NEWS Firefighters Mutual Bank enters broker market Following a successful merger in November last year P8
BUSINESS STRATEGY Making smart goals How to make the right kind of business goals that will set you up for success P14
ANALYSIS The Chinese Crackdown How will the Chinese government’s new cashflow restrictions affect the Australian property market? P16
FEBRUARY 2017 ISSUE 14.3
OPINION The strategic broker
The benefits of building strong relationships with portfolio-building investors P18
MARKET WRAP New year, new house
A fresh flock of Chinese buyers has entered the property market P24
JAMES SYMOND The CEO of Aussie on the company’s 25th birthday celebrations, marked by a new national campaign that puts brokers in the spotlight P10
A BIG DEAL A complex case
The deal that was a turning point for how to approach non-prime clients P26
AGGREGATOR SNAPSHOT 2
NEWS
ASSOCIATIONS
REGULATION
LENDERS
MFAA responds to Ramsay report P4
Carnell report released after “sobering” review P6
Mutual bank enters broker market P8
BROKERNEWS.COM.AU
A LOOK AT AFG’S MEDIAN MORTGAGE
EDITORIAL
Average mortgage size in dollars
Editor Madelin Tomelty
SALES & MARKETING Sales Manager Simon Kerslake
Fiscal year
Fiscal quarter
National
NSW
NT
QLD
SA
VIC
WA
2013
1
$390,170
$454,208
$393,251
$344,540
$315,721
$382,905
$403,048
2013
2
$396,445
$471,380
$379,343
$343,648
$314,049
$385,016
$411,688
2013
3
$392,390
$459,433
$376,334
$346,140
$331,960
$378,078
$403,086
2013
4
$400,878
$482,929
$401,857
$341,559
$314,037
$384,431
$410,180
2014
1
$408,294
$496,798
$397,687
$347,995
$318,525
$389,259
$408,402
2014
2
$424,124
$515,816
$384,330
$356,020
$332,961
$413,280
$422,993
ART & PRODUCTION
Chief Executive Officer Mike Shipley
2014
3
$425,196
$513,092
$378,728
$358,744
$333,255
$415,829
$425,773
2014
4
$428,365
$522,659
$410,414
$364,845
$330,073
$412,039
$425,963
Design Manager Daniel Williams
Chief Operating Officer George Walmsley
2015
1
$433,813
$523,657
$388,224
$362,799
$332,639
$423,622
$432,559
2015
2
$449,718
$560,917
$399,064
$368,395
$350,609
$434,540
$433,337
2015
3
$446,160
$550,502
$392,863
$370,510
$338,412
$429,830
$433,346
2015
4
$459,671
$558,137
$422,049
$380,061
$352,403
$440,125
$447,071
2016
1
$470,389
$582,286
$399,526
$386,330
$361,869
$455,325
$435,414
2016
2
$475,083
$581,398
$422,628
$393,436
$371,660
$463,931
$442,966
2016
3
$472,846
$588,619
$383,120
$394,412
$372,278
$446,437
$453,210
2016
4
$477,207
$591,040
$407,761
$398,806
$378,461
$455,437
$448,100
2017
1
$479,101
$596,950
$408,807,
$399,876
$378,711
$459,048
$444,014
2017
2
$488,875
$604,945
$384,676
$405,046
$379,770
$477,687
$445,229 Source: AFG
intense competition, while the broker market continues to grow as an increasing proportion of home buyers seek out broker services,” the report said. The increased use of brokers is an industry tailwind for Mortgage Choice as it expands its franchise footprint and improves operational productivity. While the report was specifically around Mortgage Choice, the headwinds mentioned above would be similar for other firms in the mortgage broking space, David Ellis, senior equity analyst of banks, insurance, and diversified financials at Morningstar, told Australian Broker.
Journalist Maya Breen Production Editors Roslyn Meredith Bruce Pitchers
Designer Martin Cosme Traffic Coordinator Freya Demegilio
Account Manager Rajan Khatak Marketing and Communications Manager Lisa Narroway
CORPORATE
Managing Director Justin Kennedy Publisher Simon Kerslake Chief Information Officer Colin Chan Human Resources Manager Julia Bookallil
EDITORIAL ENQUIRIES
Madelin Tomelty +61 2 8437 4792 Madelin.Tomelty@keymedia.com.au
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tel: +61 2 8O11 4992 fax: +61 2 9439 4599 subscriptions@keymedia.com.au
ADVERTISING ENQUIRIES
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MORTGAGE CHOICE TO KEEP GROWING While tougher lending criteria, weak wages growth and higher interest rates are set to drag down demand for home loans across the country, national franchise Mortgage Choice is still set to grow, albeit at a slower rate than before, analysts have said. According to a new research note by Morningstar, these medium-term headwinds will result in an average annual earnings per share growth forecast of 3.5% to fiscal year 2021. Solid growth will be maintained as Mortgage Choice expands its broker footprint and broadens its product range. “These initiatives should help the firm stabilise its market share amid
News Editor Miklos Bolza
“I’m not saying that Mortgage Choice is going to slow and other brokers like AFG are going to continue growing strongly. I think it’s an industry-wide trend that we’ll see over the next few years with the slowdown in new mortgages approved or written.” When contacted by Australian Broker, John Flavell, CEO of Mortgage Choice, refrained from offering any further comments on the insights of the research note. “We don’t like to comment on analyst reports. They provide analysis on what the industry as a whole is facing and our results will speak for themselves,” he said.
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 This magazine is printed on paper produced from 1OO% sustainable forestry, grown and managed specifically for the paper pulp industry Copyright is reserved throughout. No part of this publication can be reproduced in whole or part without the express permission of the editor. Contributions are invited, but copies of work should be kept, as Australian Broker magazine can accept no responsibility for loss. Australian Broker is the most-often read industry publication, according to independent research carried out by the Ehrenberg-Bass Institute for Marketing Science at the University of South Australia in December 2008. The research also found that brokers rate Australian Broker as the best for both news content and feature articles, followed by sister publication MPA. Overall, on all categories, Australian Broker ranks top followed by MPA. The results were based on a sample of 405 respondents who were the subject of telephone interviews.
ASSOCIATION HAPPENINGS 4
, DATES TO WATCH
MFAA RESPONDS TO RAMSAY REPORT The MFAA has released its response to the Ramsay review’s interim report on the external dispute resolution and complaints framework. The Ramsay review’s interim report includes a principal recommendation that the two existing operations of the Credit and Investments Ombudsman and Financial Ombudsman Service be amalgamated into a single scheme, to reduce consumer confusion, due mainly to its concerns about overlapping jurisdictions.
However, the MFAA’s submission, released on behalf of its members, states that it does not support the recommendation to develop a monopoly model for these services, which would disadvantage its members as small business owners and have little impact on the major credit providers. “The need for two alternative EDR providers better supports the different types of customers and businesses serviced by each scheme while offering members the choice of provider,” said the association.
“In the MFAA’s view, the proposal is anti-competitive, lacks efficiency, equity, transparency, accountability and comparability of outcomes.” The MFAA stated that a monopoly environment “does not foster a better approach”, but rather “the weight of evidence supports a negative impact on the proposed model in terms of members’ pricing, innovation, competition and efficiency in dispute resolution outcomes.” It added that a “one size fits all” approach would not be effective.
Ren Wong “Foreign buyers, especially from mainland China, probably constitute less than 5% of market activity although the headline numbers are prominent given that they tend to buy more expensive properties” P16
Nathan Birch “A strategically minded broker has the ability to become the go-to person for portfolio-building investors who may require several more lines of finance than the average borrower” P18
WHAT THEY SAID...
