Australian Broker 15.06 by Key Media

APRIL 2018 ISSUE 15.06

All eyes on Tas Hobart’s boom shines light on supply shortage /16

UK and US boost overseas investment Ansarada shares findings from the first Indicators report /21

STEVE KANE NAB’s GM of broker distribution on exceeding targets and supporting brokers through industry changes /14

Boosting business How one broker helped two applicants buy their Sydney premises /22

ALSO IN THIS ISSUE … Movers and shakers The latest appointment news from across the industry /18 A big deal Melbourne masters supply woes as 144,000 new residents arrive /26 Hotseat The founder of Hero Broker talks crowdsourced funding /30

NEWS

IN THIS SECTION

Lenders CBA chief on commission debate

Associations FBAA demands apology from ABC

/04

/08

Market BIS issues caution across key economies

Regulators Big Four face ACCC competition allegations

/10

/12

www.brokernews.com.au APRIL 2O18 EDITORIAL Editor Melanie Mingas News Editor Rebecca Pike Journalist Nicola Middlemiss

DATES TO WATCH

Upcoming can’t-miss events

Production Editor Bruce Pitchers

ART & PRODUCTION Designer Martin Cosme

16 APRIL

19 APRIL

27 – 29 APRIL

Royal commission returns

Australian Property Market Update

Self-managed Superfund Expo (SMSFE)

Hosted by Blue Wealth Property, this evening networking and seminar platform will explore the key drivers of the Australian property market and explain how to use research to identify buying opportunities and growth markets.

Helping professionals compare products and services, meet like-minded individuals and get expert information. SMSFE will focus on enabling trustees to make informed decisions about their future retirement and further supporting a vibrant SMSF community.

After a headline-grabbing first round of public hearings, the commission’s second round commences on Monday, 16 April. To date, the commission has received over 2,800 submissions, with 70% concerning the banking industry.

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

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Financial Counselling Australia Conference

AREC 2018

Covering such topics as investing in your personal brand in the trust economy; navigating CEO appointments; Australia’s top male and female CEOs and how they made it to the top; prioritising opportunities and nurturing leadership skills.

Taking place in Hobart, the conference covers topics including the impact of bankruptcy. On day one, ABA CEO Anna Bligh is due to deliver a speech on the topic of trust, with specific reference to the royal commission.

Designed to revolutionise the way people approach business, AREC 2018 is the largest conference to take place on the Gold Coast. Over two days, it covers the defining trends across real estate, and features influential seminars, debates and presentations.

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Private Business Tax Retreat

Health Insurance Summit

Organised by the Tax Institute, the retreat takes place at the Palazzo Versace on the Gold Coast. This event is designed to deliver up-to-date thinking on many of the private client advisers’ most common tools and to define emerging trends.

Learn how to diversify at this Informa Network event. Taking place at Rydges World Square, the summit covers areas such as technology challenges facing the industry, policy, operational issues and other topics related to health insurance.

MPA Broker Business Exchange 2018

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Taking the most successful elements of the High-performance Business Summit and introducing additional streams of content, the inaugural Broker Business Exchange will welcome hundreds of brokers looking to grow and diversify their business in 2018 and beyond to this high-level, one-day event at The Westin 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.

NEWS

LENDERS ALT LENDER BANKS $1BN RMBS

Source: CoreLogic, ABS, RBA, UBS

If tighter lending standards see home lending fall, then house prices will likely follow

% y/y

PEPPER

SMBS SHUN BANKS FOR BROKERS businesses increasingly rely on mortgage brokers during tough times due to a lack of support from their banks, according Auswise Finance MD, Paul Boyd-Skinner. Warning many would collapse were it not for brokers, Boyd-Skinner said he had clients faced with selling the family home and breaking up their business due to a dearth of finance options. “Sometimes we need to think outside of the banking arena and segregate facilities to other non-bank specialist providers,” he said.

Stephen Moore CEO, Choice

www.brokernews.com.au

-3

-9

-6

-18

-9

SMALL

“The addition of Firstmac to Choice’s lending panel will further strengthen the wide range of lending solutions already available via our network.”

RBA rate cut cycles

Dwelling prices y/y (LHS)*

*CoreLogic national dwelling prices

Dwelling prices m/m (LHS)*

Home loans (RHS, advanced 5 months)**

**Total home loans excluding refinancing

CBA CHIEF WEIGHS IN ON COMMISSION DEBATE Rowena Orr QC presents confidential letter from outgoing CEO to independent reviewer Stephen Sedgwick, confirming CBA’s awareness of customer impact senior manager of the Commonwealth Bank (CBA) has admitted that upfront and trailing commissions for mortgage brokers can lead to poor customer outcomes. During his 15 March testimony before the royal commission, executive general manager of home buying Daniel Huggins said the commission structure is linked to the size of the loan. The longer a loan takes to pay off, the larger the trailing commission will be. “That can lead to a conflict – well, there is a conflict between – between the customer, you know, and the broker,” he added. Huggins confirmed to Orr that brokers can maximise their income by getting the largest possible loan A

approved to extend over the longest period of time for the customer to repay. The bank knew about this as early as February 2017, according to a confidential letter by CBA’s outgoing CEO Ian Narev to Stephen Sedgwick, who was at the time the independent reviewer for the Retail Banking Remuneration Review. Orr presented the confidential letter during the hearing. “We agree with the reviewer’s observations that while brokers provide a service that many potential mortgagees value, the use of loan size linked with upfront and trailing commissions for third parties can potentially lead to poor customer outcomes,”

% y/y (3-month average)

Group has banked a record securitisation following significant efforts to broaden its investor base. Pepper Group priced its first $1bn RMBS issue after Pepper Residential Securities Trust No. 20 attracted an over-subscription in excess of $2bn. “This is a real milestone for everyone at Pepper. This transaction is a strong endorsement of Pepper’s business, loan quality and expertise as a lender to the many customers who are underserved by the banks,” said CEO Mario Rehayem.

INFOGRAPHIC

-27

Narev said in the letter. “We would support elevated controls and measures on incentives related to mortgages that are consistent with their importance and the nature of the guidance that is provided,” Narev added. These initiatives include delinking incentives from the value of the loan across the industry and the potential extension of regulations, such as future and financial advice to mortgages in retail banking. Another CBA submission attached to Narev’s letter said that broker loans are reliably associated with higher leverage compared to those applied through proprietary channels. “Even for customers with an identical estimate of ex ante risk, loans through the broker channel have higher leverage … and loans written through the broker channel have higher incidents of interest-only repayments,” it added. For more on this story turn to page 25.

