as less consumers will seek face-to-face meetings in the current environment.”

White has predicted a surge in customers seeking out brokers in the wake of job losses and business closures as the economy plummets, and has encouraged brokers to do their research beforehand to be able to handle the influx.

“We must be ready to guide our clients to lenders who can help them in their time of financial hardship; therefore, it is vital we

know what each lender is offering in terms of support,” he said.

“Due to the financial, social and emotional value of the family home and small businesses, our industry is on the front line of any economic shift.”

The customer boom will swell even further when both new borrowers and those wanting to change lenders surface as interest rates fall to record lows, housing prices drop and lenders compete for business.

“New home buyers and investors will emerge to take advantage of a weaker market, and we must be able to deal with this at the same time,” said White. “Most brokers will need this new business for their own viability.”

“All brokers should be ready now for what this crisis will bring in the coming weeks, months and even years,” he added.

of 0.25% in March in response to the spreading impact of the COVID-19 pandemic – as has become the norm at central banks around the world in recent times. The RBA had previously communicated that 0.25% was its floor; rather than moving to 0%, the central bank said it would likely look to other support measures moving forward. According to Canstar analysis, if the 0.25% cut is passed on by lenders, borrowers will likely see a further $56 in monthly savings on the average loan.

“All brokers should be ready now for what this crisis will bring in the coming weeks, months and even years” Peter White Managing director, FBAA

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31/03/2020 12:24:27 PM

TECHNOLOGY UPDATE

BROKER DIVERSIFICATION POWERING PEPPER’S COMMERCIAL OFFERING was the objective that drove Pepper Money to roll out a new commercial offering 12 months ago, with digitisation underpinning the faster ‘time to yes’, and that’s why it’s proven popular with brokers, says Pepper Money’s Head of Commercial, Malcolm Withers.

Withers’ primary goal was to eliminate the complexity brokers experience with commercial loan processing.

“At the request of the broker industry, our biggest goal was to remove all complications and provide unencumbered access to commercial lending to enable brokers to deliver product to customers,” Withers states.

Withers compliments NextGen.Net for developing ApplyOnline Commercial because, as he says, it removes the commercial loan stigma by simplifying the whole process.

“We made a strategic decision upfront to have ApplyOnline Commercial as our foundation system for receiving commercial applications. One hundred per cent of our commercial applications go through the ApplyOnline process.

“ApplyOnline Commercial emphatically affirms NextGen.Net’s commitment to build simplicity (yet at the same time, sophistication) into commercial lending,” Withers declares.

Pepper Money’s entry into the commercial space entailed implementing the unique service and support transaction model established on their residential lending platform.

“We have a direct credit lodgement platform that allows the broker to lodge the application directly to credit managers and straight into our credit queue. It doesn’t go through a business development manager because we’ve elevated brokers to business relationship manager status for DIVERSIFICATION

Tony Carn, Chief Customer Officer, NextGen.Net

the customer. In other words, they become ‘business banking brokers’,” Withers explains.

“Brokers deal with and talk directly to our credit managers. If a credit manager has a query regarding a transaction, he or she will ring the broker directly to get further information. That allows us to keep everything moving and get

Malcolm Withers, Head of Commercial, Pepper Money

than traditional lenders – up to 25 years. We also provide them with access and control via an access portal so they can go into their loan, see their balance, print statements and have a redraw facility.

“We assess the transaction within 96 hours to approval: the time starts the minute a broker hits submit. That’s just one

residential mortgage. That means being able to lodge deals by leveraging data they already have in the CRM system. Therefore, having online visibility and loan traceability and the ability to receive standardised back-channel messages and liaise directly with Pepper Money’s credit managers.”

“ApplyOnline Commercial emphatically affirms NextGen.Net’s commitment to build simplicity (yet at the same time, sophistication) into commercial lending” Malcolm Withers, Head of Commercial, Pepper Money a better assessment outcome.

“By removing the middle person, we give brokers more control and access. A business relationship manager filtering everything just delays the process.”

Pepper Money has gone to the market with commercial property secured lending solutions for customers across their product range.

“We provide longer loan terms

benefit of connecting directly with credit.”

“This initiative from Pepper is enabling brokers within the ApplyOnline ecosystem they know and trust for a residential loan,” says NextGen.Net Chief Customer Officer Tony Carn.

“Our digital application makes it easier for brokers to transact commercial deals in a similar way to a

Barely 12 months after the rollout of Pepper’s introductory commercial product, Withers says broker feedback confirms the attainment of his primary goal: to eliminate complexity from commercial loan processing.

“Part of the credit, of course, goes to ApplyOnline Commercial for providing the platform for this to happen,” he says.

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NEWS

TECHNOLOGY FINANCE TOOL EXPANDS TO NEW ASSET CLASS is integrating marine vessels into its platform, enabling brokers and lenders to speed up and automate the verification process for the new asset class. The app provides automated verification of the seller’s banking details via a single click; they can instantaneously upload all documentation to meet the lending criteria for marine assets. By removing the need for physical inspections, the update brings “unparalleled efficiencies” for marine financing, saving brokers an average of 10 days per loan application.

VERIMOTO

NON-BANK OFFERS COVID-19 HARDSHIP ASSISTANCE has announced a hardship assistance program to help small business customers weather the financial fallout of the spread of COVID-19. Chief lending officer Cory Bannister reiterated the group’s dedication to supporting its customers through the rocky start of 2020. “We are looking out for our customers who have been impacted by the spread of COVID-19. As always, we remain committed to helping our customers through these challenging times.”

LA TROBE FINANCIAL

“We are looking out for our customers who have been impacted by the spread of COVID-19”

Cory Bannister Chief lending officer, La Trobe Financial

8

DO YOUR ‘DUE DILIGENCE’ IN PREPARING FOR OPEN BANKING HashChing CEO Arun Maharaj calls on brokers to get ready for open banking and the opportunities it presents much attention is being consumed by other events in Australia’s financial services industry and the world at large, the head of a digital mortgage marketplace has highlighted that the implementation of open banking is under three months away – and he’s calling on brokers to make sure they’re adequately prepared.

HashChing CEO Arun Maharaj explained, “Finance, and in particular banking, has been notorious for relying on customer inertia to squeeze out value – not passing on the full interest rate cuts is one example of this practice.

“We know that open banking has created a positive outlook for both consumers and brokers.

WHILE

With [the new system] coming into effect this year, there’s an unprecedented opportunity to redefine how financial services are consumed.”

Maharaj expects open banking to have a “significant impact” on brokers, and he’s urging the industry to start preparing for the shift now.

“With better access to customer data and information comes greater opportunities for streamlining and efficiencies.

Open banking will drastically change the way brokers fill out forms and paperwork for their clients – where they previously had to fill these in manually, much of this will now be automatically available,” Maharaj said.

“This will save brokers time on admin tasks, and allow them to focus more on work that really moves the needle.

“Basically, once a customer has authorised access to their data, the broker can straightaway develop a comprehensive credit profile upfront without having to ask numerous questions.

“Not only will brokers have an influx of data coming their way, they’ll need to have a system in place which properly stores and categorises that data. Customers will and should expect brokers to have a secure, up-to-date system of storing this personal data.

“Brokers must ensure they’re digitally savvy and ready – open banking will certainly see the end of the traditional ‘pen and paper’ aspect to their business.

“I’d strongly encourage brokers to do their due diligence in researching all things open banking and how it will affect them specifically.”

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31/03/2020 12:26:16 PM

NEWS

MARKET INITIAL RESPONSES TO GOVERNMENT’S STIMULUS federal government has said its $17.6bn stimulus package will “protect the economy by maintaining confidence, supporting investment and keeping people in jobs” as the fallout of COVID-19 is felt. NAB CEO Ross McEwan expressed similar confidence, saying “NAB kept lending through the GFC, and we will do the same now”.

The Housing Industry Association has also welcomed the stimulus, saying strong action is necessary to avoid a housing market backslide.

THE

HOW PROPERTY MARKET COULD FEEL THE EFFECTS OF COVID-19 The current “extreme uncertainty and economic fragility” means housing market activity is unlikely to lift, according to CoreLogic analysis more usual circumstances, the RBA’s decision to make a second rate cut in March would likely have infused optimism into the housing market, as its research has shown there is an inverse relationship between cash rate changes and property price movements.

The rapid increase in the value of residential homes from June 2019 was in large part tied to the series of cash rate cuts made over the year.

However, according to CoreLogic analysis, the current situation of “extreme uncertainty and economic fragility” means housing market activity is unlikely to lift, even with the historically low cost of debt.

Consumer confidence, which has been weak for months, is trending UNDER

lower as the coronavirus pandemic stretches onward and the possibility of a recession grows. In this context, consumers are wary of making significant financial decisions, such buying or selling a home.

A weakening in labour markets could also lead to a substantial rise in mortgage arrears and distressed properties entering the market.

Those positioned to benefit in the coming months are buyers who have the confidence and financial wellbeing to remain active in the housing market despite the broader context, with significant potential for good buying opportunities at competitive prices and ultra-low interest rates.

Despite the escalating coronavirus crisis, this past week was the

second-busiest for auction activity this year, with 2,539 homes taken to auction across the combined capital cities. However, the preliminary auction clearance rate of 61.3% will revise down to below 60% for the first time since mid-2019.

Withdrawal rates also rose as vendors opted not to test the market and buyers lost confidence or chose to avoid public gatherings; CoreLogic predicts more vendors will withdraw from the market until confidence and selling conditions improve.