James Symond “There’s still a great number of consumers out there that you need to demystify the concept of what a mortgage broker does [for]” P10
A rundown of the next fortnight’s events
FEBRUARY
15
What: MFAA ‘Lifting the veil of the ATO: Dealing with the ATO in the context of finance transactions’ webinar Where: Online Details: This webinar will provide brokers with practical tools to assist them to better deal with clients who have taxation debt and enable brokers to generate more work from this increasingly lucrative area.
FEBRUARY
17
What: MFAA PD breakfast Where: Fraser’s Restaurant, Perth Details: CEO Mike Felton will provide members with an MFAA update, while Craig Gregory, director, fraud investigation and dispute services at Ernst & Young will provide a mortgage fraud update.
FEBRUARY
21
What: MFAA Where: Peppers Seaport Hotel, Launceston Details: CEO Mike Felton will provide brokers with an MFAA update. Ben Weeding, buyer’s agent at Buyside will provide a property update focusing on current market activity and new opportunities in local areas and throughout Tasmania, and there will be a property investment tips and tricks presentation.
REGULATORY ROUNDUP 6
WORLD NEWS
CANADA VANCOUVER LOOSENS FOREIGN BUYER TAX Some of those who’ve had to pay a 15% foreign buyer tax on real estate in Metro Vancouver, Canada, may be in for a respite. The government of British Columbia is considering rebates of the six-month-old levy to those who obtained Canadian citizenship or permanent resident status shortly after buying a home, the Vancouver Sun reported. “It’s one of the things that has been presented that we’re looking at, in terms of someone who has made a purchase and then in a very short period of time meets the criteria and acquires the status whereby they wouldn’t have had to pay the tax,” Finance Minister Mike de Jong said in an interview with the Vancouver Sun recently. Last week, Premier Christy Clark announced that the tax will be lifted for those who have a work permit and pay taxes in British Columbia. The move came as a reaction to US President Donald Trump’s temporary ban on refugees and travellers from several Muslim-majority countries. De Jong said the government has no plans of changing the rate or expanding the tax outside Metro Vancouver. The foreign buyer tax took effect in August last year, with the government stating the levy would help manage foreign demand while new homes were built to meet local needs. Government data showed foreign nationals were involved in 13.2% of property transfers in Metro Vancouver from 10 June to 1 August last year. The rate fell to 3% in October.
BANKWEST PAYS FOR BLUNDER
$4.9M
The amount Bankwest has been ordered to refund to approximately 10,800 customers after ASIC found the bank failed to link offset accounts to home loan accounts resulting in customers being overcharge interest Source: ASIC
CARNELL REPORT RELEASED AFTER “SOBERING” REVIEW A report into small business lending practices has been released, offering 15 recommendations for the banks and the government after what has been called a “sobering” review process. Originally commissioned on 31 August 2016, the Inquiry into Small Business Loans examined 23 extreme cases of poor customer experiences for business owners dealing with the banks and conducted a deep dive into six of these. The inquiry also included a two-day public grilling of the big four banks. “It has been a sobering process to review the experiences of business owners impacted by the poor practices of some members of the banking industry,” said Kate Carnell AO, Australian small business and family enterprise ombudsman, who was asked to run the inquiry. The 15 recommendations in what is known as the Carnell report will address gaps in the existing regulatory environment and with the practices of industry participants. The implementation of these recommendations is required by 1 July
this year. Additionally, banks must also provide borrowers with a new small business standard form contract that is short and written in plain English by December 2017. “The government expects the banking industry to give the highest priority to careful consideration of the 11 recommendations that focus on changes to the way banks deal with their small business customers,” said Kelly O’Dwyer, minister for revenue and financial services.
LENDER UPDATE 8
REGIONAL BANKS’ ARREARS RISE
Mortgage arrears statistics – prime borrowers: 5% 4.5% 4% 3.5% 3% 2% 1.5% 1% 0.5%
Sep-16 1.11 1.87 0.94 0.62 1.00 1.14
Oct-16 1.14 1.85 0.98 0.69 1.07 1.16
Nov-16
Mar-16
Aug-16 1.08 1.91 1.03 0.61 1.05 1.14
Jul-15
Jul-16 1.08 2.00 1.07 0.71 1.02 1.16
Nov-14
Mar-14
Jun-16 1.12 2.06 1.05 0.71 1.05 1.19
Jul-13
(%) Major Banks Regional Banks Other Banks Non-bank Financial Institutions Non-bank Originators Prime SPIN
Nov-12
Mar-12
Jul-11
0% Nov-10
Firefighters Mutual Bank has announced its entry into the broker market following a successful merger with Teachers Mutual Bank in November 2016. “This is an ideal time to have another reputable niche brand enter the broker market under the Teachers Mutual Bank banner,” said Mark Middleton, national manager of third-party distribution at Teachers Mutual Bank. “We anticipate that brokers will be keenly interested in what Firefighters Mutual Bank has to offer to the market.” As well as supporting a niche not currently open to brokers, Middleton told Australian Broker that FMB’s new third-party channel created an extra “business opportunity” that could help brokers supplement their current activity. The launch of FMB’s third-party channel will roll out over the remainder of the 2017 financial year, Middleton said. “The channel is at present ahead of projections, which is mainly attributable to the launch of UniBank in August 2016 and primarily home loan lending nationally. As a result, the organisation has exceeded its expectations by over 25% YTD.” FMB will add a new business development manager for NSW/ACT as of 6 February 2017. The bank will also provide additional recruitment for resourcing support to aid with an increase in submission flows without impacting on service standards. This move opens up Australia’s 7,400-strong firefighting and emergency services market, said Jim O’Connell, general manager of FMB. “Furthermore, Firefighters Mutual Bank’s entry into this channel shows that we are a bank that is fully engaged with our members’ financial needs and goals.” By joining the broker market through Teachers Mutual Bank, FMB will connect with a third-party distribution network partnered with 12 aggregators and more than 2,200 accredited brokers.
2.5%
Mar-10
MUTUAL BANK ENTERS BROKER MARKET
Nov-16 1.14 1.88 0.96 0.63 0.95 1.15 Source: Standard & Poors
NAB UNVEILS NEW BROKER OFFERINGS NAB has announced two exciting offers as part of its ongoing commitment to the broker channel. Brokers will be able to continue to offer their customers a $1500 cashback on NAB home loan products, and as part of a new initiative, will also be able to offer a $395 fee waiver for the first year of a NAB Choice Package. These initiatives follow NAB’s transformation in 2016 of its mortgage broker proposition, which included making available the full suite of NAB’s retail home loan products to brokers. “Last year, we made our retail home loan products available to brokers, and we’re kicking off 2017 with great offers to further enhance the broker-customer experience,” NAB general manager of broker distribution, Steve Kane, said. “NAB absolutely supports brokers and their customers, and these offers reflect our commitment to the broker channel.” For a limited time, NAB customers who apply for
an eligible NAB home loan (of $250,000 or more) and banking bundle could be eligible for a $1500 cashback offer. This offer is available on the following products: • NAB Base Variable Rate Home Loan • NAB Tailored Home Loan • NAB Interest Only in Advance • NAB Choice Package Brokers will also be able to offer customers a $395 fee waiver for the first year of a new NAB Choice Package for a limited time. “Through these enhancements, we are empowering brokers with a compelling offer for their customers,” Kane said. “We look forward to launching more initiatives throughout the year, to help brokers grow their business and build strong relationships with their customers.” This includes a strengthened small business offer due to be launched in coming months.