NEWS

LENDERS

SUNCORP ROLLS OUT NEW INTEREST RATE 28 March, non-major bank Suncorp increased variable owner occupier P&I rates by 0.05% pa, Variable Investor P&I by 0.08% pa, and Variable Interest Only rates by 0.12 pa. Suncorp’s Variable Small Business rates increased by 0.15% pa and Access Equity (Line of Credit) rates increased by 0.25% pa. The bank’s CEO David Carter said the hike was based on higher costs of funding, as well as meeting the costs associated with regulatory change. FROM

ANZ REVIEW TRIGGERS RETAIL LOAN SUSPENSION ANZ suspends suite of retail banking loans ahead of internal review of processes, with execs pinning the move on growing tech overheads announced last month that it

ANZ will suspend providing new

secured asset finance loans for retail customers in Australia, while the bank undertakes a “detailed review of its business”. The announcement was made ahead of ANZ’s appearance at the royal commission during the second week of hearings. The move comes in response to what ANZ describes as higher technology costs, prompting the major bank to increase the need to “effectively compete” in the secured consumer asset finance market, according to ANZ managing director retail distribution Catriona Noble. While customers looking for motor vehicles, boat and caravan loans will be unable to borrow from

the bank after 30 April this year, personal loan customers will be unaffected by the suspension, as will existing retail customers, during the five-month review. ANZ has previous disclosed that it added 250,000 new retail banking customers in Australia and New Zealand in the last financial year. Noble said, “Given the increased technology costs required to effectively compete in the secured consumer asset finance market, we have decided to suspend all new loans while we conduct a detailed review of the business.” “Our secured consumer asset finance product represents less than 1% of revenue within our broader Australian business, so we need to assess if it is better for our customers,

shareholders and employees if we focus our investment on areas of our business that are core to what we do,” said Noble in a statement issued in March. The bank will continue to service existing current consumer asset finance customers and will also provide customers with access to personal loans during the suspension. ANZ said its asset finance product for commercial customers is not impacted by this announcement. “Providing asset finance solutions for commercial customers remains a core business for ANZ, and we will also continue to service existing retail customers for the duration of their loans,” Noble said. The suspension begins on 30 April and ANZ expects to complete its review by 30 September this year. In March, ANZ was named the fourth best corporate bank in Asia for the sixth consecutive year, and achieved first place for overall quality in relationships, in Greenwich Associates’ large corporate banking study of 700 companies.

Big Four banks have instituted a litany of changes to their small business loan contracts in compliance with the unfair contract terms law, according to ASIC. Regulators have found the banks doing too little to bring their small business loan contracts into compliance with key provisions under the Australian Consumer Law. They committed to change in August. Deputy chair Peter Kell said, “The report provides further guidance to help banks and other lenders ensure that their small business loans are fair, and do not breach the rules prohibiting unfair contract terms.” THE

INFOGRAPHIC Source: Allure Media

Annual share of total sales in excess of $1m, combined capital cities 25% Houses

20% Units

15% 10% 5% 0% Dec 1997

SMALL BUSINESS LOAN CHANGES IMPLEMENTED

www.brokernews.com.au

Dec 2002

Dec ’07

Dec ’12

Dec ’17

NEWS

A S S O C I AT I O N S CAFBA LAUNCHES NEW CERTIFICATION Commercial & Asset Finance Brokers Association (CAFBA) has launched the Certificate IV in Financial Services: Commercial and Equipment Finance. The first dedicated curriculum for new entrants, the course comprises four modules covering the basics of commercial and equipment finance, including products used, tax treatments, regulation, marketing, pricing and credit. CAFBA says the lack of specific training material for commercial finance is an inhibitor for new entrants to the profession. THE

MFAA SLAMS “HIGHLY INAPPROPRIATE” MODEL MFAA has published its submission to the Productivity Commission this week, with the organisation taking clear umbrage at fee-for-service payment models. “The suggestion that mortgage brokers could be paid directly by the consumer via a fee-for-service model, in contrast with the commission model currently used that involves payment from lenders, does not fit with current regulatory thinking and remains highly inappropriate for the broker industry,” reads the association’s submission. THE

“Successful fintech players, either independently or in partnership with others, will need to deliver improved customer, cost, growth or regulatory outcomes.” Ian Pollari Fintech expert and KPMG partner

FBAA DEMANDS APOLOGY FROM ABC Association says network’s chief economic reporter “misrepresented” broker qualifications during segment aired in March edition of Matter of Fact Finance Brokers Association of Australia (FBAA) has accused the ABC and its chief economic reporter, Emma Alberici, of “misrepresenting the qualifications of finance brokers”, amid the royal commission’s inquiry into alleged misconduct in the banking sector. During an episode of the network’s Matter of Fact show with Stan Grant, the FBAA said Alberici confused National Australia Bank’s “introducer program” with the entry standards of professional mortgage brokers. “Anyone can set themselves up as a mortgage broker, even a gym owner,” Alberici said. The introducer scheme paid third-party professionals for THE

referring their customers to the bank for loans. Unlike brokers, they are not required to be licensed or regulated by the National Credit Act. According to FBAA director Peter White, finance brokers work within a very strict regulatory environment, as they must have at least a Cert IV in Financial Services (Finance and Mortgage Broking). They are also mentored for two years and continue training after that. “Entry into this industry could be described in a way like a traineeship, where brokers receive a combination of theory and formal training, plus guidance and on-the-job training, as well as ongoing development for their

entire career,” White said. “As those within the industry are aware, training never stops and, in fact, is mandatory for brokers to meet their regulatory and association requirements.” White has called on the ABC to publicly correct the record and apologise. He said it is unprofessional for any journalist to imply that a few people who do the wrong thing represent the entire broking sector, or that the industry is not professional and skilled. “The media must be careful how they report from the commission, and the FBAA will not stand by and allow finance brokers to be misrepresented,” he said. Prime Minister Malcolm Turnbull announced the royal commission in November last year, to investigate how financial institutions have dealt with misconduct in the past and whether this exposes inherent cultural and governance issues.