But even as the unease grows, Australian Banking Association CEO Anna Bligh said Australian banks were “well prepared” for the challenges of COVID-19 and ready to provide support.

“Australia’s banks are strong, stable and open for business, including for any company wanting to take advantage of initiatives in the government’s stimulus package, such as the increase to the threshold of the instant asset write-off from $30,000 to $150,000,” she said.

US FED MAKES RECORD RATE ADJUSTMENT US Federal Reserve has implemented an emergency interest rate cut down to 0%, joining the growing ranks of central banks around the world in instituting atypical measures to rescue markets. The move is intended to make borrowing cheaper and more accessible for households and businesses, and to stimulate economic activity, despite the oppressive impact of COVID-19.

THE

“NAB kept lending through the GFC, and we will do the same now”

Ross McEwan CEO, NAB

COVID-19: OECD SLASHES 2020 FORECAST FOR WORLD ECONOMY Source: OECD, Statista

GDP growth forecast for world’s largest economies in 2020 0%

November 2019 forecast

1%

2%

3%

World

4%

5%

6%

7%

-0.5pp*

March 2020 forecast Change from previous forecast

-1.1pp

India

-0.8pp

China US

*OECD expects world economy to grow by 2.4% – down from its November 2019 estimate of 2.9%

-0.1pp

France UK Germany

-0.3pp -0.2pp -0.1pp

Japan Italy 0%

10

-0.4pp -0.4pp 1%

2%

3%

4%

5%

6%

7%

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31/03/2020 12:27:21 PM

MFAA UPDATE

WHY MORTGAGE BROKING IS AN ESSENTIAL SERVICE outbreak of COVID-19 has thrown our economy into uncharted territory.

We have all had to reconsider our actions almost every day: where we go, whom we see and how we work.

This is already impacting the home lending market and the economy more widely.

As unemployment rises and the number of customers seeking financial hardship assistance from their lenders escalates, brokers will play an increasingly vital role.

The MFAA identified a number of key COVID-19 related threats to our industry early, and we have been working hard to engage with policymakers and industry partners to help ensure our members can survive and add value through this crisis.

Brokers must be allowed to remain open to service their customers. In times like these, the importance of mortgage brokers in assisting customers with hardship and facilitating access to credit cannot be overstated. For many Australians – particularly those in rural or regional areas – brokers represent the only source of assistance.

Any significant compromise to the broker channel would have serious implications for customers in the short term, and for competition in the home lending market in the long term.

Accordingly, the MFAA has been in proactive and positive discussions with Treasury and others to ensure that brokers are considered an ‘essential’ financial services industry that is allowed to continue operating during this event. Our ask is that, as long as lenders continue to provide services during this period, so too should mortgage brokers and aggregators.

Brokers’ expertise in helping customers navigate the complex home lending market – and their intimate understanding of their customers’ personal circumstances – means they are uniquely positioned to provide THE

critical support for customers when discussing hardship and available options with lenders.

Although lenders prefer to deal directly with customers on hardship matters, there is no reason why brokers can’t accompany customers to meetings or dial into phone calls. There has already been tremendous feedback regarding the advocacy provided by brokers to customers in this space, and I have no doubt that brokers will continue to find ways to stand alongside (albeit perhaps not in person) their customers who are experiencing hardship, and to assist in alleviating some of the pressure on lender hardship resources.

Broking is a personal business. Brokers have traditionally worked face-to-face with customers, so the shutdowns will change the way they interact with their customers. A key challenge has been the lender requirement that brokers conduct faceto-face initial interviews and Verification of Identity (VOI).

This practice is obviously incongruous with social distancing requirements.

The MFAA has been actively working on this over recent weeks, including seeking legal counsel, and we have made good progress in identifying and developing possible solutions.

We’ve engaged in bilateral talks with many individual lenders, and discussed the issues with the Australian Bankers Association (ABA) and other representative bodies, and it has been pleasing to see the numerous recent lender announcements that have increasingly enabled customers to access credit without face-to-face contact.

The MFAA has also been strongly focused on ensuring that customer payment holidays do not impact the customer’s credit file or broker trail.

Following many conversations with lenders large and small, as well as the ABA, we have been delighted to see the

Mike Felton, CEO, MFAA

“As we navigate this unprecedented uncertainty, the MFAA is committed to working to advocate on behalf of our members, and we stand ready to assist brokers with their challenges in the coming months” supportive individual lender announcements on trail.

These are some of the key issues we’ve been working on over recent weeks. Transactions pending settlement are now in focus, and no doubt there will be more.

However, I remain confident in the future of our industry.

Brokers offer tremendous and essential value to their customers, and we have demonstrated great resilience over many years, through good times and bad. In addition, the unity we have seen over recent weeks within the industry has been extremely heartening.

Brokers, aggregators, lenders, government and industry bodies have worked together to overcome the challenges we face and to support customers when they need it most.

As we navigate this unprecedented uncertainty, the MFAA is committed to working to advocate on behalf of our members, and we stand ready to assist brokers with their challenges in the coming months.

In the meantime, stay safe, stay positive, and keep doing whatever you can to help your customers.

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31/03/2020 12:36:51 PM

NEWS

R E G U L AT O R S

APRA: BANKS WARM UP TO RISKIER LENDING has released its quarterly banking data, revealing that ADIs have begun to overcome their aversion to riskier lending, perhaps in a bid to remain competitive amid the onslaught of new lenders coming into the market. The data shows that new residential home loans to borrowers with a high debt-to-income ratio increased by 22.3% between the September and December 2019 quarters. Low-deposit loans – those with an LVR of 95% or higher – jumped 17.5% from the previous quarter, with interest-only loans increasing 7.9% over the same period.

APRA

CORONAVIRUS MAY CREATE CREDIT SQUEEZE banks should be able to absorb the increase in credit losses and disruption to funding markets due to the COVID-19 outbreak – as long as the duration and severity of the pandemic’s impact are in line with expectations, according to S&P Global Ratings. If the virus progresses on the predicted timeline, the group estimates that it will contribute to the Australian banks’ credit losses nearly doubling in 2020 from historic lows in 2019, which, while significant, is low compared to what is expected in other countries.

AUSTRALIAN

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BROKERS URGED TO READ ASIC’S BEST INTERESTS GUIDE The CEO of an aggregator group is urging “all brokers” to read ASIC’s 43-page regulatory guide to gain a better understanding of its approach to the best interests duty CEO Anja Pannek shared her thoughts at the group’s recent PD days on the importance of brokers familiarising themselves with ASIC’s regulatory guide to the best interests duty (BID).

While Pannek described 2019 as being marked by significant uncertainty around the future, she believes 2020 has brought “a new level of clarity” to the industry through the provided “roadmap for regulatory reform”.

“This is a great place for the broking industry to be. We continue to work with regulators, and the government understands us. I think we have a fantastic future ahead,” she said.

However, to fully benefit from PLAN AUSTRALIA

the thorough direction provided, Pannek urged brokers to go through the entire regulatory guide themselves and spend time processing the 15 scenarios ASIC had included to give their guidance more tangible shape.

This self-education is especially crucial given that a key element of BID is being able to educate customers.

As of 1 July, brokers must be able to demonstrate why a product they have recommended is in the best interests of their client.

For example, Pannek described a scenario in which a customer approaches a broker with a credit product already in mind, such as a fixed-rate loan. Under BID, the broker must demonstrate that

they have educated the client on the pros and cons of a fixed-rate loan, and have also run through the other credit options available.

“Most brokers will already adhere to these principles. The key change from 1 July 2020 will be demonstrating how you go about it,” said Pannek.

Echoing a sentiment already expressed across the industry, Pannek highlighted how requiring brokers to act in the best interests of their customers by law created a significant advantage for the industry and a tailwind for broker market share.

“Come July 2020, you will be able to say to your customers that you will always act in their best interest. Only mortgage brokers can give their customers that guarantee,” she said.

“Credit providers can’t because best interests duty doesn’t apply to them. That’s a major unique selling proposition and will no doubt drive broker market share higher over the coming years.”

ADIS OVERCOMING AVERSION TO RISKIER LENDING APRA’s quarterly report shows riskier lending is on the rise Residential mortgages – new loans funded

September 2019

December 2019

% change

Owner-occupier

$64.0bn

$71.9bn

+12.4%

Investment

$28.6bn

$32.0bn

+12.0%

Interest-only

$17.4bn

$18.7bn

+7.9%

LVR ≥ 95

$1.4bn

$1.6bn

+17.5%

Third-party originated

$48.3bn

$53.5bn

+10.7%

Debt-to-income ≥ 6x

$14.0bn

$17.1bn

+22.3% Source: APRA

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13/02/2020 10:31:15 PM 31/03/2020 12:38:43 PM

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SPECIAL REPORT

LA TROBE FINANCIAL ON NAVIGATING COVID-19 CRISIS

Australian Broker speaks to La Trobe Financial’s chief investment officer, Chris Andrews, and chief lending officer, Cory Bannister, about how the wealth manager is handling the crisis and what support it can offer brokers in these unprecedented times of economic stress

$10bn lender, La Trobe Financial is the longest standing of any current operating non-bank in Australia. With $636m in annual revenue and $223m in net assets, its planning and resilience around crises such as COVID-19 has been decades in the making.

Since 1952, La Trobe Financial has served over 150,000 customers, covering some $23bn of institutional investment mandates from banks and global investment houses. It also survived the 1970s credit squeeze, the 1990 bank collapses in Victoria, the various stock market collapses of 1989 and 2002, the 2008 GFC, and now faces the economic fallout from the 2020 COVID-19 pandemic.