10
COVER STORY AN AUSSIE EVOLUTION On Aussie’s 25th anniversary, its CEO James Symond reflects on over two decades’ worth of success for what has become an iconic brand for consumers and brokers alike
IN 1992 John Symond took the first step towards building a business that would support aspiring homeowners in their quest to achieve the great Australian dream. Twenty-five years later, Aussie settles over $2bn a month, has over 1,000 brokers on its books and more than 200 stores. The journey is still going, and there’s no end in sight. In fact, as the founder’s nephew and current Aussie CEO James Symond says, “The first 25 years were just the beginning.” As Aussie turns a quarter of a century old, it seems only fitting to reflect on what has become an enduring Australian success story. To celebrate, the company has injected $25m into a nationwide 18-month marketing campaign that aims to draw on the deep nostalgia of a brand recognised by generations of Australians, while looking ahead to an evolved and revitalised brand positioning. “When you look to the future, you also have to consider the past,” Symond tells Australian Broker. “We look to the past and we look to what worked best, and what is the essence of the business, the brand and the people.” Symond is referring to Aussie’s multi-channel marketing campaign conceived by agency Special Group, in which the memorable tagline heard across the country for years – “At Aussie, we’ll save you” – has returned. The spoken slogan, which perhaps wouldn’t be quite as at home in a 2017 context, is back, but not in the way Australians remember it. “We’ve brought back, ‘We’ll save you’, but we never say, ‘We’ll save you’,” Symond says. “It’s just the tag line. You don’t see John saying it, but people remember it.” And he is absolutely right. The much-loved saying has been cleverly recycled in a strategy that shows Aussie’s recognition of the strength of a brand that has become embedded into the Australian subconscious. To throw such powerful brand presence out the window would be an awful waste - something Symond is acutely aware of. “John saying ‘we’ll save you’ is a finished chapter, but how do we develop it for 2017?” he says. “From print to radio, to the posters in the foyer and the business cards that you see, we’ve gone and touched every part of the Aussie brand
positioning across the group just to bring it up to 2017 – to make sure that we’re as relevant now as we were 25 years ago.” Unfaltering dedication to the industry “The essence of the business is the customer,” Symond says, and the 2017 campaign is as much a statement about Aussie’s commitment to the mortgage industry as it is about showing the Australian consumer the extent of its steadfast, reliable existence. “A lot of companies don’t hit five years, let alone 25 years, in this day and age,” Symond says. “Australians like that. Australians like seeing the security of brands, the security of tenure. Brokers like seeing the security of it, so it’s worked, hopefully, in our favour. “We are spending $25m over an 18-month period on our marketing campaign. Come on, what other broker on the planet does that to support their people, and [do something] that is also good for the industry? No one.” But the sheer cost and extent of the marketing overhaul is not just about reminding consumers
While nearly 54% of home loans in Australia are written by brokers – a vast improvement on the broker market share of a few years ago – it is still comparatively low. In the UK, for example, over 70% of mortgages are written by intermediaries. “The good news is that just over 50% of consumers use brokers. The bad news is that there’s still nearly 50% of consumers that don’t use brokers … and the broker recall rate is huge for people once they use a broker. But there’s still a great number of consumers out there that you need to demystify the concept of what a mortgage broker does [for],” Symond says. The campaign shows brokers as friendly, professional and approachable people who are, first and foremost, on the consumer’s side – there to help them through what has become an increasingly complex maze to navigate. “The mortgage broking proposition is more relevant today than ever before,” Symond says. The amount of change that’s happening on a daily basis with lenders … the complexities are extraordinary … so for them not to use a mortgage
“I don’t think there’s another mortgage broking business out there that has had the same consistency of leadership, the same consistency of message and has just kept powering away. If there is, I’d love to know” about Aussie’s legacy, but also Aussie’s other customer – the broker – because where would Aussie be without brokers? On the launch of the new Aussie advertisements, Symond received a call from the Mortgage and Finance Association of Australia (MFAA), who told him that the campaign does just as much for broking as it does for Aussie, because it explains very clearly what a broker does.
broker – for the average mum and dad – is madness.” The home loan information overload is leaving many potential borrowers feeling overwhelmed, and this is where the broker needs to step in with what Aussie calls a “collective wisdom”. For his part, Symond believes Aussie has played a large role in the intermediary channel’s growth over the past 20 years – something not many would dispute. Aussie has, after all, been
11
James and John Symond recreate a family photo from 20 years ago as part of Aussie’s 25th anniversary Memories of Home competition.
continuously “on the front foot banging the broking drum” for a quarter of a century. “I look at what we’ve done for the industry and I look very proudly that Aussie has been hopefully seen as ahead of the curve and something integral in driving the success of this industry consistently for 25 years … I don’t think there’s another mortgage broking business out there that has had the same consistency of leadership, the same consistency of message and has just kept powering away. If there is, I’d love to know.” The human difference Two themes characterise the Aussie campaign:
“the human difference” and “collective wisdom”. According to Symond, they are going down exceptionally well. “Thus far it’s the most successful campaign that we’ve run for a very long time,” he says, adding that an integral part of Aussie’s success has been its light-footedness – its ability to pivot, to progress and to evolve over time. Symond himself started in the business at the fresh-faced age of 19, and now can’t remember his life without Aussie. “The journey’s been an incredible one. There’s been a few keys to success, but one of them has been evolution. And you’ll see Aussie evolve and
change its model every five or six years, so we never have a Kodak moment in the negative way,” he says. “I think that we’re really only using six cylinders out of our 12. And over the next five and 10 years, we hope to really push ahead and really hope to evolve strongly, as we’ve done in the last five or 10.” Symond is passionate about Aussie’s heritage, and proud of the distance it has come. But that’s not to say he’ll be taking his foot off the gas any time soon: “Today we have just over 200 stores, our vision for 2020 is to have 300 retail stores.” Clearly, business is booming for Aussie. “We’re writing more business than ever before;
12
COVER STORY MEMORIES OF HOME To celebrate Aussie’s 25th birthday and thank its customers, Aussie is conducting a customer competition where customers are invited to recreate a family photo that was taken in the past 25 years. Aussie’s judging panel will then select the top five finalists, and customers will vote to select the winner, who will win $25,000. Those who vote will go into the draw to win one of five $1,000 prizes.
we’re as profitable as ever before; we’ve got the best people we’ve ever had on this business, and the right branding,” Symond says. So what does Aussie’s 25th birthday mean to Symond? One of the most powerful things, he says, is hearing customers’ stories, those families who have used the same Aussie broker for multiple generations. “Seeing our brokers that started with us 20 years ago whose children are working for us. They opened a store and now their children are opening stores,” he says. “It goes back to the human difference, back to what we’re about. It’s a lovely thing; it’s great. Our journey has been amazing.”
A STRONG BOOK
$75bn The total value of Aussie’s loan book Source: Aussie
AUSSIE, AUSSIE, AUSSIE
FY16 figures including those of sub-aggregator, nMB
$22bn
FY16 loan volume
56,000
Settlement count
Source: Aussie
14
BUSINESS STRATEGY SMART GOALS
Performance coach Mike Irving on setting the right kind of business goals that will set you up for success
AS WE settle into the new year we often set ourselves goals to boost business growth but unintentionally end up stunting growth and triggering compulsive behaviour. There are two types of business goals – objective and subjective. The latter will always negatively impact on profits and workplace culture eventually. A subjective goal is not clearly defined and therefore impossible to achieve. The goal to ‘be a winner’, the goal to ‘be successful’, or the goal to ‘have financial freedom’ are all examples of subjective goals. Subjective goals cause frustration and disappointment because they have different meanings to different people and so create a lack of clarity in a team. Subjective goals
only cause frustration and disappointment because, as time passes, the goalposts keep changing. You can always see a way you could be more of a winner, or more successful. The goalposts on ‘financial freedom’ move with the changes in your lifestyle. Yet business leaders worldwide continue to set these goals every year for themselves and their teams, expecting great results. Subjective goals are objectively pointless Why is it so common for SME leaders to set subjective goals? Self-help gurus are partly to blame as they use subjective buzzwords, many of which relate to broad terms like happiness, financial freedom, success, and winning.