VV$40,614,829,064 FIRST HOME BUYERS IN AUSTRALIA Source: ABS Housing Finance

12,000

340 330

10,000

320

8,000

310 300

6,000

290

4,000

280 270

2,000

260

Jan 2011

250

Jul ’11

Jan ’12

Jul ’12

Jan ’13

Jul ’13

Jan ’14

First home buyers – dwellings financed (no.)

www.brokernews.com.au

Jul ’14

Jan ’15

Jul ’15

Jan ’16

FHB average loan size ($000)

Jul ’16

Jan ’17

Jul ’17

Jan ’18

NEWS

MARKET HOME LOAN APPROVALS DOWN IN JAN number of Australian home-loan approvals fell a seasonally adjusted 1.1% in January from December, according to ABS statistics. Economists had expected a 0.2% fall over the month. The value of loans for investment housing rose by 1.1% from December. Finance approvals to build new houses rose by 3.1% on-month in January. Approvals to buy newly built dwellings fell by 4.7%, while lending for the purchase of established homes fell by 1.5% in the month. THE

ANZ BOSS SAYS MONEY “MORE EXPENSIVE” financial trends will push funding costs for Australian lenders to their biggest monthly rise since 2010, the year the Reserve Bank of Australia last raised its policy rate. Key for market strategists is whether the increase proves to be more than just a quarter-end phenomenon or starts to accelerate – forcing banks to decide whether to raise the cost of credit. “Money is more expensive,” said Martin Whetton, senior rates strategist at ANZ Banking Group, adding banks “can either absorb it or pass it on”. GLOBAL

BIS ISSUES CAUTION ACROSS KEY ECONOMIES As the world emerges from a decade of recession and muted growth, Australia posts amber results in three out of four domestic banking stress factors may have weathered the global financial crisis of the last decade, but there are signs it is heading towards a banking crisis of its own, according to a recent report by the Bank for International Settlements (BIS). BIS looked at four early warning indicators for stress in different countries’ domestic banking systems. These were: debt service ratio (DSR), household DSR, cross-border claims to GDP, and credit-to-GDP gap. Employing a traffic signal system, Australia posted amber results in the first three criteria. That colour means an indicator falls within the lower threshold required to predict at least 90% of the past crises the BIS surveyed. AUSTRALIA

Nevertheless, other advanced economies fared worse. Canada and Hong Kong flashed red in their respective credit-to-GDP gap indicators, indicating they have breached the threshold for predicting at least two-thirds of the crises. BIS said these signals are reinforced by property price developments. Canada also flashed red in debt DSR, and flashed amber in the last two other indicators. “Financial markets and the global economy are sailing in uncharted waters and, after an unusually long period of unusually low interest rates and accommodating monetary conditions, it would be unrealistic to expect no further market ructions,” said Claudio Borio, the head of BIS’ monetary

and economic department. In a statement, he called on central banks to strike a balance between normalising policy and avoiding unnecessarily derailing economic expansion. “Treading the path will call for a great deal of skill, judgment and, yes, also a measure of good fortune. But policymakers need not fear volatility as such. Along the normalisation path, some volatility can be their friend,” he added. Also in March, BIS said in a report that “recent volatility in global financial markets should not deter top central banks from lifting interest rates or ending years of unprecedented stimulus”. It also maintained the sweep of higher interest rates that originated in the US earlier this year should continue. The Swiss bank BIS is an international financial organisation owned by 60 member central banks – including the Reserve Bank of Australia. Its members make up about 95% of world GDP.

“History shows that house prices eventually grow fastest in the markets which have seen low growth in the recent past.” Shane Garrett Senior economist, HIA

INFOGRAPHIC Source: CoreLogic, ABS

Total value of housing finance commitments, national $25 Owner occupier

$20

$bn

Investor

$15 $10 $5 $0

Jan 1998

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Jan 2002

Jan ’06

Jan ’10

Jan ’14

Jan ’18

TECHNOLOGY UPDATE

HERITAGE BANK’S EPIC DIGITAL SOLUTIONS EVOLUTION Australia’s largest customerowned bank has embarked on the next phase of its mammoth transformational technology expansion and upgrade objective. With its focus squarely on providing best-in-class solutions for the national broker network, Heritage Bank is ploughing ahead with its digital revamp, which is positioning it for continued efficiencies and growth. “The strategy set by Heritage CEO Peter Lock across the whole bank, not just the broker channel, is to change from a physical bank with a digital presence to a digital bank with a physical presence,” says their head of broker distribution, Michael Trencher. “That’s now both our motto and our mantra,” he adds. “Our most recent move to further digital solutions has been to switch our workflow processing to NextGen.Net’s ApplyOnline in order to handle our increased loan volume.” Heritage’s digitisation strategy corresponds with its commitment to the third-party channel, which was cranked up and has been set on full throttle since Trencher was appointed in February 2016.

logical step and graduated from their “rather clunky manual proprietary system” to ApplyOnline as their workflow processor. “Across all sections of the bank, digital solutions are being explored and implemented. We’ve revitalised the brand; we’ve got new sponsorship money out there so people know who we are; the loans are coming through thick and fast, so the obvious next part of the equation was to start working on further technology wins. That led us to NextGen.Net, whom we’ve had a strong partnership with for years,” Trencher says. “We worked closely with NextGen.Net to establish ApplyOnline as our workflow processor. It meant retaining ApplyOnline for electronic loan lodgement, then opening the portal to make it function as an origination platform. Loans now stay with NextGen.Net all the way through to formal approval. It’s a perfect fit. NextGen.Net sales director Tony Carn pays tribute to Heritage Bank for its forward thinking, pointing out that in reality what is currently still viewed by some lenders as two separate systems – loan application submission and

“The further we progress with digitisation, the better line of sight we’ll achieve on customers and the more access we’ll have to data” “We only have 60 branches, so we rely on the broker channel for a presence and becoming more digitally driven enhances our offering to brokers and their customers,” Trencher says. Heritage has been utilising ApplyOnline for electronic lodgement of loan applications for a number of years. As Trencher explains, in February this year they took the next

workflow processing – should be seen as one. “It’s a given that in the not too distant future the majority of lenders will have adopted the approach that Heritage took last month in establishing one seamless system,” Carn says. “We live in a world of rapidly growing digitisation and in order to meet customer expectations for efficiencies and

Michael Trencher, head of broker distribution Heritage Bank

positive outcomes, those two platforms should be merged.” Carn credits Heritage’s project charter with the ease it took to integrate the two systems. “A lot of work goes into building a new platform, and the project was completed on time and on budget,” he says. “What Heritage did, which was very refreshing, was adopt the right project charter, which meant deciding up front what they wanted delivered and not continually tweaking it. “Some lenders can spend literally hundreds of millions of dollars extra building in-house solutions with continual changes to the original requirements. “In the case of the ApplyOnline workflow processor, lenders buy versus build. In other words, we provide the platform and lenders configure it – as opposed to customise – to their requirements. Heritage did their

homework and understood that, and it paid off.” Going forward, Heritage is focusing on full end-to-end processing. “We plan on taking the automation beyond approval and into post-approval,” Trencher says. “The further we progress with digitisation, the better line of sight we’ll achieve on customers and the more access we’ll have to data. That means knowing what trends are emerging, understanding how we can balance the growth of the broker channel and knowing what our customers are requiring. “Once we’ve got these things in place it will, of course, mean loans get processed faster. But ultimately, it’s the data that we’ll source as a result of all this that will help us target our business, which in the end will serve everyone – customers, brokers and us.”