With its current leadership group largely unchanged for the past two decades, and many of its managers having operated the business through those downturns, the two principal leaders responding to this current downturn are its chief lending officer, Cory Bannister – a 20-year veteran of the mortgage finance industry, and Chris Andrews, the group’s chief investment officer and deputy CEO – a 15-year veteran of investment markets operating the group’s $5bn retail investment credit fund.

Their simple message to loan brokers, independent financial advisers, retail investors and the market broadly is that La Trobe Financial is financially sound, has a deep balance sheet prepared for such times, and remains open for business and ready to serve those customers who are underserved and overlooked by mainstream financial entities.

Speaking on the current crisis, Andrews explains, “The business is A

14

in great shape, with a reservoir of trust from investors, both retail and institutional, built up over seven decades based on performance across all market conditions.”

Bannister adds, “It’s a unique combination of “strong culture and our track record of disciplined investment and loan underwriting that ensures our future.”

COVID-19 disruption Australia entered 2020 with a focus on getting bushfire victims back on track. The nation was dealing with one of the largest and most impactful bushfires in our nation’s recorded history. Few were closely following the story of a new flu-like virus causing problems in central China. Then, in early February, just as the bushfires abated, the world awoke to the potential catastrophe that was brewing in the form of COVID-19.

One month down the track and the entire world has entered an unprecedented health emergency that has become the singular driver of markets everywhere.

According to La Trobe Financial, the local responses to these events have been remarkable. The response to bushfires saw funds raised, materials donated and labour volunteered at levels we have never seen before. Lenders offered special bushfire assistance to borrowers, and the whole industry pitched in to show solidarity with the affected communities.

But amid the horror, it was a moment to reflect on the special values of communities working together and putting others before themselves.

The response to COVID-19 has been similarly strong on both a local and international level.

La Trobe Financial says it has seen overwhelming adherence to the societal and travel restrictions implemented by both state and federal governments.

Both Bannister and Andrews say they believe people do genuinely want to play their part to flatten the curve and stop the spread of this most virulent disease. They say Australians care about protecting the most vulnerable and that our healthcare system has the ability to cope with the likely spike in attending patients.

Indeed, since the start of the year, the state and federal governments have been working together, as well as both sides of politics at a federal level. The government, regulators and the Reserve Bank of Australia have created a coordinated response to the challenges faced, with unprecedented fiscal, monetary and social measures taken to protect individuals, small businesses and our communities.

“COVID-19 is first and foremost a human story, and its worst impacts are at the human level.

That is important to acknowledge.

Obviously, however, as investors and as investment managers we must also consider the likely impact on markets, portfolios and the broader economy,” says Bannister.

And those effects will be profound. Daily, the world witnesses the closure of shops, factories and offices. The nightly news shows lines outside Centrelink that have not been seen since the ‘recession we had

to have’ in September 2001, when unemployment peaked at 10.8%.

Andrews also suggests that the dramatic ‘lockdown’ of economies, both here and abroad, is projecting a base case of GDP down 6.5%, unemployment at 12.5% and a peak effect in the second and third quarters of this year.

But there is some good news.

Andrews explains that there is systemic strength in the financial sector, with substantially stronger bank balance sheets underpinning the economy through the worst of the COVID-19 crisis.

What’s more, he says that since many of the key impacts are being felt in fundamental service sectors, labour is likely to be quickly redeployed and the rebound may therefore be surprisingly quick.

Andrews explains, “The key variable, of course, is the time taken to develop effective treatments and/or inoculations to the virus. With many promising developments being reported daily around the world, a line of sight on such developments could be achieved sooner than many commentators expect.

“In the meantime, governments and economies have to mitigate the immediate-term impacts.

A sudden spike in unemployment will test the capacity for borrowers to maintain their monthly mortgage repayments. Despite around 2.5 years of excess servicing held in offset and similar accounts system-wide, the unequal distribution of such means that specific cohorts of borrowers will face cash flow challenges.”

Undoubtedly, governments also

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Chris Andrews, chief investment officer, La Trobe Financial

Cory Bannister, chief lending officer, La Trobe Financial

“We are very mindful of the struggles facing everyday Australians through this time. That’s why we have introduced a four-month repayment moratorium upon request to assist home loan customers, together with a raft of offerings to help our valued small business borrowers” Cory Bannister, chief lending officer, La Trobe Financial have a role to play, and the federal government has outlined its initial economic response to COVID-19 through a range of measures designed to aid borrowers and support the immediate cash flow needs of SMEs. The SME Guarantee Scheme will guarantee some $40bn of credit for the SME market, says Andrews.

And such a provision should enable cash flow concerns to be addressed and obligations to be met through this period.

APRA has also temporarily eased bank capital requirements to support ongoing lending, while the Australian Office of Financial Management has launched a $15bn structured finance offering for non-ADI and smaller ADI lenders in the securitisation market.

The industry, too, stands ready to assist. Lenders have been

quick to offer special hardship arrangements to borrowers to help them negotiate this difficult period.

At La Trobe Financial, for example, further to its assistance program for bushfire-affected borrowers, a special hardship assistance program has been offered for customers affected by the COVID-19 virus and its wider economic impact.

Bannister told Australian Broker, “We are very mindful of the struggles facing everyday Australians through this time.

That’s why we have introduced a four-month repayment moratorium upon request to assist home loan customers, together with a raft of offerings to help our valued small business borrowers.”

He explains that La Trobe Financial also has in place a dedicated hardship assist team to

ensure compassionate and prompt service is offered to borrowers through this difficult time.

Bannister adds, “We are ready for our borrowers. In the wake of the bushfire crisis we were quick to offer special hardship arrangements for those affected.

We see the value in staying true to our philosophy of ‘others before self ’ and demonstrating that we are here to serve our customers across every life event.”

Likewise, he suggests that La Trobe Financial’s investment offerings provide assistance for those impacted, with a waiver of early withdrawal fees for customers suffering material hardship as a result of COVID-19.

To this, Andrews adds, “Placing the needs of our customers first is fundamental to our philosophy.

Many of our investors have held

active accounts for 10 or even 20 years. It is absolutely in our DNA to return the same support to our investors that they have demonstrated to us over many, many years.”

Of course, beyond lending, the impact of COVID-19 is also being felt by investors. As is widely publicised, the All Ordinaries Index retreated from a peak of 7,289 in February to a low of 4,564 in March, and daily trading sees stock prices flying around wildly.

Globally, this is playing out across all markets, leading investors of all persuasions to seek less volatile investments.

Andrews says, “The La Trobe Australian Credit Fund has been helping investors navigate volatile markets for more than 20 years.

All of our portfolio accounts have an incredible track record of consistent monthly income, 100% return of capital and flawless liquidity, which is something we are immensely proud of.”

Finally, both Andrews and Bannister suggest that while the eventual duration and impact of the COVID-19 waits to be seen, what we do know is that Australians stick together. And together we need to do our part in strengthening the economy and building a bridge to the other side of this health and economic crisis. AB www.brokernews.com.au

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BUSINESS PROFILE

DIVERSIFICATION: TOP OPPORTUNITIES AND HOW TO LEVERAGE THEM

With so much instability in the global economic markets as a result of COVID-19, is now a good time for brokers to diversify into commercial property? Many may say no. But Thinktank’s general manager of partnerships and distribution, Peter Vala, says the best way to manage forces outside of your control is to evolve, develop and fortify your business against current and future headwinds

to Thinktank’s general manager of partnerships and distribution, Peter Vala, diversification reduces the risk to your business of concentrating on one income stream and helps mitigate the risk of the ‘unknowns’. In times of uncertainty, that is vitally important. Vala gives the following tips for how brokers can diversify into commercial lending and explains the kinds of opportunities this can bring.

ACCORDING

Strengthen your business Challenges such as COVID-19 will place significant pressure on businesses, especially on brokers who are focused predominantly on the residential space. There is a real possibility that the market may see a downturn in residential lending as customers become more and more impacted by this crisis. This is when commercial property becomes an even stronger option to consider.

Diversifying into commercial can offer greater security and open new opportunities for brokers and their customers during periods of instability. Specifically, for COVID-19, measures you could consider are: • Identifying those self-employed customers who currently own commercial property • Identifying those who may take up the purchase of capital items under $150,000 as part of the 16

government’s relief package • Refinancing and cash-out for purchase options • Refinancing and restructuring loan repayments to a longer term to create capacity to service an additional borrowing (asset finance) or increase cash flow By opening yourself up to these possibilities in commercial, you

become more than ‘just a broker’ – you become a trusted finance partner able to provide greater lending solutions to help better achieve your customers’ financial and wealth goals.

By diversifying into commercial, you make it possible for your customers to benefit greatly from your affiliations across many lenders and source the best lending solution and conditions.

It also allows you to maximise

“Diversifying into commercial can offer greater security and open new opportunities for brokers and their customers during periods of instability” Peter Vala, general manager of partnerships and distribution, Thinktank could be protecting not only your interests but also the interests of your customers.

Maximise the benefits for your customers It makes sense that if you’re successfully assisting your customers with home loans, there’s an expectation as their trusted broker that you can also assist with other forms of finance as needed. This is a strong position to be in, as you

personal and/or business cash flow and manage potential covenants such as cross-default clauses and crosscollateralisation concerns.

With the maturing of product distribution channels, a contemporary broker can occupy a very similar role to that of a traditional relationship manager in a major financial institution. And you have a distinct advantage, as you’re not driven to cross-sell from a singular institutional platform and are essentially

unlimited in terms of product offerings, recommendations and eventual selection.