We get told that “everyone wants to be happy” and “everyone wants to be successful”, and we agree with those statements. But the problem seems to be that not many people have looked at whether or not these goals have a positive influence on our lives. Our research shows that they do not. You can always find something that will make you “more happy” or “more successful”, and so, as I said, those goalposts – the ones you came up with – will keep changing. This process creates an unachievable standard that will keep you busy going nowhere for a long time. You become the equivalent of the hamster on the wheel. Have you ever felt like you’ve been running for a long time and yet you haven’t got
15
Mike Irving is a recruiter, business owner and leadership performance coach www. advancedbusinessabilities.com
anywhere? It’s often because you’ve set yourself a subjective goal. While this can be frustrating, the answer lies in ensuring that you set yourself clear, measurable, objective targets. An example is a goal to increase profit margins by 4% within 12 months, or a goal to hire two new sales staff within six months who sell over 300,000 widgets each in the 12 months following. One of the biggest problems business owners face is failing to see what they’ve already achieved, which means they are constantly perceiving the ideal of success as something that perpetually lives in the future. It’s important to acknowledge when you do the things you said you were going to do – even just a quick pat on the back for having kept your agreement goes a long way when administered by yourself.
Business is about people, so successful business is about building successful people. Successful people get good at setting and achieving clearly defined, objective targets Testing your goals If you’re not sure if your goals are subjective or objective there is a simple three-step test you can do: 1. State your goal to a stranger in 10 seconds or less. Can they understand it? 2. Once stated, can the stranger measure your progress? 3. In your mind, can you see exactly what the goal will look like when it has been accomplished? If the answer is yes to all three questions, it is an objective goal that is likely to benefit you and the business. If the answer to any of the three questions is no, then you might be creating an impossible mission for yourself and your team. The key to achieving any more than two or three goals yourself is to have a team to delegate to. In these instances, it becomes even more important to have clearly defined and communicated targets. But the great thing about setting objective goals is that it doesn’t matter how many goals you’ve set. If they are all objective, you’ll be able to measure each one’s progress. Business is about people, so successful business is about building successful people. Successful people get good at setting and achieving clearly defined objective targets. The more you can ensure that your people are working on objective targets, the more they will achieve. The more they achieve, the more they feel good about themselves and their work, and as a result you have the basis of a very solid organisation, full of successful people.
WHITE-LABEL UPDATE
s
WHITE-LABEL GROWTH: BUILDING RELATIONSHIPS THAT MATTER The white-label industry is continuing to grow at a rapid rate. By the end of 2016, 85% of brokers had access to Advantedge’s white-label products compared to 35% in 2015. Brokers are realising the benefits of white-label as more than just a costeffective solution – seeing it as a loan type that ticks the boxes for all stakeholders. Consumers get quality products at sharp rates and brokers get efficient service with top-quality support. White-label not only benefits brokers but also allows aggregators to reinvest back into their business to improve their systems, service, and develop their staff – ultimately better supporting their broker network. Advantedge’s white-label products are appealing because they cater to a diverse range of customer needs: whether that is a first home buyer, an investor, or someone who is self-employed. Five ways Advantedge white-label products add value: 1. Top-quality support services Advantedge gives brokers a high level of support by providing services like experienced Business Development Managers, Scenarios Teams with credit authority and a dedicated local CustomerCare team. Our support networks are specially designed to ensure brokers are equipped to give the best possible level of support to their customers. In our latest NPS survey, Advantedge received a score of 8.3 for overall service satisfaction – showing brokers appreciate these support services. 2. Help retain customers Repeat business and referral business are crucial to building a broker’s book, and Advantedge endeavours to support brokers in retaining their customers. Through a proactive customer retention program for PLAN Lending, ChoiceLend and FASTLend, Advantedge contacts the broker, letting them know of customers who will be rolling off their fixed rate term or interest-only period within the next 45 days. This friendly reminder makes it easier for brokers to contact their customers at a critical point in time to help the customer take the next step in their loan journey. 3. Facilitate more first-touch, unconditional approval First-touch unconditional approval is something brokers strive for as another string to add to their bow. It strengthens their proposition and is gold for customers looking at making their home loan dreams a reality. To ensure white-label customers receive market-leading turnaround
Brett Halliwell, General Manager, Advantedge
times, Advantedge has introduced an inbound quality program. For submissions that tick all the boxes, approval can be provided within 48 hours. 4. Consistency and personalised approach Advantedge’s scenario team members are empowered with delegated credit authority, and Credit Managers are available via direct phone or email to help with complex deals. The lending teams at Advantedge take a personalised approach. They’ll call the broker on each and every deal, because we understand that broker access to credit is a critical desire. 5. Staying top of mind Because the white-label product is exclusively available through brokers, this enables them to become the face of the loan, and they provide their customers with something they can’t access anywhere else. Every time the consumer receives their statement, logs into their online home loan account or uses their debit card, they’ll be reminded of their broker relationship. According to the quarterly Comparator data from June 2013 to June 2016, the percentage of white-label loans written by brokers in the industry has doubled to 6.3%, which translates to approximately $12bn of the overall home loan market. At Advantedge, we’ve reinvigorated our strategy by enhancing our broker service offering, focusing on delivering value and greater service. In our most recent broker satisfaction survey, we received an overall NPS score of +44 across seven of our white-label home loan brands. Furthermore, Advantedge’s ranking on our aggregator partners’ lender panel regularly features within the top four to six, confirming that Advantedge is a very significant force within the market. We look forward to driving this momentum as more brokers turn to white-label to provide the best possible solution for their customers.