NEWS

R E G U L AT O R S

ASIC GETS LEADERSHIP BOOST new deputy chairperson role has been created at the Australian Securities and Investments Commission (ASIC), to strengthen ASIC’s leadership and position as a “world-class regulator”. Minister for Revenue and Financial Services Kelly O’Dwyer, said it will, “give ASIC greater flexibility to manage the breadth of ASIC’s new powers and increased responsibilities resulting from recent and upcoming law changes”. It will also bring ASIC into line with the structure of the Australian ACCC. A

BIG FOUR FACE ACCC COMPETITION ALLEGATIONS ACCC’s interim report claims banks are deliberately reluctant to “lead the market down”, instead applying opaque pricing discounts to “maintain current position” than vigorous” price competition in the residential mortgage market – especially between the Big Four banks – is proving a bane for both prospective and current borrowers, a recent government report has found. The interim report by the Australian Competition and Consumer Commission (ACCC) found pricing discounts among lenders to be “opaque” in their terms and overall costs. This is quite significant, because discounts are a major factor in the interest rates customers are liable to pay. Banks offer both advertised and discretionary discounts, but the regulator said the latter are not always transparent. The ACCC’s Residential Mortgage “LESS

ABA MEMBERS TO ADOPT NEW CONDUCT CODE new code of practice is in the pipeline with all Australian Banking Association (ABA) members mandated to sign up following ASIC approval. ABA said the code better meets community standards and industry scrutiny as Australia’s banking sector looks to improve conduct and culture. “In the past it was up to each individual bank. However this new customer-focused code will become compulsory for all ABA members with a retail presence,” ABA CEO Anna Bligh said. A

www.brokernews.com.au

Price Inquiry is monitoring the prices charged by five banks affected by the government’s major bank levy: Australia and New Zealand Bank, Commonwealth Bank of Australia, Macquarie Bank, National Australia Bank and Westpac. “We do not often see the Big Four banks vying to offer borrowers the lowest interest rates. Their pricing behaviour seems more accommodating and consistent with maintaining current positions,” ACCC chairman Rod Sims said. “We have seen various references to not wanting to lead the market down, to have rates that are mid-ranked and to maintain orderly market conduct,” he added. According to ACCC figures from June 2015 to June 2017, the average

discount across the five banks under review on variable interest rate loans was 78-139 basis points off the relevant headline interest rate. “The discounting by the big banks lacks transparency and it’s almost impossible for customers to obtain accurate interest rate comparisons without investing a great deal of time and effort. But the potential savings from these discounts are immense.” The report also found the average interest rates paid for basic loans are often higher than for standard loans at the same bank. “We think many customers who opted for basic or no frills loans thinking they are saving money would be surprised to learn they might actually be paying more,” Sims added. The report further stated, “While borrowers might assume a broker is offering them independent advice, this may not always be the case … inquiry banks have tended to gain a disproportionately high share of referrals from the mortgage broking businesses in which they have an ownership interest.”

INFOGRAPHIC Source: Economic Insights, 28 February

Proportion of loss-making sales, combined capitals vs regional markets 30% Combined capitals

Combined regional

25% 20% 15% 10% 5% 0% Dec 1997

Dec 2001

Dec ’05

Dec ’09

Dec ’13

Dec ’17

FE AT URES

SPECIAL REPORT

GIVING BACK TO BROKERS Exceeding its financial targets in 2017, NAB attributes a 15% increase in business to its broker channel. Now GM of broker distribution Steve Kane has big plans to repay the favour

NAB KEY NUMBERS 2018

NAB employs

30,000

people across more than 900 locations

Financial performance in 2017 exceeded targets

Investment in NAB Labs is set to double

$200M

will be invested in the Customer Journeys scheme

Digital PD days debuted in March to enhance broker training

www.brokernews.com.au

the words of Steve Kane, NAB general manager of broker distribution, the last financial year was “exceptional” in terms of the bank’s relationship with the broker channel. Exceeding its targets for book growth, revenue and sales, NAB recorded a near 15% increase in business. The figures are the direct result of a 2016 strategy that saw NAB open its entire portfolio to the broker channel, prompted by the realisation it was operating what Kane describes as “two separate businesses”. “We canvassed our broker and aggregator partners and decided to make available all of the NAB products and services to their customers,” he explains. In addition to the bottom line impact, it was great news for channel partners too, who could now provide a more extensive range of advice and products. “It has been a win-win for everyone. NAB Broker Distribution’s positive financial performance in 2017 was driven largely off the back of extending these products in the marketplace. We believe we saw a 10-15% increase in business because of it,” Kane discloses. New products weren’t the only change in the mix. Further extending its reach in the broker space, NAB launched its customer advisor broker (CAB) program, placing members of the broker network directly in its retail branch network. The approach was designed to meet demand from customers who prefer the in-branch experience, as well as providing contact for brokers through the branch network. Additionally, it allowed those in-branch to IN

witness the value of third-party brokers first hand. Further campaigns included How’s Business, a double-edged strategy to tap the 30% of residential loan applicants who are also small business operators. Backed with a prequalifying tool, it coaches brokers on the questions that advance customer conversations while also extending their knowledge of NAB’s credit process. Kane says, “We recognise the broker channel is expanding. Not just in terms of residential mortgages, but also in terms of

loan documents, with online verification apps par for the course. As COO, Antony Cahill pledged in his opening statement to the productivity commission that investment in NAB’s specialist tech innovation hub NAB Labs will double. Supporting the customer’s transition to digital banking – and exceeding their expectation in the process – a further $200m will be invested in the Customer Journeys program, to “completely re-engineer key customer experiences”. It’s NAB’s philosophy towards tech that sets it apart from others: rather than tailor what innovation sends its way, NAB is using its suite of new digital tools to diversify what brokers present to customers and how they present it. Following on from the Helping You Accelerate scheme in 2017, focus will fall on advancing the application process for residential and small business lending. A digital