Develop your lender network and build slowly When venturing into commercial, develop your network to at least three to four trusted lender relationship managers who are willing and experienced in helping you to structure and shape transactions to suit your individual customer’s circumstances or needs.

At Thinktank, we have a team of highly experienced relationship managers who can assist and support the workshopping and deal preparation of any type of commercial property transaction. In fact, a large proportion of our new business over time has come from residential brokers looking to write their first or second commercial loan.

Starting with simple commercial property or quick asset finance transactions can help you to quickly build a deeper relationship with your customers. Follow through with broader and larger commercial property backed transactions, which might include purchases, refinances and/or equity releases. This includes SMSF lending, which business owners are increasingly using effectively in pursuing their longerterm wealth management plans, often with their business premises owned within their fund.

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In partnership with

two products and requires selfcertification of income supported and one other common form of income verification. We also offer Residential Mid Doc owner-occupier and investment loan options up to 80%, which are designed specifically for everyday self-employed customers.

Peter Vala, general manager of partnerships and distribution, Thinktank

Target your existing residential customer base The best place to start diversifying your business is with your own customer base. They are already a captive audience and can be a powerful tool in spreading the word that you’re not just a residential broker.

Now more than ever, your customers will be looking to you to help them navigate through the current maze of funding options.

Diversification brings a holistic view to their current and future debt funding needs and effectively creates a plan to move forward to meet their personal and business objectives. Use this to your advantage. This might include the acquisition of assets, improving cash flow, restructuring assets and loan facilities, or providing working capital for business growth.

The value of clear, timely, accurate and complete communication, especially in relation to deals, cannot be understated. Whether in the scenario stage, in workshop or with credit, being proactive with communication will always help speed up the process of knowing what is a deal and getting to an approval for your customers as quickly as possible.

Some simple steps you can take to

generate opportunities with your existing customer base are: • Send regular reminders to your client base so they know you have access to other lending solutions beyond home loans • Cultivate and distribute relevant content about different solutions, such as case studies, while being sure not to step into the licensed territory of giving financial advice • Review your customer base and identify how many are self-employed. Look at how many are trading from a rented property – do they want to buy? How many have external debts to other institutions? Have you met their accountants and financial planners? Have you conducted an annual review of their future needs around asset finance, relocation, expansion? Do you have a list of their current asset finance commitments, residuals and expiry dates?

Expand your product knowledge It’s vital you know what products are available from different lenders, and the associated policy that applies.

Products change all the time, and many banks have pulled out of

SMSF and low-doc lending, while also moving on pricing and policy.

Staying on top of which lender offers the products and terms that fit your customers’ needs is essential, and this is where good relationships with your aggregator and lenders can mean the difference between capturing and converting an opportunity or missing out.

At Thinktank, for instance, our relationship manager team is equipped with a suite of commercial and residential offerings to meet the majority of brokers’ needs.

We also offer numerous educational programs, from Commercial Lending 101 to SMSF and Commercial 201.

Our commercial products are simple to understand and are not dissimilar to a residential loan. Our loan terms are generally from 25 to a maximum of 30 years and, just like a home loan, there are no annual reviews, no revaluation requirements and no ongoing fees. Just simple ‘set and forget’ lending, which is what many borrowers these days want most.

Several income verification solutions are also available, from Full Doc requiring two years of financial statements and tax returns, to Quick Doc with self-certification of income.

A Mid Doc offering sits between these

Remember that ‘cash is king’ Always keep in mind that ‘cash is king’ – for everyone. It’s not always about the rate. Often, it’s about offering the right financial solution that meets your customer’s needs and minimises monthly repayments, with the option to make additional payments over time to pay off the loan at an accelerated rate.

Cash flow to a business is like oxygen: it is absolutely essential.

That’s why at Thinktank we make our funding options extremely flexible and appealing to SMEs, giving you greater leverage with your customers.

So, whether you want to protect yourself from an uncertain market, or to provide a full product and service customer experience to increase new opportunities and revenue or defend against potential loss of a relationship, there are many good reasons to diversify into commercial. Looking after your customers’ broader finance needs is an effective way to ensure they have no reason to look elsewhere.

But change is challenging. And the pace of change seems to be continuing to accelerate, whether in relation to a global crisis, lender policy, loan products, compliance or regulatory intervention, or new entrants to the market such as fintechs and neobanks.

However, with great change also comes great opportunity. Brokers are the constant in delivering a critical service in a volatile market that now offers a broader range of products and services than ever before. Non-banks are proving to be the fastest-growing and most innovative sector and, being so closely aligned to the broking channel, it will be the brokers and their customers who embrace this trend who will benefit the most.

If you would like to explore opportunities in commercial lending, Thinktank is here to help. We work closely with all the major aggregators on professional development, information and education events.

We also conduct our own more targeted sessions on high-value-add areas such as prospecting, deal identification and conversion, as well as mentoring. AB www.brokernews.com.au

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FE AT URES

NE WS ANALYSIS

CHALLENGES FACING THE INDUSTRY

Taking a step back from the chaos surrounding the economic fallout of COVID-19, what other challenges are brokers and the industry facing right now, and how can brokers and lenders hope to survive in a turbulent, low interest rate environment? Industry experts at a recent panel session discussed the biggest challenges for 2020 and beyond official cash rate has been slashed to its lowest level on record – just 0.25%. Banks typically use this rate as a guide to set interest rates on their products, such as home loans and savings accounts.

In more typical circumstances, the Reserve Bank’s decision to institute the second rate cut last month would likely have infused optimism into the Aussie housing market; RBA research has revealed there is an inverse relationship between cash rate changes and property price movements.

The rapid increase in the value of residential properties from June 2019 was in large part tied to the series of cash rate cuts made over the year. However, according to CoreLogic analysis, the current situation of “extreme uncertainty and economic fragility” means housing market activity is unlikely to lift, even with the historically low cost of debt.

So, while there is no question that COVID-19 continues to wreak havoc on Australia’s economy and people’s lives, brokers and banks are facing another challenge: how to maintain the long-term loyalty of customers to their mortgages given the lower interest rate environment.

THE

Challenges magnified in a low interest rate environment Speaking at the Australian Mortgage Innovation Summit 2020, Joel Larsen, head of customer engagement and home ownership at Westpac, said mortgages had traditionally meant a 30-year relationship with the bank, but this was not the world we lived in any more.

He explained that relationships with clients were becoming a lot 18

shorter, as consumers had many more options before them. This was especially true for the major banks, which he said now had to make sure they were presenting enough value to customers throughout the life of their loan.

Bartolo, the challenges for a non-major bank are very similar.

He says, “I think two key ones are the volume of regulatory change, but also, in a low-credit, low interest rate environment, the competition is quite intense. On the regulation bit,

“Whether it’s face-to-face or over the phone, humans still crave a human connection, particularly in the context of the home buying process” Byron Donovan, head of commercial management, NAB “I think that’s going to continue to be one of the main challenges that majors face,” Larsen said.

But for ME Bank’s general manager of home lending, Andrew

the challenge is the change coming at us all at once and the resources that are consumed. As a smaller bank with less resources, it’s challenging consuming all that

change at the same time. And now that the RBA has cut the cash rate to 0.25%, it makes it a lot harder for consumers to differentiate between lenders. We’re in a low-rate environment for a reason; obviously, that’s to stimulate economic activity.

The visibility of that to consumers means customers are shopping around more.”

In such an unprecedented economic landscape, banks therefore need to think about how they can offer an experience that goes beyond price. Bartolo said this meant thinking about “how are customers interacting with us” and “how do we take friction out of the process to enhance value”.

Larsen added: “The more immediate challenge with the low-rate environment is how quickly it stimulates housing, and how quickly house prices are growing and how that changes the credit dynamic, especially in Sydney and Melbourne.

With that dynamic taking place, the house price rise that we’re seeing at the moment does also put pressure on the system, because it changes consumer expectations.

“Unfortunately, sometimes it means a lot of people miss out.

There’s the consequence that while consumers are now expecting a lower rate, they are able to borrow more, and they’re probably going to pay more. Managing that dynamic is equally risky.”

Challenges of open banking The start of open banking this year will bring a whole host of opportunities for the industry, but it

RBA CASH RATE DECLINE Source: RBA

The official cash rate has been falling since October 2011, hitting a historic low in 2020 20.0% 17.5% 15.0% 12.5% 10.0% 7.5% 5.0% 2.5% 0% 1990

1995

2000

2005

2010

2015

2020

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Byron Donovan, head of commercial management, NAB

could still take some time before the full benefits are realised.

According to Byron Donovan, head of commercial management at NAB, who also spoke at the summit, there is a big trust element in opening up data to other providers.

“That’s going to be critical from day one. How you build that trust with consumers that they’re able to hand over access to their data and trust it’ll be used appropriately. A big part of that will be transparency around how it’s used, how it’s consumed, and ensuring you’re using it appropriately,” Donovan said.

“Customers are increasingly expecting that from all their service providers around how you can trace and track and understand where you are at and what people are doing with what you’re investing.”

Indeed, the element of transparency, protection and trust will become critical for brokers and their clients to unlock the full potential of what that data can reveal.

But does more data just create additional complexity, especially given how many players are involved in the mortgage process, such as brokers, real estate agents and solicitors – and how can they all work together to use the data effectively?

Bartolo admitted that brokers’ and lenders’ systems wasted a lot of time and were not as effective as they could be.

“You think about things like income expense verification or fraud checks. We’ve got some broker groups and aggregator groups doing

Joel Larsen, head of customer engagement and home ownership, Westpac

those sorts of checks for meeting their own obligations, and then the lenders are doing the same thing on their side,” he explained.