16
ANALYSIS THE CHINESE CRACKDOWN With the Chinese government restricting cash outflow for international investment, Australian Broker examines what effects, if any, this will have on the local property market
ON NEW YEAR’S Eve, while the world was getting ready to farewell 2016, the Chinese government made a move that would resonate in both local and international markets. China’s State Administration of Foreign Exchange (SAFE) commenced an aggressive crackdown on overseas investment, declaring that it would force buyers of foreign exchange to sign a pledge not to use their $50,000 annual quota for offshore property investment. Violators of this agreement would be added to a watch list, put on a three-year foreign currency ban, and subjected to a money laundering investigation. Since the announcement, sentiment has been mixed, with local banks, buyers and brokers alike all questioning what this new legislation will mean for the Australian property market. A back-and-forth battle In the event that this new legislation is the extent of China’s cash outflow crackdown, CT Johnson, general manager of business intelligence agency Basis Point, has predicted that money transfers from Chinese investors will slow down during the first half of 2017. However, through new methods and structures, these investors can then compensate for this downturn and transfer their money out of China during the second half of the year, he told Australian Broker. “That’s assuming that the Chinese government doesn’t implement any new rules that disrupt these new mechanisms for getting money out.” This back-and-forth battle between the Chinese government and investors is not likely to end soon, with a depreciating currency whipping up the desire for investors to get their money out of China. The main draws for overseas investment in areas such as property include diversifying risk, discovering new asset categories, and taking advantage of the transparency available
in foreign markets. “On the other hand, the Chinese government is grappling with the issue of increased capital outflows. This is causing problems for the Renminbi, which depreciated by about 12% versus the US dollar in 2016,” Johnson said. This mixture of a depreciating currency and further government restrictions is a combination that has driven investors to send their money overseas. Growth versus demand Released in early December 2016, a few weeks prior to the crackdown, the Treasury paper Foreign Investment and Residential Property Price Growth examined the effects of foreign investors on Australian house prices. Through a lengthy analysis, it found that “the majority of price growth experienced in recent times does not appear to be attributable to increased foreign demand”. While foreign investment approvals did indeed trend upwards along with price growth in the few years prior to the study’s release, foreign investment accounted for a small proportion of this growth. Furthermore, overall foreign investment actually helped increase the total supply of dwellings by encouraging investment in new houses and apartments, a trend that was – and is – in line with the Australian government’s policy aims. However, the methodology used for this report was unclear, Johnson said, making it difficult to determine how the researchers came to their conclusions. A scattered effect What the experts can agree on is that there will be some localised flow-on effects on certain geographical regions and demographics from the crackdown. Johnson predicts a reduction in the
number of Chinese buyers will drag down the rate of house price growth in Australia. “I believe there will be more pressure on high-density off-the-plan buildings. I expect to see zero impact on the other end of the scale with land and house type developments. So it depends on the geographical market as well as the type of structure you are looking at. I think a reduction will have some impact, but I don’t think it’ll be massive,” he said. Ren Wong, CEO of finance and property group N1 Holdings, has a more conservative outlook, and told Australian Broker that the crackdown would not have any significant general effects on the Australian property market. “Undoubtedly, foreign lending is a significant market for some brokers or even lenders. However, in terms of impact on the property market, it’s probably not as large as some of us thought it would be.” While certain Chinese buyers who previously could afford to purchase property in cash are now barred from transferring their cash to Australia, this only accounts for a small percentage of property investors, Wong said. “Foreign buyers, especially from mainland China, probably constitute less than 5% of market activity, although the headline numbers are prominent given that they tend to buy more expensive properties.” Figures from the ABS agree with this sentiment, with China accounting for a mere 2.5% ($74.8bn) of more than $3,000bn in total foreign investment that flowed into Australia in 2015. With market changes becoming more frequent, Wong said he was unsure if foreign investment would eventually return to normal in Australia, although he was sure that if this occurred it would not be in the short or medium term.
17
CHINESE INVESTORS COVET AUSTRALIAN PROPERTY
Approvals by country of investor in 2013/14 $m 30,000 25,000 20,000 15,000 10,000 5,000
New Zealand
Thailand
South Korea
Germany
United Arab Emirates
Kuwait
United Kingdom
South Africa
Spain
Switzerland
Hong Kong
Japan
Netherlands
Singapore
Malaysia
Canada
United States
China
0
Source: FIRB Note: China excludes Special Administrative Regions and Taiwan
CHINA’S INVESTING DOMINANCE ALL HYPE?
300
Total stock of foreign direct investment by country
$bn
250
OTHER
200 150 UNITED STATES 100 UNITED KINGDOM 50 0 2001
JAPAN
2002
2003
2004
2005
2006
2007
CHINA 2008
2009
2010
2011
2012
2013
2014 Source: ABS
18
OPINION THE STRATEGIC BROKER
Nathan Birch on how brokers can benefit from building strong, ongoing relationships with portfolio-building investors
SINCE APRA tightened lending restrictions in 2015, many investors have come to believe that building a large property portfolio is a thing of the past – but this is not the case. There are still opportunities out there for the property investor to build a successful portfolio – as long as they purchase the right properties in the right order, in line with their goals and financial situation. However, there is another deciding factor to their success – the lending environment. Without the right loan structure, many investors find their journey comes to a screeching halt after just one or two investment properties. This puts a greater onus on the role of the mortgage broker. In this lending environment, a broker who can act as a finance strategist, that is, one who can partner with their clients to help them achieve their long-term goals, will be an essential person in every investor’s success story. Rather than writing one or two loans for a client, a strategically minded broker has the ability to become the go-to person for portfolio-building investors, who may require several more lines of finance than the average borrower. As part of a mutually beneficial relationship, this kind of broker can not only help navigate lending requirements for their clients, but also
increase their own earnings and establish a solid reputation within the investing community. Having a working knowledge of property investing and the different types of markets that are operating gives any broker a good advantage. Although brokers are not able to offer property advice, they can use contextual knowledge to gauge a keen understanding of their clients’ goals and strategy. In addition to this, having a thorough understanding of the different loan products available means the strategically minded broker will be able to offer not only the best finance structure to their clients but also possible alternative pathways for them to think about, too.
The ins and outs of investing Knowing the ins and outs of building a successful property portfolio allows the broker to continue to issue loans under responsible lending guidelines, while understanding the role that different types of properties will play in improving serviceability. A property with good cash flow, for instance, puts the investor in a much better position to continue borrowing. It can improve the serviceability of the client – especially since assessment rates are much higher that actual
interest rates charged on a loan. Buying a property below market value potentially permits equity to grow sooner rather than later, allowing the client to raise their next deposit over a shorter timeframe. In the current investing climate, buyers have begun to focus on the Southeast Queensland corridor of the Gold Coast and certain parts of Brisbane. In these areas, it is possible to purchase a property for between $200,000 and $300,000 that boasts a 7–8% yield. Compare this with Sydney, where a much higher purchase price often results in a 3–4% rental return at best. Poor cash flow properties effectively gobble up the serviceability of a portfolio-building investor. Strong cash flow properties, on the other hand, aid the investor in servicing current and future loans.
What brokers should consider If brokers consider the types of properties and markets their clients are buying into as part of their servicing requirements, they will have a much more accurate picture of the investor’s strategy. I have always adhered to the following three principles in my investing, and I continue to
19
Nathan Birch is a property investor and co-founder of Binvested.com.au
As part of a mutually beneficial relationship, this kind of broker can not only help navigate lending requirements for their clients, but also increase their own earnings and establish a solid reputation within the investing community advise my clients to do the same. Buy properties: 1. Below market value 2. With a good upside for growth 3. That offer a good cash flow Now that lending restrictions are much tighter than when I started investing back in 2003, these three principles are more important than ever. If a client is buying properties that offer good potential for growth, have a buffer factored into the purchase price, and pay a good rental return, they have taken some very important steps to mitigate risk and get
the best return on each deal. If the broker can complement this by applying a rudimentary understanding of ‘buy and hold’ property investing, they can source the most appropriate lines of finance for their client every step of the way. The right loan structure will help their investor client release equity, refinance to improve serviceability, and enable them to continue growing their portfolio. This, in turn, allows greater potential for increasing clientele and earnings while building a solid reputation amongst investors and brokers alike.