“We know that SMEs are the engine room of the marketplace and it’s really important we provide brokers the opportunity to service all those needs” small business lending, commercial lending and equipment finance.” In his eureka moment, Kane has placed customer experience and diversification at the heart of NAB’s third-party strategy, crucially paving the way for the bank to take the lead in several key areas. New horizons As part of its ongoing work to embrace digitisation – as well as collaborate with new fintech players – this year NAB will make its largest investment in broker partner technology to date. Among the developments the bank will become the first major to implement is the electronic submission of all upfront

lodgement process is scheduled for release later this year, allowing brokers to use the same technology for both small business and residential loan applications. Further, this month NAB will introduce a new small business unsecured lending facility to its broker channel, called QuickBiz, which gathers information from multiple sources for the broker to present to small business clients looking for unsecured lending. “That’s really a technological edge. We are taking a fintech type approach to provide those services to the broker channel,” Kane comments. Taking the strategy beyond its

In partnership with

Steve Kane, NAB general manager of broker distribution

own business, in recent months the bank has partnered with RealEstate. com.au to combine property search and acquisition with finance for the first time – a move Kane calls “an interesting innovation”. In February, NAB was named as one of several backers of co-living start-up Kohab. Supporting the digitisation of the mortgage and purchase process, NAB is also preparing for advances in related areas, such as land records. “It’s about preparing, not just the broker and credit process but also the settlement and fulfilment beyond that in a digital world, and making sure we keep well aware of that,” Kane says. Technology is also being

harnessed to enhance professional development. In March, NAB hosted its inaugural Digital PD day, streamed to brokers across Australia and covering such topics as business lending, market trends and using technology for competitive marketing edge. Attendees can receive up to 3.25 CPD points for the FBAA and MFAA. However, while there are big developments on the horizon, Kane says a strong call remains for the human touch. Tomorrow’s broker That human touch has found itself in the firing line recently, with further scrutiny still to come.

Executives from NAB have taken a front-seat role in the combined industry forum and in implementing its recommendations. Kane sees an opportunity for brokers to step up and remind Australia of their true value. As he says, “When you have 55% plus of business coming through brokers, it’s very important that there is a strong regulatory framework in place.” However, watchful eyes provide more reasons to shine, and he adds, “We think there is opportunity for brokers to stand up, increase the professionalism they show, and really be trusted advisors to their – and our – customers.”

Kane has a clear vision for how the role of the broker will evolve under new market conditions and commercial lending plays a key part. As he says, the priority is to retain focus on the customer and build on that relationship to service further requirements. Focusing on supporting brokers through the changes, an army of BDMs are on hand to help, and sector specialists in areas such as agriculture and health are available for further assistance. “We know that SMEs are the engine room of the marketplace and it’s really important we provide brokers the opportunity to service all those needs. We believe and support brokers and the broker channel and we think they are able to support a wide range of customers, not just customers seeking residential loans.” Whether brokers achieve that with help from an app-based question bank or draw on other sources is up to them, but the future will be diversified and the next generation of brokers will enter a vastly different industry than their predecessors. Eyeing an opportunity for growth through the arrival of new entrants, NAB is supporting next-generation talent to enter the broking space on a structure of their choice, and Kane says the only criteria is that new brokers are qualified, responsible and compliant. He adds, “We believe the lifeblood of any industry is bolstered by bringing new people in.” Offering three pieces of advice for the next generation, he concludes: “In order to deliver the best possible outcomes for customers, brokers need to work closely with their lending and aggregator partners, always keep excellent documentation and remember it isn’t about overnight success. It requires time to build relationships with customers, and brokers must continue to be absolutely aware of their responsibilities under the NCCP and be compliant with all legislation.” AB www.brokernews.com.au

FE AT URES

NE WS ANALYSIS

ALL EYES ON TAS

As the good times end in Sydney and Melbourne, those in search of better deals are heading south. But as Tasmania is starting to discover, more people means more demand on a limited supply

FAST FACTS

Tasmania’s population in June 2018 is projected to be

520,630

Tasmania has a target to become home to

650,000

residents by 2050

From left: Huw Bough, GM of broker distribution MyState Bank; Paul Ranson, CEO Bank of us

are winners and losers in every market cycle, but as homeowners in Sydney and Melbourne brace for a projected 7% drop in property values to 2019, one state is actively poaching those who are ready to put their money where their mouth is when it comes to leaving. THERE

Unemployment is currently

The average house price in Hobart is

$443,521

Hobart property price growth is up

17%

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While the RBA has officially called time on the boom in Sydney and Melbourne, in Hobart property price growth is up 17% in the past year, with some reports likening buyers to “piranhas in a pond”. As Australian Broker has reported, vacancy rates are the lowest in 15 years and inner-city

“Demand is so extreme that some families are being left with no option but to camp on the Hobart Showgrounds” Huw Bough, GM broker distribution MyState Bank Earlier this year the Tasmanian Liberal government launched its You in a Year campaign. Highlighting favourable house prices, employment opportunities and low commute times, it prompted those in search of a primary, secondary or an investment property to look beyond the mainland.