“That creates duplication of cost and everything in the system. I’m not sure what the solution is right now, but I do think there is something for us to think about as an industry around how to streamline that data capture so that we can remove the waste and redeem value.”

But can data alone replace the value that stems from having a conversation with a customer, which is critical to responsible lending today in order to understand the customer’s situation?

Donovan said, “The data tells a part of the story, but it doesn’t tell the whole story, or talk about what their lifestyle will look like post taking out the loan, versus what it is today. You can use it to help inform the conversation, but I don’t think it should dictate the entire conversation.”

Similarly, Bartolo said, “Whether it’s face-to-face or over the phone, I think humans still crave a human connection. Particularly in the context of the homebuying process, there are situations where some circumstances are more simple than others.

“I think the data and the technology will be there to help inform and take friction out and make quicker decisions. But I also think there’s a level of judgment we’re going to have to still apply, and that customers are thinking about that

Andrew Bartolo, general manager of home lending, ME Bank

guidance and advice as well.”

He added that the industry had to work together to ensure technology and data were actually working alongside the human interface.

Changing role of the broker Regardless of the changes that were already here and those that were still coming, Larson suggested that there was still going to be a valuable role for bankers and brokers.

“The way they interact with customers will change. It will be digitally dominated. Most of them will start online. A portion will do the whole thing online. We know the majority still need help somewhere in the process, especially when you’re buying a property,” Larson said.

“It’s different when you’re refinancing, but when you’re buying a property, it’s time-bound, it’s emotional and it’s stressful, and having an expert in there, whether they be virtual or your local broker or the branch down the road, is going to be critical.”

So a business that has a large branch network like Westpac will need to think about whether having a banker and a branch is still the right way to do business with a customer.

“The broker industry, especially the large broker firms, would have one very firm eye on their digital capability and how they can get in front of customers before they go directly to their lenders,” Larsen said.

“I think brokers will be looking at how they can innovate their offering and make it simpler for a big group

of customers, and being accessible online is the most obvious way to do that.”

Donovan added: “The amount of customers we lose purely due to price is actually quite small. Being able to solve their problems in a seamless manner is critical to keeping them happy.”

Head to head with fintechs According to Donovan, when it comes to competition between traditional lenders and fintechs, the latter have the advantage and the beauty of starting with a blank slate, so it was easier to digitise everything from day one.

He explained, “[Instead] we’ve got big legacy systems and processes that we’re working through. For us, it is around how we remove as much paper out of the process all the way through, starting with customers.

“The old days of having to fund a home loan book are changing and evolving, so you have the likes of Athena coming in, who are able to isolate and target a segment of the market and do that very well.

“As more and more competitors come in and try to compete in that space, the days of big banks being able to be everything to everyone, that offering gets harder when parts of the market are being picked off and serviced in a different way.

He adds, “For us, it’s how we face that threat, but equally, being conscious of staying true to our strategy and what we think is going to keep us on the right path.” AB www.brokernews.com.au

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BUSINESS PROFILE

FINTECH LENDING: AWARENESS AND ADOPTION STILL THE KEY CHALLENGES

While there are currently over 600 fintech firms in Australia, with the space growing year-on-year, consumer awareness is still lagging. Australian Broker talks to OnDeck CEO Cameron Poolman to find out what other challenges are facing fintechs and alternative finance providers in the current climate

OnDeck is a fintech lender for SMEs – could you elaborate on what this means exactly? mainstream banks A Unlike and other lenders, which often ask business owners to complete reams of time-consuming paperwork, fintech lenders such as OnDeck combine technology with data and analytics to support lending decisions.

OnDeck Australia’s proprietary small business credit-scoring system, OnDeck Score, evaluates thousands of data points, from cash flow to public records (including corporate documents such as registers, liens, ABNs and other sources) through to social data, to quickly and more accurately assess the health and creditworthiness of a business.

We do not rely solely on the small business owner’s personal credit history but instead look at the overall health of a business. This use of innovative technology allows us to streamline the finance process for SMEs, requesting far less information and expediting the application and approval process by allowing key documents, such as bank statements, to be uploaded directly to us online.

This approach ensures a fast application process, cutting the time taken for SMEs to secure finance from four to six weeks with a major

Q

20

bank to less than three days – and potentially just one day. In an increasingly competitive environment where Australian SMEs are competing in a global marketplace, this time-saving can be the make-or-break factor that gives a business a competitive advantage.

How do you support Q brokers? What aggregators have you partnered with? broker market is a A The significant pillar of support for Australian SMEs, and this has seen OnDeck make a substantial investment in the broker channel.

that we know our products and processes thoroughly and are skilled at solving SME challenges.

OnDeck also works closely with brokers during the first steps in the journey, providing training and sharing best practice. If the broker prefers, an OnDeck BD can speak to customers directly on the broker’s behalf, though the relationship always belongs to the broker.

OnDeck also provides significant support for brokers to maximise their database potential. Our partner portal, for example, gives brokers access to marketing tools that include flyers and template

“Despite the growth in awareness and popularity of the sector, one of the biggest challenges remains” Cameron Poolman, CEO, OnDeck OnDeck Australia provides extensive support to brokers through our highly skilled business development team. In the past 12 months we have more than tripled the head count of our BDM team, sourcing our newest business developers (BDs) from the ranks of our most experienced sales team.

The experience each BD brings to the role gives brokers confidence

copy. If brokers want to send out an EDM promoting SME lending, OnDeck can provide a ‘send ready’ design complete with the brokerage’s logo and brand colours, with brokers free to choose from several generic or industry-specific templates.

This level of support has been well received by brokers. In the last year, OnDeck recorded 70% growth in broker-generated loans. To date we

have partnered with 10 different aggregators, including AFG, Buyers Choice, College Capital, Connective, Consolidated Finance Group, Platform Finance, FAST, Loan Market, Outsource Financial and Vow Financial.

What is the biggest challenge for fintechs and alt finance providers currently? the growth in A Despite awareness and popularity of the sector, one of the biggest challenges remains awareness and adoption. Depending on the survey you read, awareness of online (or alternative/fintech) lenders ranges from 12% to 30%, which means there are a lot of SMEs out there who don’t know about our sector or the many companies operating within it.

While we’ve come a long way in recent years, there’s certainly more to be done. Lower levels of awareness in turn impact acquisition costs as lenders have to overcome potential customers’ lack of knowledge of the sector. This requires more marketing effort across more channels and often competing with the larger traditional players, such as the banks, which have a lot more resources to invest in marketing than many fintechs.

Q

Where do you see this industry 10 years from now? For example, do you see

Q

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In partnership with

confirmed that 22% of SMEs would consider an online lender, up from 11% in the past. The level of interest in online lenders rises to 42% for SMEs that have previously had an application for finance rejected by a bank.

In addition, the banking royal commission exposed some deeply concerning practices in the financial sector, making fairness and transparency more important than ever. In response, OnDeck successfully drove the adoption of the SMARTBox™ loan comparison tool, which uses plain English to explain pricing for small business loans – something we believe is critical to support the success of Australia’s small business economy.

How will this space be impacted by open banking?

A Open banking offers a range of benefits for the SME community, potentially helping small businesses find new financial products and services. The key benefits include:

Q

Cameron Poolman, CEO, OnDeck

an increase in demand for the use of AI? is evolving at a A Technology rapid rate, and as fintech lenders are already at the forefront of technology, the sector is well placed to take advantage of emerging developments to make the lending process even more streamlined for SMEs and brokers.

We certainly expect to see growth in the number of SMEs who rely on fintechs for rapid finance to take advantage of as-of-the moment business opportunities.

Ultimately though, we’re still a very people-facing business. Since OnDeck launched in Australia in 2015, I’ve been hitting the road for face-to-face catch-ups with our customers. It’s the most valuable time of my week. It’s a similar situation to that of brokers, who typically form long-term relationships with their clients, and no amount of technology can replace that human touch.

We believe that fintech lenders will increasingly form part of a broker’s suite of lenders and products.

Brokers continually tell us that being time-poor is a major pain point for their businesses, and being able to write small business loans, which can be processed within as little as one day with the likes of OnDeck, is very appealing for brokers.

SMEs continue to struggle Q to secure funding from traditional banks and are increasingly open to alternative finance options. Where is the growing interest in alternative lenders among SMEs coming from? What current trends are driving demand? recent years, significant A Over growth in non-bank lenders has been driven by the need for small businesses to have improved and more timely access to funds.

OnDeck’s research found that one in four SMEs has been knocked back for finance by a bank, and among those that have secured bank finance, one third say their business was negatively impacted by the time taken to secure funding.

The upshot is that large numbers of Australian SMEs may not be reaching their full potential either because they can’t secure bank finance, or because an inefficient and lengthy lending process is adding to the cost burden. This has driven awareness of online lenders as an alternative source of SME finance.

We’re seeing interest from SMEs across the board – no industry is dominant. However, OnDeck only lends to small businesses that meet certain minimum criteria, such as more than one year in business, minimum annual revenue of $100,000, as well as the business credit score and some other key criteria.

How has the alternative finance space changed over recent years?

The industry has certainly A become less ‘alternative’.

A significant development is the growing interest and awareness among small businesses of online lenders. Our latest research

Q

• Giving SMEs greater choice and better access to business finance • Improving the efficiency of the Australian economy as open banking eliminates the need to manually transfer and analyse data • Support for greater competition within Australia’s financial sector – and ensuring the financial services industry remains competitive internationally.