20
TECH FOCUS DIGITAL LOANS ON THE RISE Digital loan product applications have overtaken branch applications for the first time, but how long until borrowers can complete the mortgage process online? NEW RESEARCH from the RFi Group Global Distribution Report has found that consumers are increasingly using digital channels to apply for loan products, with digital applications overtaking branch applications for the first time in the past year. The research shows that the proportion of consumers applying for a loan via digital channels increased from 23% of applications prior to 2011 to 44% in the last 12 months. However, while borrowers in Australia have an appetite for online applications, the number of lenders with a proper end-to-end online process is limited. “That inability to actually use these digital channels is holding back progress a little bit.” The fact that home loan applications are inherently more complex is slowing down progress in this area, Alan Shields, managing director of
RFi Consulting, told Australian Broker. “If we think about just really putting the physical application into an online environment, there are no more efficiencies around that. What needs to happen is we have to think more about how to pre-populate consumer information on an application form.” While banks already have plenty of data on their customers, they still provide blank application forms to potential borrowers, he said, a practice that isn’t particularly useful. Despite this slow progress, Shields said the Australian mortgage industry was starting to see more digital players such as HashChing, LoanDolphin and Uno providing either an online marketplace or brokerage-type model. The move towards digital home loan applications is inevitable, he added, with the speed
BRANCH LOAN APPLICATIONS GOING DOWNHILL
at which this happens being dependent on how well the industry facilitates and invests in it. “The fact that we’ve seen these players come in just over the past 12 months is indicative of the fact that even if the major players don’t do anything about it, there are going to be options for consumers going forward.” Consumers are already stepping towards a full digital application process by doing research and making enquiries online now, he said. “It’s only when you get to the actual application process that we start to see some of that falling away.” Shield said future digital applications would not be a threat to brokers as long as the process involved documentation and proof, and there was a need for guidance. These online platforms could also be used to expand a broker’s reach, especially if used properly, he added.
PEOPLE PREFER DIGITAL
Changing channel preferences: Loans
Percentage of consumers who used/would prefer to use digital channels in the future
For loan products, digital applications overtook branch applications for the first time in the last 12 months
70% Enquiry
60% 50%
44% 40%
40% 30%
Application
35%
20% 13%
10% 0%
46%
Pre-2011 Branch
2011/12 Call centre
2012/13 Digital
Third party
2013/14
2014/15
2015/16 Source: RFi Group
Future preference
53%
Source: RFi Group
21
COMMERCIAL LENDER RECEIVES CAPITAL BOOST European fintech SME lender Spotcap is expanding its reach in Australia through a new partnership, with brokers at the helm of its distribution strategy EUROPEAN-BASED online SME lender Spotcap has partnered with New Zealand bank Heartland to expand its Australian operations through a $20m fund injection. “We are excited to have Heartland support our local operations through this investment,” said Lachlan Heussler, managing director of Spotcap Australia and New Zealand. “It puts further focus on our region’s potential to become global leaders in the fintech space.” The lender provides unsecured credit and business loans of up to $250,000 to small and mediumsized enterprises. Instead of looking at a client’s historical financials when making credit decisions, a proprietary credit algorithm is used that examines the financial condition of the business. The investment by Heartland provides Spotcap with balance sheet funding to allow the lender to grow its loan book, Heussler told Australian Broker. “In order to do that, we’re ramping up our sales efforts. We’ve already doubled our distribution team in the last month or so, and we’ll be aggressively pursuing the vast networks of partners that we now have access to.”
RELYING ON CREDIT
$45bn
The amount of total fixed business lending in November 2016 Source: ABS
Spotcap has spent the past 12 months establishing relationships with some of the key aggregators in Australia and is now listed on the panel of several of these groups, he said. “Our sales and distribution team acquired account managers who are going out and working with those distribution channels to educate them about our product, what it is that we do, and how it can benefit their clients.” Through these efforts, Spotcap has onboarded more than 1,000 partners in the past 12 months, Heussler added, a trend that is growing rapidly. “We’ve got a highly automated process. It’s very easy for the brokers to sign up to our partner program. They get access to a dedicated partner portal which is specific to them and produces unique links which they can embed
in their own websites.” The lender will continually roll out updates to this platform, he said, to ensure that brokers and other distribution partners are looked after and have an exceptional experience. “We have invested heavily in brokers and have introduced the category as a distribution channel for us. They’re delivering a significant volume as a result. What we’re going to continue to do this year is educate that channel about the opportunities that are out there.” This includes educating brokers about how to write business loans for their small business clients, he said. In the 12 months to December 2016, Spotcap grew its Australian loan book by 450%. The lender has raised over $110m in equity and debt funding while issuing more than $90m in credit to SMEs globally.
BUSINESSES DRIVING LENDING The latest ABS trend finance data has shown that total lending flow increased by 2.3% in November 2016 thanks to strong momentum in the commercial sector. A total of $72bn in credit was written in total, with secured lending for residential construction and purchases amounting to $19.8bn (slightly down from October) and total fixed business lending up by $1.4bn, or 3.74%, to $45bn. There was also an increase of $1.2bn, or 5.26%, to $23.2bn in commercial lending other than housing investment, while investment
housing grew by 1.6% to $12.9bn. Investment housing lending now accounts for 39.5% of all housing lending flows, while lending to owner-occupiers has slowed down. The commercial lending figures are good news, according to Martin North, principal of Digital Finance Analytics; however, this growth needs to continue to have an ongoing positive effect on the economy. “We need to see ongoing growth in non-housing related business investment if economic momentum is to be sustained,” he said.
22
CONSUMER INSIGHTS
PRICED OUT OF PROPERTY The housing affordability debate is front and centre once again, following the release of a new report showing that Sydney and Melbourne are in the top 10 most unaffordable cities in the world
‘EXCLUSIVE PROFESSIONALS’ DOMINATE INVESTMENT PROPERTY OWNERSHIP Digital Finance Analytics (DFA) has conducted an analysis on Australia’s investment mortgage portfolio, revealing some big variations from the owner-occupied borrowing segment. Twenty-eight percent of mortgaged investment properties were found to be held by exclusive professionals, 15% by suburban mainstream, 14% by mature stable families, 10% by young affluent, 9% by rural borrowers and 5% by young growing families. Nineteen percent of the entire existing investment mortgage portfolio was written in 2016. Young affluent
households were found to be more active last year than any other borrower segment. The analysis also shows the average value of the mortgage for each borrower group, with exclusive professionals averaging an investment mortgage of $982,360 compared with $536,193 for young affluent, $652,812 for mature stable families and $412,924 for young growing families. DFA’s findings indicate that although most borrower segments are involved in investment property, there is an evident “skew towards more affluent groups”.