growth levels are in double digits. “Tasmania’s capital, Hobart, currently has the strongest property price growth of any Australian capital. House prices now average $443,521, well below those in Sydney and Melbourne of $1.18m and $903,859,” says Cameron Kusher, research analyst at CoreLogic,

which confirmed Hobart’s title of Australia’s top performing capital city in March. Commenting on the figures he calls Hobart, “a standout performer” with “the strongest market conditions over the past year” in terms of value growth. “In fact, the five suburbs with the shortest days on market for houses in Hobart have a shorter time on market than the fastest selling suburbs in each other capital city,” Kusher adds. Tasmania is no stranger to heightened market activity, and the Real Estate Institute of Tasmania (REIT) has reported strong performance for a number of years. House sales increased 20.5% from 2014-15, with 261 investment purchases over the year, while 19 sales were valued at $1m or more. REIT reported a further surge in 2016 and this time values started to increase, too. By March 2017, the island was enjoying its highest volume of sales since 2004. Behind the numbers The reasons behind Tasmania’s growth are varied and can be attributed to trends on both the Apple Isle and mainland. At home, in 2017, unemployment dropped to its lowest rate in six years and remained at 5.9% for more than eight months. Additionally, demand from first home buyers remains strong, comprising 14.5% of the market, according to the latest figures from CoreLogic. Bank of us CEO, Paul Ranson flags tourism, residential investment, interstate relocations and Airbnb as all having had an impact on current performance and demand dynamics. However, the demand for primary and secondary homes is down to two specific factors: population growth

and relocating baby boomers. He says, “While there is only anecdotal evidence, we are aware that many professionals are choosing to take advantage of the great lifestyle opportunities for their family in Tasmania and increasingly we see them commuting when required to work interstate.” However, while these trends have only recently emerged, they are not new. As Ranson says, Tasmania’s property market is simply playing through its cycle. Predicting the lucky run will continue for up to 18 months, he adds, “What we are seeing is very consistent with the dynamics of the overall Tasmanian market, which has been very stable with modest capital growth spikes every 12 to 15 years, followed by relatively flat periods of growth.” While investors and owners enjoy the spike in demand, others are finding fewer reasons to enjoy the favourable market prices. “House and rental demand is so

extreme that some families are being left with no option but to camp on the Hobart Showgrounds, with Hobart vacancy rates at 0.5% in February,” says Huw Bough, GM of broker distribution at MyState Bank. He reports a 21% increase in Tasmanian house sales to interstate buyers, almost half of which were

record highs, demand is far greater than supply, especially in the rental market, where the lack of supply is leaving some low-income families struggling to find accommodation.” Directed development Tasmania’s growth is no accident. The state currently ranks first in

“Many professionals are choosing to take advantage of the great lifestyle opportunities for their family in Tasmania” Paul Ranson, CEO Bank of us purchased as investments. Looking ahead to the impact a surge in investment buyers could create on the market, Bough adds, “We are already seeing these factors have an effect on the Tasmanian housing market. While house price growth and sales volumes have seen

Australia for relative annual population growth rate – at 0.64%, up from 0.55% a decade ago – and is actively courting new residents: it has set itself a target of 650,000 residents by 2050. However, to thrive Tasmania must first meet the urgent housing

MEDIAN HOUSE PRICES – DECEMBER QUARTER 2017 Most Expensive

Source: REIT of Tasmania

Most Affordable

Highest Turnover

Hobart City

$903,000

Zeehan

$40,000

Devonport

Sandy Bay

$883,000

Rosebery

$67,000

Kingston

West Hobart

$806,944

Queenstown

$78,750

Glenorchy

North Hobart

$797,500

Rocherlea

$149,000

Sandy Bay

Mount Stuart

$682,000

George Town

$151,000

Howrah

Rosny

$660,000

Gagebrook

$162,450

Newnham

Taroona

$650,000

Mayfield

$165,500

Claremont

Tranmere

$650,000

Ravenswood

$170,000

Riverside

Mount Nelson

$629,000

Acton

$171,500

Brighton

South Hobart

$616,000

East Devonport

$180,000

Moonah

demands of its current residents. In the December quarter, housing affordability declined across the board and, proving growth is a double-edged sword, Tasmania recorded the biggest decline. “There is an emerging problem in the availability of affordable housing in the greater Hobart market. The state government is working with a number of parties to increase the supply of affordable housing, but this is likely to remain an issue in the short to medium term,” Ranson comments. In the early 2010s, the annual housing pipeline averaged 3,500 to 4,000 units, however that declined to 2,000 units in 2014. Offering some hope, in the last 12 months dwelling approvals have continually increased, and a recent government audit identified 239ha of land that can be used for residential development. REIT president Tony Collidge believes “the climate is right to attract increased development”, but red tape must first be removed. At the government’s emergency housing summit on 15 March, Collidge and Housing Industry Association executive director Rick Sassin called for planning to be taken away from councils to promote greater flexibility and multiple-use zones. Yet, with CoreLogic reporting that Tasmanian construction projects take an average of three months longer than those in other states, the benefits of any proposal will take time to cascade. As Tasmania tackles its challenges, investors and developers have reason to be cautious, but the state must act while its audience is captive. After all, you can’t build a sustainable housing market capable of long-term growth potential without building the houses themselves. AB www.brokernews.com.au

PEOPLE

MOVERS AND SHAKERS

FINDEX NAMES NEW PARTNER AND MANAGER Findex and Crowe Horwath confirm the appointments of former KPMG associate director Amelia Hartney, and New Zealand MOFAT diplomat Sam Lawrence

ANZ APPOINTS DIGITAL BANKING HEAD Carnegie has been named ANZ group executive digital banking, reporting directly to CEO Shayne Elliott. In addition to developing digital solutions for the bank’s eight million retail, commercial and institutional customers, as well as staff, Carnegie will also champion a “group-wide innovation culture at ANZ based on developing and attracting servicefocused, technology-literate, innovative and experimental people and teams”, according to Elliott. MAILE

Sam Lawrence and Amelia Hartney

Horwath has appointed Amelia Hartney to the position of associate partner, performance consulting, and Sam Lawrence to senior manager global trade and customs. Commenting on the appointments, Peter Gardiner, executive managing partner, specialist services, said, “Our global partner firms continue to source access to leading clients across our network of 110 offices in Australia and New Zealand. Therefore it is imperative that we continue to invest in our people. Talent such as Amelia and Sam are with us to ensure that our clients maximise their commercial effectiveness.” Joining after a decade at KPMG, Hartney will be working to build on the company’s consultancy offering, specifically acting as a mentor and leadership coach to Crowe Horwath’s extensive regional small business clients nationally. FINDEX/CROWE

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Hartney will also be working closely with businesses across Australia, helping them to gain government support via federal and state-based funding programs. Hartney and her team will be providing government relations consulting, specifically the Victorian Boost Your Business and Defence Industry Supply Chain Program initiatives and federal R&D Tax Incentive program. During her time as a management consultant for KPMG in Melbourne, she worked across several areas of the firm, most recently as program leader for Access Asia, a specialist group providing knowledge helping Australian companies plan and execute international operational strategies. Hartney said, “I love helping to develop and strengthen leadership teams and this role allows me to do what I am passionate about — helping people and businesses

reach their full potential.” Lawrence, an international agricultural trade specialist, is a former diplomat with the New Zealand Ministry of Foreign Affairs and Trade and has extensive experience negotiating Australia’s free-trade agreements. Lawrence joins Findex in a dual capacity, working between performance consulting and tax advisory, focused on global trade. He will work closely with Hartney and Richard Nutt, associate partner global trade and customs, to assist in designing and building a suite of trade-focused services for organisations, large and small. Lawrence commented, “The opportunities to increase Australian businesses’ share of global trade are truly exciting. I’m excited to use my experience to help our clients develop their ties with global trading networks and, ultimately, increase their exporting capabilities.” AB