How will this demand continue to reshape the lending landscape? Specifically, how does this change the landscape for brokers?

The transition to open banking A provides massive opportunities for brokers. It will open the door to a wider range of lending options, and brokers are well placed to support their customers as time-poor SME owners face a potentially even more bewildering array of finance options.

This is where the ‘value add’ of a broker can really shine through.

Brokers can take the opportunity to educate their customers about open banking, support them through the transition to open data, and promote their ability to help SMEs find the finance solution that is best suited to their needs. AB

Q

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31/03/2020 12:45:41 PM

PEOPLE

Have an interesting deal?

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

victoria.ticha@keymedia.com

BIG DEAL

When it comes to buying or selling a home, good preparation is key. Charlie Loveridge, senior credit adviser at Shore Financial, explains why it’s important to ensure homebuyers negotiate a lengthy settlement so they have enough time to sell other assets before taking out a new loan THE FACTS

The client De facto couple – one salary, one self-employed

Loan size $3,750,000

Loan term 30 years

Goal To own a home

We were introduced to this client by a real estate partner. They were a couple looking to purchase a new owneroccupier property, worth over $5m, through the agent, and they required a very fast approval turnaround to be able to secure the home of their dreams.

One of the applicants was on a PAYG full-time salary – very straightforward – whereas the other applicant was a self-employed individual with income predominantly made up of commissions and dividends from a large shareholding in a listed company.

We had the clients conditionally approved within 24 hours, and they bought the property that day with a delayed settlement of 16 weeks. The reason for the long settlement was the fact that the clients had two existing investment properties that they wanted to sell, and the sale proceeds were to be contributed towards the new purchase, leaving them with as little debt as possible on their new principal place of residence.

One property sold easily, yet they struggled to sell the second property, and unfortunately, with four weeks to go until settlement of the new purchase, they still hadn’t found a buyer.

Once the clients confirmed they were having trouble selling the second property, we had to take the initiative 22

Lender Bankwest

Aggregator AFG

and proceed with a back-up application with another bank.

We worked on a scenario in which they could keep the existing property as a tenanted investment but still settle the new purchase.

Borrowing capacity was evident; however, as mentioned, the clients also had a significant share portfolio, so there was the potential to sell shares and come up with additional funds to complete the purchase without selling the second property.

We had this application approved within two business days, as valuation reports had

THE SCENARIO

THE SOLUTION

Location Eastern Suburbs, Sydney

back to the original lender and increased the loan amount slightly. This enabled us to limit the amount of equity they needed to put towards the purchase (they had originally assumed a higher sale price for the second property), which left them in a strong liquidity position.

This was important to them because of the current economic climate due to COVID-19, as the client did have concerns in regard to future commission income.

They also had concerns around future dividends due to the stock market crashing amid the COVID 19 uncertainty.

But increasing the loan amount ensured they had surplus funds at hand post-settlement to fall back on, in case they needed them in the coming months.

THE TAKEAWAYS

Things don’t always go to plan. Buying before selling is risky, and you need back-up options for your clients before allowing them to proceed with the purchase.

Always ensure that when people are buying first, they negotiate as lengthy a settlement as possible so they have time to sell their assets, such as existing property and/or shares, etc.

Have a bridging back-up if possible.

For this client, one of the existing properties was owned in a trust, and therefore bridging was not going to be possible. For this reason we recommended they push for 16 weeks on the settlement, and we ensured that they could keep the property as an investment if the sales didn’t go to plan.

Make sure multiple lenders will provide

Things don’t always go to plan. Buying before selling is risky, and you need back-up options for your clients before allowing them to proceed with the purchase

Charlie Loveridge Senior credit adviser at Shore Financial

already been completed upfront in case they were needed for this purpose.

The clients were very happy with the fact that they had the back-up scenario approved so quickly, and this gave them a lot of comfort and reassurance that they were not at risk of losing a deposit.

In the end, on the same day we obtained the second approval, the client secured a buyer and decided to sell the property.

They made the decision to take a lower price rather than have to sell part of their share portfolio to cover the purchase.

Once the property was sold, we went

a solution – this is to ensure you have back-ups when it comes to all the elements outside of your control, such as valuations, sale outcomes, etc.

Before we gave the client the go-ahead to purchase, we knew that three banks would have lent them the money (for both scenarios), so they had the confidence to proceed with the property purchase.

Finally, when purchasing first, we always encourage clients to work on a conservative sales estimate to avoid shortfalls. We suggest 10% below the sales appraisal at a minimum. AB

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FE AT URES

OPINION

THE NEED FOR SPEED: TRANSFORMING TO DIGITAL The financial services industry is going through significant change, largely driven by the rise of the digital economy as new digital-only players vie to disrupt traditional ways of doing business.

Verimoto’s CEO, Peter Hewett, explains how brokers can use technology to help them compete for many manual, location-based activities that require a physical inspection. Its camera offers a means by which customers and vendors can share the required information, with GPS location data used to confirm the picture is not fraudulent.

This means brokers no longer need to do physical asset inspections, as information on assets can be shared by capturing the verification details with the vendor’s smartphone camera. This can be a game changer for brokers in regional areas, who typically spend an inordinate amount of time coordinating asset and vendor checks.

fuel the desire for instant gratification with three-hour delivery options. Smartphone apps have enabled consumers to order taxis, food and even alcohol on demand. And in the financial sector buy-now-pay-later services allow consumers to purchase products even if they don’t have the funds in their account.

This trend is already impacting the lending industry. It was recently reported that Macquarie Bank is dominating mortgage lending, thanks to its speed of service and digital offerings. Aussie Group also announced it had committed $20m in tech investments to improve its processes.

And aggregator Loan Market suggests its tech is what helps its brokers grow.

Using technology to gain the advantage of speed is clearly what is winning the battle. It’s why we keep seeing significant investment in fintech, which jumped to $2.9bn last year, according to KPMG. Speed is not only providing competitive advantage but quickly becoming an imperative in business. And the pace of change will only increase as digital transformation takes hold.

RETAILERS

Turning manual into virtual Unfortunately for brokers, there are many processes for meeting lending requirements that are still very manual.

For example, one of the biggest time sinks is the verification process, from verifying the identity of customers and vendors to arranging site visits where authorised verifiers can then tick their checkboxes. Traditional processes currently take from days to weeks. Meanwhile, a cash buyer can swoop in and scupper the deal.

However, there is one ubiquitous technology that is enabling brokers to turn these manual processes into virtual, digital processes, cutting the time it takes to secure finance, reducing processing costs and opening the door to automation. And it is something many of the new digital services are based on – the smartphone.

The smartphone can remove the need

of minutes. Whether it’s for a car, boat, caravan or home loan, by creating a set of defined parameters, along with the ability to connect and share digital information, this allows brokers to quickly and easily meet almost any customer scenario.

This gives them the chance to diversify outside of their niche and offer products that meet different life stages of customers.

Keeping it secure However, while going digital can provide the advantages of speed and diversification, it is imperative that brokers should remain

Using technology to gain the advantage of speed is clearly what is winning the battle A faster experience Now that documents are being shared digitally, it is easier for brokers to use software to automate the process, creating a faster, scalable and repeatable experience.

For instance, instead of customers having to download and email brokers their bank statements, tools like Illion’s bankstatements.com.au allow brokers to retrieve the statements they need, including a responsible lending report, to secure finance from lenders. Brokers can also use DocuSign for signatures and confirmations so customers can secure funds directly from their smartphone.

Peter Hewett CEO at Verimoto

Online opens opportunities The biggest benefit of transitioning towards a digital, online model is that it opens the door to diversification.

Today’s digital landscape can help improve the relationship between lenders and brokers, creating a platform on which digitally driven organisations can better integrate and provide products and services to meet customer needs.

Using these digital platforms, lenders can easily define the documents required for brokers to provide an offer in a matter

compliant with data privacy regulations.

Many of the documents and information required for financing are extremely sensitive. Customers can also sometimes send unsolicited information that leaves brokers at risk of a data breach – such as additional financial information they think may help with their applications.

It is important that brokers understand how they must handle this information, particularly if they sent it by email.

To this end, when brokers choose technology platforms to improve efficiencies, they must check they encrypt the information, ensure it meets data privacy regulations and doesn’t hold any information beyond reason. If unsure, it may be worth asking their lending partners if there are digital platforms they would recommend.

No better time than now Technology will be the next big battleground for brokers. Those that move first to digitise and automate will not only get the advantage of speed but also open the door to new service offerings. This will be a significant advantage in meeting consumers’ demands for instant gratification and convenience. AB www.brokernews.com.au

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PEOPLE

Q& A

WOMEN AND LEADERSHIP IN THE SME SPACE Leah Renwick, national business development and conference manager at the FBAA, talks to Donelle Brooks, head of third party at Lend Capital, about what stops many women from becoming part of the SME sector, and her advice for those aspiring to be leaders in the industry

Leah Renwick: Many of us don’t know Lend and how it came about. Can you tell us a bit about who Lend is and what it does?

Donnelle Brooks: Lend is a top Australian lender-matching site. Our team has used a combination of AI and analysis over the last three years to deliver a platform to our broker network that offers access to over 20 alternative lenders in the SME space with one application form.

LR: You work in an area that not many women write business in, let alone work in. What stops women from becoming part of the SME sector?

DB: Confidence – belief in your own ability to achieve at this level.

Persistence – if at first you don’t succeed, keep chasing the dream!

LR: How are you finding working with the many great men in this industry? Do you feel there is still a gender bias out there?