23
THE RELEASE of the 13th Annual Demographia International Housing Affordability Survey: 2017 Rating Middle-Income Housing Affordability has brought the Australian housing affordability debate back into the spotlight. The survey’s results are startling, revealing Sydney as the second most unaffordable city to live in in the world after Hong Kong, with Melbourne not far behind in fifth place. Vancouver, Canada, took out third place, while Auckland ranked fourth and Brisbane was the 11th most unaffordable city. The survey covered 406 metropolitan housing markets in nine countries, including Australia, Canada, China (Hong Kong), Ireland, Japan, New Zealand, Singapore, the UK and the USA, with five “megacities” (Tokyo-Yokohama, New York, Osaka-Kobe-Kyoto, Los Angeles and London). For a city to be deemed ‘affordable’ it needed to achieve a score of 3.0 or under in the survey, determined by Demographia’s ‘median multiple’ approach, which establishes a benchmark for housing affordability by linking median house prices to median household incomes. A city with a score of between 4.1 and 5 (suggesting houses cost 4.1–5 times the average income) was deemed to be ‘seriously unaffordable’, while a score of 5.1 and over was considered ‘severely unaffordable’. The 2017 survey’s results indicate that currently every single major housing market in Australia is severely unaffordable. Sydney received an unsettling score of 12.2 – suggesting the average house is priced at more than 12 times the average income – a figure that is 60% higher than Sydney’s score in the first survey, conducted in 2004. The overall major housing market
Median Multiple was found to be 6.6. Aside from Sydney and Melbourne, Adelaide was also labelled ‘severely unaffordable’, with a score of 6.6, and ranked 16th out of 92 major markets. Brisbane received a score of 6.2, coming in 18th, while Perth scored 6.1 and is considered the 20th least affordable major housing market. The findings also show a further 28 cities in Australia outside of the major markets to be severely unaffordable, including Tweed Head, the Gold Coast and Sunshine Coast. By contrast, there are only 13 severely unaffordable major markets in the US out of 54, seven in the UK out of 21 major markets, and two in Canada out of a possible six. Only 11 major housing markets are considered affordable, and all of them are located in the US. In the introduction of the Demographia report, the executive director of The New Zealand Initiative, Oliver Hartwich, said: “We need to tackle housing affordability urgently because the effects of unaffordable housing on society are becoming more visible by the day. Policies that raise housing costs are always likely to hit those on low incomes the hardest. Thus, in our work on different measures of poverty and inequality, we have argued that the best way to tackle both issues would be to make housing more affordable.” He added that his own housing research over the years had focused on why major Anglosphere housing markets in the US, Australia and the UK had become so expensive, while those of countries such as Germany (and, similarly, Switzerland), had not. “In a nutshell, the answer to this question has a lot to do with the way councils are funded,” he said. “In jurisdictions where local decision-
makers stand to gain from new development, they will be much more eager to make it happen. In Germany and Switzerland, council budgets largely depend on their ability to attract new residents and taxpayers. This is why both countries have traditionally had a more responsive and flexible housing supply side.” In the 2016 Demographia report, Senator Bob Day, AO, Senate of Australia, expanded on the government’s role in limited housing supply, stating that: “The distortion in the housing market … resulting from the supply-demand imbalance is enormous … and affects every other area of a country’s economy. New home owners pay a much higher percentage of their income on house payments than they should. However, the real culprit … was the refusal of … governments … to provide an adequate and affordable supply of land for new housing stock to meet demand. … the “scarcity” that drove up land prices is wholly contrived – it is a matter of political choice, not geographic reality. It is the product of restrictions imposed through planning regulation and zoning.” Following the release of the 2017 Demographia report, Prime Minister Malcolm Turnbull confirmed in a radio interview that housing supply was to blame for the affordability crisis in the capital cities. “We have not been building enough dwellings,” he told 3AW. However, he did not elaborate on how or when the problem of housing affordability would be resolved, or talk to the latest lending figures that show an increased demand for property by investors, which many suggest increases property prices further, pricing owner-occupiers out of the market.
AFFLUENT BORROWERS TAKING ON HEFTY MORTGAGES
Average value of investment property mortgage by borrower segment
Exclusive professionals
Young affluent
Mature stable families
Young growing families
$982,360
$536,193
$652,812
$412,924
24
MARKET WRAP NEW YEAR, NEW HOUSE
Chinese New Year has brought a fresh flock of Chinese buyers to the Australian property market
CHINESE NEW YEAR has brought a fresh surge of visitors to Australia, and many are intent on buying investment properties. While there has been some softening of price growth, experts agree that the large number of Asian buyers in Sydney is a positive sign for the Aussie real estate market. “2017 is looking quite promising,” David Chatterjee, director at Lucror Property, told the Domain Group. “Australia was always the second preference as a buying destination behind the US, but now, since Trump, Australia has become number one.” According to Chatterjee, the number of property enquiries is rising by about 25% each day. Not surprisingly, Sydney is very popular with Chinese investors, who are attracted by Australia’s superior lifestyle, clean food and environment, and political stability. “Australia is very appealing to the Asian market, particularly new apartments in areas in the city and around Barangaroo, and especially if the Australian dollar goes down as is forecast,” James Pratt, director of auctions for Raine & Horne and James Pratt Auctions, told Domain. “We have everything here that they like: nice weather, fresh food, good schooling and stable government.” However, Chinese investors are becoming increasingly hampered by Beijing’s stricter money exit clamps, which have reduced the amount of money leaving China for investment havens like Australia. Further complicating the situation are the higher tax rates on overseas buyers. But while these hurdles are creating delays in final buying decisions, many Chinese buyers are still able to overcome them. “I’m not sure 2017 is going to be quite as busy as last year, because it is harder to send over the money, investment is very slow, and people are taking longer to make decisions. But the big attractions are still our stable economy and the
THE PICK OF THE LITTER
SUBURBS TIPPED TO ENJOY ABOVE-AVERAGE GROWTH IN NEXT 12 MONTHS
Brisbane Gold Coast Holland Park Paddington Sunshine Coast
NT QLD WA SA Lathlain Maylands Scarborough
NSW Fitzroy Frankston Langwarrin Melbourne
VIC
Coffs Harbour Inner West Newcastle Paddington Parramatta Penrith Port Macquarie Sydney Hobart
TAS Source: NAB
regular returns,” said Monika Tu, director of Black Diamondz. Pratt, however, doesn’t see the current restrictions on lending to offshore investors affecting the market at all. “We have a lot of infrastructure set up today for Asian investors, and developers aren’t spending hundreds of millions of dollars on developments just hoping they’ll be able to sell; there’s a lot of confidence around,” he said. Several agencies around Sydney have been
busy organising tours and airport pickups, as well as booking accommodation for visitors, he added. “During Chinese New Year, some agents see no Chinese buyers and others see an abundance of them,” said Charles Pittar, chief executive of Juwai.com. “It depends on the type of product they’re selling and the location. “Generally, we find that the wealthier buyers are more likely to combine property-hunting with tourism during Chinese New Year.”
25
TOP OF THE LIST
The hottest suburbs for Chinese buyers, according to Domain
Properties close to good private schools and universities are the most desirable for Chinese buyers, as many hope to send their children to Australia to be educated. There will be strong demand for new apartments for sale off the plan, and apartments close to transportation or retail hubs will be particularly coveted.
New apartments, especially luxury apartments, in the major CBDs will be sought after by higher-end clients.
Homes on the waterfront or those with some of kind water view will be in demand as well. Feng shui practitioners favour property next to streams and rivers with gently flowing water, as this is considered auspicious.
APARTMENTS TRUMP HOUSES
Type of property bought – overall 240 220
53
53
51
49
31
30
31
32
16
17
18
19
Q4’14
Q1’15
Q2’15
Q3’15
200 180 160 140
53
51
53
32
31
29
18
Q1’16
15
51
55
32
30
18
17
15
Q2’16
Q3’16
Q4’16
120 0
Apartments
Houses
Dwelling/Land for redevelopment
Q4’15
Source: NAB
26
A BIG DEAL A COMPLEX CASE Abe Tuckett from PTR Finance Group tells Australian Broker about the deal that would become one of his biggest learning curves
THE SCENARIO I was introduced to a couple who had been directed to a debt consolidation company. This company had decided it was in the best interests of the clients to file for a costly Personal Insolvency Agreement – Part X – under the Bankruptcy Act. Because a Part X (PIA) is a form of bankruptcy, traditionally all but a few specialised lenders shy away from such applications, and because there were multiple properties involved – both residential and commercial – obtaining finance was proving to be particularly difficult. The clients had engaged the services of a broker whose finance application was declined, and meanwhile the ATO, which had agreed and signed off on the initial agreement, was running out of patience as it waited for full payment of the clients’ tax debt.
THE SOLUTION I was able to work with La Trobe Financial, which was willing to accept the properties and provide finance through its Lite Doc Residential and Lite Doc Commercial loans, accept the Part X and circumstances surrounding it and also accept the clients, one of whom had recently taken a full-time job after being selfemployed for many years. The positives were that despite being employed full time in his new position for only a matter of weeks, the
husband had been in a volunteer role for many years prior to this, and his new income, along with his wife’s consistent long-term income, were sufficient to service the refinanced and consolidated loans satisfactorily. Working closely with the underwriters and the trustee of the Part X was beneficial, as at times the discussions seemed endless, but after a lot of work we saved the clients from losing their properties and incurring any further penalties.