DAMIAN PERCY HEADS STRATEGIC PARTNERSHIPS and Adelaide Bank has appointed industry veteran Damian Percy to a newly created leadership role. Percy – who joined the bank in 1999 – will become the company’s first head of strategic partnerships within the partner connection division. Executive Bruce Speirs said the appointment would see Percy working closely with the third-party banking, leveraged and portfolio funding business, so the organisation can continue to build on its “strong partnering culture” while broadening existing partner relationships. BENDIGO

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FE AT URES

OPINION

WE NEED TO TALK Ongoing investigations, reports and commissions have seen brokers come under fire over recent weeks. However, as Ray Hair, executive director of The Local Loan Company says, brokers are not the problem but the key to a solution

brokers are feeling very aggrieved and misunderstood right now. First ASIC, then Sedgwick and now, a royal commission and the Productivity Commission (PC) are investigating our industry. In the case of the royal commission, the investigations are far broader than just third party distribution of home loans, but right now we have been the topic of discussion, innuendo and accusation. And the inevitable media spotlight, sensational headlines and commentary. The hot topic over recent weeks has been trail commissions. Why are they paid? Do they promote or hinder competition? And, do the banks measure and monitor the outcomes they allegedly sought? I commenced in mortgage broking in 2001, and the questions of should trail commission be paid and why is it paid have always been the subject of debate. The agreements between banks and aggregators did not address why trail commission was payable, nor did they stipulate any contractual obligations for aggregator and broker to meet. Most agreements did, however, contain some form of anti-churn clause, reflecting the economic imperative for loans to stay on a bank’s books for long enough for the bank to recoup origination costs (commission, valuation fees, legal fees, etc). And, of course, clawback provisions applied if loans were repaid or refinanced within stipulated periods (usually 12-24 months). The problem with the above is, we as an industry did ourselves no favours. There has been a lack of open discussion and reporting that good customer service requires a broker to

maintain a relationship with their clients, to review their debt and provide advice (another term we have skirted around for years) and to ensure that their debt still meets their current and future objectives. We didn’t need NCCP and responsible lending to tell us or require such. In fact, our industry’s leading brokers (and by that I do not mean necessarily those who have settled the most) have provided exactly the levels and type of customer service I’m talking about. It is no surprise that ASIC has asked why there is not more transparency and

MORTGAGE

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brokers, for fear of losing market share. Surely all a bank needs to do to compensate for a potential fall in market share is lower its interest rates and stand back. It sounds to me that the fear was a loss of margin not share! The PC’s unfortunate suggestion that perhaps trail commission should be paid to borrowers reflects a misunderstanding of the fact that borrowers get the same pricing from their bank whether introduced by a broker or not. In fact, many customers have only benefited from reduced rates because they used a broker: apathetic and loyal customers often pay a higher price. There is also no acknowledgement of the otherwise unpaid work brokers do for their clients: seeking rate reductions, fixing interest rates, addressing issues with account set-up, repayments, etc. Does the PC really suggest that broker clients should effectively get a lower interest rate (payment of trail) than non-broker introduced borrowers? And are they naive enough to believe the banks wouldn’t just absorb this into their margins over time? If the PC’s objective is to promote competition, they need to be working to find ways to allow new players into the market and promoting the smaller lenders while protecting consumers. We have actually come a long way (no exit fees, credit reporting) and, yes, there are other improvements to be made.

“There is also no acknowledgement of the otherwise unpaid work brokers do for their clients: seeking rate reductions, fixing interest rates”

Ray Hair Executive director of The Local Loan Company

reporting of broker, aggregator and lender alignment and outcomes around looking after borrowers. As an industry we – lenders, aggregators, industry media and brokers – have been far too focused on the next deal and/or who settled the most. We will therefore see increased scrutiny, measurement and monitoring of consumer outcomes at the lender, aggregator and broker level. As an industry, we need to invest in measuring and reporting relevant and timely data. I find it interesting, if not amusing, that the royal commission might accept that a bank does not have the competitive power or will to unilaterally change its commission offering to

Brokers have played a significant part in assisting borrowers to benefit from historically low interest rates and find solutions no longer available through the banks due to regulator intervention. Brokers are part of the solution and we all need to have a say. There will be change, as there has been in the past. Our industry provides an important and valuable service. The Combined Industry Forum, aggregators, industry bodies and media need to continue to represent and fight for balanced outcomes, protecting consumers and promoting competition. Mortgage and finance brokers are not the problem. However, we do need to be part of the solution. AB

IN THE NE WS

UK AND US BOOST INBOUND INVESTMENT

2017 saw a steep increase in Australian property deals originating in the UK and US. Discussing key findings from the data, Ansarada CEO Sam Riley shares the stories behind the numbers with Australian Broker Ansarada’s virtual data rooms over the past two years, and offers new insight across 11 industries under the Global Industry Classification Standard and 10 different transaction types. While the first report demonstrated a steep rise in new deal

hub for technological innovation and knowledge. “The growth of interest coming from the UK and the US shows no signs of slowing, so 2018 could see further investment across Australia from these areas,” Riley adds. In addition, demand from other

“The growth of interest coming from the UK and the US shows no signs of slowing” Sam Riley, CEO Ansarada

Sam Riley, CEO Ansarada

the last quarter, the biggest movements in property were a result of new deal commencements across the sector, increasing by 20% year on year. Industrial real estate sectors, in particular, demonstrated strong growth, with Sydney and Melbourne taking the bulk of deals and pushing land value averages upwards. Growing developer confidence has driven industrial supply in Sydney especially. The growth in e-commerce is driving demand for warehouses and logistics facilities, boosting the transaction volumes and values for commercial real estate in this sector, also. However, according to the first Indicators report, it is overseas interest that drives the market at this time. Indicators was created to provide comparative real-time insight on market transactions. By trawling data from more than 20,000 recently commenced or closed deals, Indicators demonstrates new patterns and trends and reports them as they emerge. IN