DB: It’s getting better. I wouldn’t have progressed my career, nor would I be the person I am without the support, friendship and mentoring from some great men in this industry.

LR: Is Lend working on anything to help further promote women working in the SME sector?

DB: Always. We recently appointed another woman to our team, who adds immense value. Where we struggle is finding female developers.

We have a team of 10 developers, and they are all male.

24

LR: What do you think is the most significant barrier to female leadership?

DB: Self-belief! Perhaps more important is a combination of lifestyle choices and individual mindsets, including socialisation pressures, lack of confidence, risk aversion, valuing work-life balance, or a desire to avoid politics.

LR: Did you ever think you would be a leader in a male-dominated profession?

DB: Absolutely. I’ve always been involved in sport. I coached men’s netball at state level at the age of 21, played all the usual sports and cricket as well. My competitive side meant I wanted to hold my own against the boys!

Donelle Brooks, head of third party, Lend Capital

LR: What is the best and worst decision you have ever made?

DB: The best was becoming a mum almost 25 years ago! The worst? I’ve made some poor decisions, but let’s

“Go out and back yourself. Be a sponge – take it all in and learn as much as you can about all parts of the industry” Donelle Brooks, head of third party, Lend Capital LR: What woman or women inspire you, and why?

just say you don’t get better with age if you don’t learn from your mistakes.

DB: My mum is such an inspiration to me. She worked in probation and parole (justice) for over 30 years, in a very male-dominated environment. She is super strong, highly professional and went back to school when my brother and I were young to achieve the necessary qualifications to chase her dream.

LR: What do you think will be the biggest challenge for the generation of women behind you?

DB: The next generation of women will continue to have access to a world that’s much more inclusive than it’s ever been. Our biggest challenges will be the continual

Leah Renwick, national business development and conference manager, FBAA

struggle for work-life balance, and the expectations placed on our women through social media.

LR: What is some advice you can share with women entering a male-dominated profession?

DB: Be persistent, be confident, and don’t expect the role to fall in your lap because you are female. Go out and back yourself. Be a sponge – take it all in and learn as much as you can about all parts of the industry.

LR: Where do you see yourself in 10 years’ time?

DB: I’ll still be here, in an industry I love and have passion for. Supporting brokers, lenders, peers and colleagues to be the best they can be.

LR: What is the best piece of advice your mother gave you?

DB: “It doesn’t matter the situation or scenario. Always respond, never react.

Remember, Donelle, just be kind.”

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PEOPLE

CAUGHT ON CAMERA Recently, the FBAA held its 2020 International Women’s Day event. The day started off with registration, drinks, nibbles and goodie bags on arrival. This was followed by an opening address by Leah Renwick and a ‘Diversity vs Diversity of Thought – What Are We Trying to Solve?’ Q&A session with Prospa’s head of partnerships, Alex Brgudac.

Motivational speaker Shade Zahrai gave a presentation on ‘Building a Successful Mindset, Self-belief and Self-mastery for Business Professionals’. Finally, delegates heard from Women’s Community Shelter development director Sallianne McCelland.

www.brokernews.com.au

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31/03/2020 12:47:48 PM

DATA

WESTERN AUSTRALIA

SA SPOTLIGHT

Perth eases back into the game as the economy gains strength After languishing near the bottom of the market alongside Darwin for what has seemed like forever, there is finally positivity to be observed in Perth as a recovering economy helps usher in a second wind.

“After a prolonged period of turbulent conditions following the slowdown in the mining sector, the WA market appears to be stabilising,” reports Damian Collins, president of the Real Estate Institute of WA. “Mining projects are expected to create thousands of new local jobs, which should continue to support population growth, improve demand for housing and aid recovery.”

There has also been a stronger focus on supporting the tourism industry, especially in the regional pockets of the state, indicating that the WA government is looking to strengthen its economic foundation, which would help cushion the blow of an industry downturn.

Residential housing supply levels have been low, but sales activity is expected to pick up in the second half of 2020.

Area

Type Median value

Quarterly

12-month

growth

growth

Perth

H

$480,000

-0.2%

-2.0%

WA Country

H

$330,000

1.2%

0.0%

Perth

U

$375,000

-0.8%

-4.6%

WA Country

U

$213,500

-1.4%

-3.6%

QUEENSLAND

Brisbane outdoes Sydney in ranking of capitals with five-year growth potential Brisbane is yet to hit the top of the market but recorded “the strongest growth conditions” among the capital cities in December 2019, as property values rose by 0.7% over the month, according to CoreLogic’s Home Value Index.

House price expectations were high for the Sunshine State, according to the 2019 ANZ/Property Council Survey on consumer sentiment, although sentiment was only moderate. The 2019 Property Investor Sentiment Survey conducted by Your Investment Property, Property Update and Onthehouse indicated that, out of almost 2,000 investor-respondents, 37% owned investment properties in Brisbane. Brisbane also outranked Sydney when it came to capital cities with the best potential for capital growth over the next five years.

“The Queensland property market has started to show signs of growth, as CoreLogic reported Brisbane with 2.4% growth in December 2019 compared to the previous quarter,” says Dennis Wong, property data research specialist at Real Estate Investar.

Area

Type Median value

Quarterly

12-month

growth

growth

HIGH HOPES FOR ADELAIDE Investors are recognising the long-term potential of the Adelaide market, with its favourable rental conditions and affordability is maintaining the momentum it began picking up in the latter half of 2019, as the findings of the ANZ/Property Council Survey for March 2020 indicate.

Consumer sentiment towards the SA market is quite high, as are house price expectations.

In fact, many investors are picking Adelaide over former top player Hobart when it comes to capital cities with growth potential over the next five years. Supply also looks to be staying low, which, along with the affordability of properties, could help build demand.

CoreLogic’s Home Value Index for December 2019 noted that it was the lower quartile of Adelaide’s market that was drawing buyers, with prices rising by 1.9% over the year.

“South Australia offers a quieter lifestyle, and due to a couple of key infrastructure projects, some areas are likely to experience growth,” says Dennis Wong, property data ADELAIDE

OPPORTUNITIES AND KEY INFRASTRUCTURE

$350m stimulus package

$90m for roadway intersection

FInance package aimed at safeguarding the economy and protecting jobs

Funding for improvements to Augusta and Copper Coast Highways and Port Wakefield Road to ease congestion

365 new eco-friendly buses

$550,000

Drive to make Adelaide world’s first carbon neutral city

QBE estimate of median house price by June 2022 – an increase of 12.3% on 2019

SUBURB TO WATCH: ST AGNES

Brisbane

H

$545,000

0.6%

1.5%

Median price (houses)

QLD Country

H

$450,000

0.9%

0.0%

$405,675

Brisbane

U

$390,000

0.0%

-0.5%

QLD Country

U

$370,000

0.0%

-1.3%

26

research specialist at Real Estate Investar.

“Projects such as Adelaide’s North-South Corridor will provide easier access and an increase in job numbers once the office building and retail spaces from the Adelaide Festival Plaza redevelopment are completed by 2022.”

Accompanying the infrastructure development initiatives is a burgeoning rental market characterised by strong yields and tight vacancy rates.

“Rental yields in SA are much more attractive than in NSW and Victoria – SQM reported healthy vacancy rates for October 2019, with Adelaide at 0.8%, and this rate has been declining since its peak in November 2016 at 2.1%,” Wong reports.

“Rental conditions are attractive for investors in South Australia and much more affordable, with the median house price in the $400,000s and the median unit price in the $300,000s.

Median price (units) $250,725

12-month growth

3-year growth

5-year growth

Indicative gross rental yield

3.0%

7.7%

15.0%

4.7%

12-month growth

3-year growth

5-year growth

Indicative gross rental yield

-6.5%

-1.9%

0.7%

5.4%

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AUSTRALIAN CAPITAL TERRITORY

Rents rise higher in the most expensive capital city rental market Despite being one of the most consistent markets in the country, Canberra’s lack of affordability remains a serious dampener on its appeal to buyers. Even without the added economic stress of COVID-19, it already boasts one of the highest median prices among Australia’s capital cities, at $611,841, trailing only Sydney and Melbourne CoreLogic’s Home Value Index for December 2019 notes that it is also one of three areas in the country to report record-high housing values, alongside Hobart and regional Tasmania. Moreover, Canberra remains the priciest capital city to rent a house in.

The Domain Rental Report for Q4 2019 indicates that in the wake of a boom in unit construction, asking rents continued to increase, and significantly too – house rents were up by 3.6% over the year, while unit rates increased by 2.1%. The vacancy rate in Canberra was low, a sign of high demand in spite of the rental rate, although it did go up in 2019.

Area

Type Median value

Quarterly

12-month

growth

growth

Canberra

H

$694,000

0.8%

2.3%

Canberra

U

$450,000

1.2%

0.4%

NORTHERN TERRITORY

A major recovery isn’t on the cards yet for Darwin

HIGHEST-YIELD SUBURBS IN SA Suburb

Weekly median

Type

Median price

Quarterly growth

12-month growth

Solomontown

H

$108,500

17%

26%

$200

10%

Port Augusta

H

$139,000

-1%

-4%

$240

9%

Davoren Park

H

$165,000

-4%

-8%

$251

8%

Salisbury

U

$162,500

5%

-6%

$240

8%

Whyalla Norrie

H

$145,000

5%

14%

$210

8%

Elizabeth Downs

H

$178,250

3%

-1%

$255

7%

Elizabeth North

H

$177,000

1%

7%

$251

7%

Loxton

H

$195,000

0%

-13%

$270

7%

advertised rent

Gross rental yield

Bordertown

H

$166,500

1%

13%

$230

7%

Smithfield Plains

H

$195,500

0%

10%

$270

Two Wells

H

$325,000

21%

24%

Elizabeth East

H

$202,750

-3%

-5%

The state of the property market in Darwin does not look much different from how it has been for quite some time, but the 2019 Property Investor Sentiment Survey conducted by Your Investment Property, Property Update and Onthehouse reveals that investors are hoping for better things from this capital city in the next five years. The survey revealed that more investors were looking at Darwin than at Canberra, likely because the falling prices have been to buyers’ advantage.