THE TAKEAWAY This deal is particularly memorable, thanks to its complexity. At times it appeared that the credit department was going to knock back the application, even in the last stages of finalising the formal approval, but by working with the credit department team and my BDM, Paul
Biddle, we eventually got the deal over the line. There were many aspects that I had not come across before in an application, so after this experience I am confident that in the future I would be able to speed up an approval for clients in situations like this.
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COALFACE NO SECRET FORMULA Australian Broker caught up with a high-flying Hobart broker who’s been working in finance for over 20 years are very passionate about what you do and you love it, everything else just happens automatically. I don’t do anything special; I have no business plan. I pretty much just absolutely love what I do – I love helping people. I know everything there is to know about finance and how to get people into their homes and sort out their problems, and everything just follows.” She is also always learning and makes sure to attend training courses and business functions that are on in Melbourne. “Even though I’ve been in the industry so long, if you pick up one little thing [it’s worth it].” Kerstan-Duske understands that being a broker doesn’t just mean finding deals for your clients. Brokers are also stress absorbers, literally taking the stress out of financial milestones in people’s lives. “People don’t realise, you don’t come to a mortgage broker just to get the best deals. We take the stress and do everything for you, so we’re dealing with people’s stresses on a daily basis.” These include financial stress, debt consolidation, purchasing stress, bank stress, and of course personal stress – if a client’s marriage has broken down, for example, and they need to sell a house and buy another one. For new-to-industry brokers, all these demands can be a daunting experience.
IT’S NO coincidence that the one thing all successful mortgage brokers have in common is a genuine, unbridled passion for what they do. Their enthusiasm is infectious, palpable even during a quick conversation on the phone. These brokers reaffirm the idea that success doesn’t come from merely having a desire to be successful, but also from genuinely enjoying doing the very thing you want to succeed in. In the words of Nobel Peace Prize winner Albert Schweitzer, “Success is not the key to happiness. Happiness is the key to success. If you love what you are doing, you will be successful.” This quote couldn’t be truer for Hobart broker Narelle Kerstan-Duske, who has loved her journey working in finance, which she began 24 years ago. Unsurprisingly, success has quickly followed. Recognised as one of aggregator PLAN’s top 200 brokers in Australia for the last six years straight, she has been a broker for the past 13, and founded her own brokerage, Gloss Finance, in 2007. No one thing As a broking pro with extensive experience in the Tasmanian market, Kerstan-Duske doesn’t need to spend hard-earned dollars on advertising. Business flows in purely from word-of-mouth referrals, and her schedule is booked out weeks in advance. Her business is booming, but without a large team of people to delegate to, it’s not an easy feat to strike the right work-life balance. So it’s a good thing she has a
“With me it’s really simple; it’s not rocket science. If you actually have an interest and are very passionate about what you do and you love it, everything else just happens automatically” system in place – one that she has down pat. Working 35 hours per week to allow for time with her eight-year-old son, Kerstan-Duske has two part-time team members in her close-knit team. Lisa Fell is a broker and Helen Dineen provides admin support while also training to be a broker. “We’re all friends and we have the best day, the best fun,” says Kerstan-Duske. “Actually, our office is a house; our offices are in the three bedrooms and the lounge room is the waiting area. We have so much fun because we love what we do and we’re very passionate about it – I love my job; every day is exciting and different. So because of that passion and I love it, I don’t feel that it is work.” Although she says there’s no one secret to running a successful brokerage, there are definitely some key elements that work in synergy to make magic in a business. She says she has passion, a great team, expert knowledge, is super organised, and has very structured processes in place. “With me it’s really simple; it’s not rocket science,” she explains. “If you actually have an interest and
“Having been in finance for 10 or 12 years before I became a broker, I had a huge understanding of lenders and products and banks,” she says, adding that newcomers to the industry would need at least two to five years to really get the hang of broking, “because everyone’s application is so different it’s a really hard job to learn”. She advises new brokers not to go into the industry alone. “Make sure you’re joining a mortgage broking business or going alongside someone else to help you for the next two years minimum.” There’s no denying Kerstan-Duske has an enormous workload, especially compared to brokers in some of the bigger states, where the average loan size is often double the average in Hobart (around $300,000). However, working hard should never become a burden, according to Kerstan-Duske. “It’s very important for me not to ever get the business to a point where I’m not enjoying it, or it’s too much. So it’s really keeping happy and loving what you’re doing and everything else follows.”
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PEOPLE CAUGHT ON CAMERA In December, Pepper Money and Pollenizer hosted a two-day microhack designed to select participants for their 12-week FREE | MONEY incubator program. The event saw 20 entrepreneurs participate, culminating in the applicants pitching their finance start-up business ideas. The final pitches were judged by Patrick Tuttle and Michael Culhane, co-CEOs of Pepper Group; Matthew Tinker, head of innovation, Pepper Group; and Tim Parsons, partner at Pollenizer.
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PEOPLE HOT SEAT
RAYMOND TEH
The principal of one of Sydney’s leading Mortgage Choice franchises on the ASIC broker remuneration review, achieving success with time management, and how he had a vision for a revolutionary taxi business long before Uber
Who or what inspired you to become a broker? I came from the custody industry as a portfolio accountant. A While this sounds like a glorious role, custody is, in practice, a servant or back office for fund managers. Accepting the reality that I was not going to get into the front line of fund management, the low cost of entry as a mortgage broker and the desire to determine my own destiny led me into the industry.
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What will be the biggest hurdles for broking this year? ASIC’s pending review of brokers’ remuneration, including A the payment of trail. The sword of Damocles is hanging over the head of anyone reading this. If ASIC’s final report runs to the tune of the recent Sedgwick interim review – which seems to espouse the benefit of banning commission payments as in the Netherlands – broker numbers will halve and it will be difficult to recruit new talent to the industry. I pray for a market-orientated report which is not socialist-inclined to be released by ASIC soon. With the uncertainty on payment structure, no small mortgage business with core income from mortgage broking has any incentive to expand or reinvest.
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What is your point of difference as a broker? The cognisance that time decays. If it takes me two hours A longer than my peers to contact a prospect, my conversion rate reduces. If it takes me a day longer to obtain formal approval over my client’s expectations, the probability of being given a referral reduces. Therefore my point of difference is managing time well, be it monitoring how time is spent, streamlining workflow or minimising work duplication.
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What has been your most memorable moment as a broker? In my first year as a mortgage consultant, I was driving my A Mitsubishi Magna back home after seeing a client. They had already obtained formal unconditional approval but wanted to reduce the total loan amount sought from $800,000 to $100,000. Fear crept into my mind with my hands cold and legs trembling. There would be insufficient funds in the bank account to pay the landlord and bills the following month!
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If you weren’t a mortgage broker, what would you be and why? Running a taxi business with a friend, focusing on taxi A rental, with car hire as a secondary income stream. This was in 2003, of course, before Uber and its uber capital came into existence. The taxi industry in those days appeared to be stagnant, with the majority of taxi companies run as family businesses without much innovation. The idea was to create a competitive advantage through an above-par working environment for taxi drivers, a procedure manual for staff and drivers, the computerisation of all record-keeping, standardised mechanical repairs, and a two-tier pricing system for repeat customers who could either choose a cab or use a hire car.
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