“The September 2019 quarter saw a further fall in the median price of a house in Darwin, dropping by a further 8%,” says Quentin Kilian, CEO of the Real Estate Institute of the NT. While that is good news for buyers, for those looking to sell in this market it has taken prices back to the equivalent of March and June 2009, and in the Palmerston market house prices have retreated to the same levels as 2008.” In that same period, Greater Darwin’s median price fell to March 2007 levels.

Area

Type Median value

Quarterly

12-month

growth

growth

Darwin

H

$480,000

-0.8%

-2.8%

7%

NT Country

H

$395,000

-3.1%

-5.1%

$435

7%

Darwin

U

$280,000

-3.2%

-13.0%

$271

7%

NT Country

U

$314,500

3.3%

-0.6%

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DATA

TASMANIA

Dwelling values are still on the rise in the Hobart market Hobart is still a positive market, but the findings of the 2019 Property Investor Sentiment Survey by Your Investment Property, Property Update and Onthehouse reveal that not a lot of investors are putting their long-term faith in the Apple Isle.

Despite its remarkable run at the top until the latter half of 2019, few people invested in Hobart.

Furthermore, for many investors Adelaide topped Hobart as the better market to invest in for capital growth over the next five years. Hobart’s skyrocketing property prices over the past few years have also had an effect on its affordability, which could be driving a slowdown in the market.

“A nominal recovery in housing values implies homeowners are becoming wealthier, which may also help to support household spending. However, the flipside is that housing affordability is set to deteriorate even further as dwelling values outpace growth in household incomes, signalling a setback for those saving for a deposit,” says CoreLogic head of research Tim Lawless.

Quarterly

12-month

growth

growth

Hobart

H

$502,000

1.8%

6.7%

TAS Country

H

$325,000

1.6%

5.0%

Hobart

U

$370,500

1.4%

7.1%

TAS Country

U

$257,500

0.0%

2.0%

Quarterly

12-month

growth

growth

Sydney

H

$969,000

0.6%

-4.8%

NSW Country

H

$485,000

1.5%

1.1%

Sydney

U

$720,000

0.0%

-3.4%

NSW Country

U

$415,000

0.0%

1.2%

28

99

Cleared

39

Uncleared

18 68.4%

Clearance rate

PERTH Total auctions

28

Cleared

4

Uncleared

3 57.1%

Clearance rate

Houses

$900,000

Units

$0

Sydney Melbourne Brisbane

Adelaide

Perth

Hobart

Darwin

$443,000

$670,000

$497,500

$428,000

$515,000

$387,500

$100,000

$460,000

$200,000

$330,000

$300,000

$434,500

$500,000 $400,000

$372,250

$600,000

$490,000

$700,000

$531,000

$800,000

$666,833

CoreLogic’s Home Value Index crowned Sydney as the top-growing capital city in Australia once again after dwelling values went up by 6.2% in the three months to December 2019. In the ANZ/Property Council Survey for March 2020, buyers also showed increased confidence in NSW as market conditions improved and growth expectations went up.

The performance of the property market in the latter half of 2019 helped facilitate this boost, as have the infrastructure projects in the pipeline that are supporting the local economy. However, despite this remarkable return to form, Leanne Pilkington, president of the Real Estate Institute of NSW, does not see Sydney setting any new records soon.

“We don’t expect a return to peak growth in 2020. More than just supply constraints, there are the broader economic uncertainties and prevailing burdens like stamp duty that will continue to weigh on people’s minds in deciding whether to upgrade, downsize, invest or otherwise,” she explains.

Type Median value

Total auctions

MEDIAN HOUSE AND UNIT PRICES

Buyers renew their faith in the Sydney market as prices rise again

Area

ADELAIDE

$264,000

NEW SOUTH WALES

There were 2,220 homes taken to auction in the week ending 15 March, returning a preliminary auction clearance rate of 70.6%.

In comparison, 1,494 auctions were held in the previous week, returning a final clearance rate of 68.6%. Although clearance rates have edged lower, the final clearance rate across the major auction centres is likely to remain within the high 60% to low 70% range, implying this is still a seller’s market.

With uncertainty rising and confidence slipping as the coronavirus outbreak becomes more widespread, there is some downside risk that housing activity will reduce, which could weigh on auction markets over the coming weeks. However, based on the early auction results this week, the housing market has proven to be relatively resilient so far. In Melbourne, a preliminary auction clearance rate of 70.1% was recorded across 1,173 auctions this week. There were 749 auctions held in Sydney, returning a preliminary clearance rate of 74.6%.

$645,000

Type Median value

WEEK ENDING 15 MARCH 2020

$780,000

Area

CAPITAL CITY AUCTION CLEARANCE RATES

Canberra

CAPITAL CITY HOME VALUE CHANGES Capital city

Weekly change

Monthly change

Year-to-date change

12-month change

Sydney

0.3%

1.6%

3.5%

12.1%

Melbourne

0.2%

1.0%

2.9%

11.6%

Brisbane

0.2%

0.7%

1.5%

2.6%

Adelaide

0.1%

0.1%

0.5%

0.8%

Perth

0.3%

0.5%

0.6%

-3.8%

0.3%

1.1%

2.7%

8.5%

Combined 5 capitals

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

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BRISBANE CANBERRA Total auctions

57

Cleared

25

Uncleared

11

Clearance rate

Total auctions

102

Cleared

30

Uncleared

28

Clearance rate

51.7%

69.4%

SYDNEY Total auctions

749

Cleared

391

Uncleared

133 74.6%

Clearance rate

TASMANIA

MELBOURNE Total auctions

1,173

Total auctions

12

Cleared

646

Cleared

5

Uncleared

275

Uncleared

1

Clearance rate

Clearance rate

70.1%

VICTORIA

Area

Investors expect Melbourne to top growth charts long-term In an analysis of the recent Property Investor Sentiment Survey by Your Investment Property, Property Update and Onthehouse, Metropole Property Strategists CEO Michael Yardney points out that it is a good time to look into the Melbourne market, which has been recording growth across the board. “This is the best countercyclical opportunity in Melbourne and Sydney for a long time, and around 39% of respondents think Melbourne is going to have the best long-term capital growth in the next five years.�

The results of the ANZ/Property Council Survey for March 2020, which measures consumer confidence and expectations for the market, indicate that buyers have high hopes for Melbourne. House price expectations are close to the levels last observed in 2014, with expectations for Victoria among the highest.

However, the full impact of COVID-19 on the property market remains to be seen.

83.3%

Type

Median value

Quarterly growth

12-month growth

Melbourne

H

$745.000

1.0%

-2.4%

VIC Country

H

$381,500

1.8%

4.8%

Melbourne

U

$586,000

2.8%

4.5%

VIC Country

U

$307,000

4.7%

9.0%

All data sourced from CoreLogic.com.au

Be strategic Smart succession planning starts early Contact Trail Homes: experts in enabling lucrative succession.

Nick Young | 03 8508 6666 | 0417 392 132 | nyoung@trailhomes.com.au

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PEOPLE

IN THE HOT SEAT

Daniel Hustwaite, principal at Aqua Financial Services, discusses the biggest challenges for brokers in these uncertain times of COVID-19, and how financial services are working to improve consumer experiences

What inspired you to become a broker?

A I felt that working in the mortgage broking industry would be a great way to enhance the customer experience when obtaining a loan for a property purchase.

Q

What are some of the biggest challenges facing your industry at this time?

A As much as we have specific challenges at the moment, it is just as important to note that these same challenges also create significant opportunities for our industry as a whole.

The biggest challenge as of today is quite obviously the fluid nature of the impact of the coronavirus on the industry.

Clearly, this directly impacts our client engagement processes, and we are actively managing this with our staff and customers. Banks are already taking steps to assist the broker channel in addressing the direct impacts, with changes to policies, such as verification of identity, to make it easier to interact with clients online where possible, rather than in person. Clients are now having to be more proactive in reviewing their circumstances and options in light of recent developments, particularly given the potential economic downside risks. We see this as an opportunity for our industry to ensure consistent and proactive engagement with our clients to support them in saving money.

Q

What sets Aqua Financial Services out from the crowd?

A Aqua has long prided itself on its customer service ethos, and we try to go the extra mile for our customers. We have a specific approach to post-settlement support, which we believe provides a service that not only lets our customers feel valued but ultimately helps them save money in the long run.

Daniel Hustwaite, principal, Aqua Financial Services

Q

Q A

30

What’s been one of your biggest career accomplishments?

I would say that my biggest accomplishment would be building a great team of people who I really enjoy working with every day.

How do you best support your customers?

A We ensure the customer is always front of mind, and we aim to help mitigate their risks to ensure that we protect their financial interests as best we can.

We also have a direct focus on our post-settlement support processes to ensure our clients are looked after and therefore retained over the long term.

Q

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To find out more about MFAA member benefits or to become a member call us on 1300 554 817 or visit mfaa.com.au www.brokernews.com.au

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23/03/2020 9:24 AM 31/03/2020 12:51:44 PM

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