Indicators is published by Ansarada, and its CEO, Sam Riley, says the report is part of an “ongoing commitment to helping businesses and their advisors prepare for material events”. “For Ansarada, Indicators is simply the next step to unlocking more value from the wealth of data found in our deal rooms for the benefit of dealmakers everywhere,” he adds. The report is based on aggregated and anonymised data from deals in

commencements and growth in commercial real estate, it also showed a steep growth in interest from investors in the UK and US. These markets represented 12% and 18% of offshore deals respectively last year, but the YoY figures confirm a stronger trend. “Interest from the UK increased 150% between 2016-17, with post-Brexit uncertainty driving dealmakers to look for alternate investment opportunities in Australia,” Riley says. The US is also gaining momentum, with an increase of 84% over the same period. Many claim the draw remains lifestyle and investment related – an attraction to beauty over brains, rather than Australia’s reputation as a

APAC countries remained strong, comprising a 56% share of total overseas investment last year. The news comes as Australia’s strongest overseas market, China, faces new capital controls, which could threaten property transaction rates in Australia, particularly new housing stock. Figures from Credit Suisse for the period January to June 2017, show Chinese buyers represented almost 25% of all new build buyers in Sydney and 15% in Melbourne. New regulations imposed in China – designed to keep Chinese wealth within the country’s banks and borders – allow an annual quota of US$50,000 for overseas transfers and transactions. AB

ARE YOU READY FOR THE BOOM IN AUSTRALIAN DEALS? Source: Ansarada

Strongest quarterly growth

Tenders

Weakest yearly growth

Debt

Private raises/placements Public offering/IPO

Strongest yearly growth Other

Raising a fund Joint venture

Merger/acquisition/divestment Relative number of data rooms

Bankruptcy/insolvency Weakest quarterly growth

20x

50x

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PEOPLE

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

Melanie.Mingas@keymedia.com

A BIG DEAL

Nathaniel Nhan Truong, director of The Loan Lounge, recalls how he helped to make the Australian dream come true for two non-resident business owners who wanted to buy their Sydney premises

THE FACTS

give her confidence that we could get the deal done. We found out that the deal had been submitted to ANZ Business Banking using payslips instead of the company financials. We were able to make the deal work under the full document policy using the rental addbacks. Because the couple were purchasing an owner-occupied property for their business premises, they were no longer paying rent. Therefore, that money could be taken out of their ongoing expenses and considered as income, further boosting their serviceability. We also structured the loan over three years to give the bank comfort around the visa situation and ensure the loan would be paid off regardless of the visa’s renewal. THE TAKEAWAY

Loan size and term $360,500 for 3 years

Client Young couple in their early 30s, self-employed

Goal Purchase a commercial property

Location Chatswood

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Aggregator Finsure

their narrow choice of products was decreasing further. As all this was against the would-be borrowers, the vendor was pressuring them to pull out so they could get a better deal as the markets swayed upwards, potentially threatening the future of the business.

THE SCENARIO

Many of Australia’s foreign residents want to take advantage of the booming economy and property markets, but it isn’t always easy. Not only is it more expensive, these buyers require approval from the Foreign Investment Review Board, depending on their circumstances. Often the loans require bespoke terms and conditions, and some major banks have stopped accepting residential mortgage applications from non-residents altogether. Despite the challenges, it’s far from impossible, so when a solicitor referred a self-employed couple to Loan Lounge we were hopeful a workable solution could be found. The couple were in their early 30s and had already placed a 10% deposit for a commercial property in Chatswood, Sydney valued at $555,000 with settlement due in a year’s time. They both had visas with three and a half years remaining, and while the income wasn’t strong on face value, the business had gained significant traction and was already operating from the premises they wanted to buy. They had tried to secure finance with multiple providers receiving the approval each time only to discover on settlement the lender would not be able to deliver. The client had faced this blow time and time again, and the stress levels had increased considerably; already limited by their visa and employment status,

Lender ANZ Small Business Banking

THE SOLUTION

To overcome the limitations in the criteria, we had to think outside of the box and draw on our commercial experience. We started by understanding the client’s position and the applications she had placed with various lenders before this point. At this time, it emerged they

The first step to understanding and knowing the client is the most crucial in the loan process. We took time to understand the client’s position and understand if previous applications were made and how they were made. The details – and near deals – that emerged during this process gave us greater insight in preparing the right proposal. The clients had faced a series of setbacks, despite their growing business and were about to agree to a deal with terms that would not have been in their best interest. Throughout the negotiation of the loan, we had to be mindful of their visa situation and how the loan had to be renegotiated over the next three years to take into account their permanent residency or risk a sale down the track. Fortunately, we were able to provide the clients an approval in a timely manner and not only reduce their upfront costs but provide an affordable loan over the next three years. Today, the clients own their own

“To overcome the limitations in the criteria, we had to think outside of the box and draw on our commercial experience.”

Nathaniel Nhan Truong Director, The Loan Lounge

had become so exhausted by the lack of options, they were about to pay a private lender $20,000 upfront to get a deal approved and over the line, with ongoing costs of 2.5% interest per month. I still remember being on the phone with the client when she was at the branch and about to make the transfer. It was at this point we had to really gain her trust and

business premises and have permanent residency. They were very happy with the outcome and they have become clients for life. We are currently looking after their first land and house package and renegotiating the commercial loan over a 15-year term. We are very pleased with the outcome as there was a clear benefit for all parties. AB

Get involved in the discussion Share your thoughts at

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FROM THE FORUM Top comments from trending stories on brokernews.com.au

TRAIL COMMISSIONS MAY LEAD TO “POOR CUSTOMER OUTCOMES” A senior manager of the Commonwealth Bank (CBA) has admitted that upfront and trailing commissions for mortgage brokers can lead to poor customer outcomes. During his 15 March testimony before the royal commission, executive general manager of home buying Daniel Huggins said the commission structure is linked to the size of the loan. The longer a loan takes to pay off, the larger the trailing commission will be. “That can lead to a conflict, well, there is a conflict between the customer, you know, and the broker,” he said. I love the witch-hunt on the broking industry. Also, why is [CBA chief executive Ian Narev] writing confidential letters to Sedgwick building an apparent “independent review”? Scott Juda on 23/03/18 at 10:02 AM

I’m always fascinated with the “Sedgwick independent review”. As the banks funded it, how is it independent? Mark Harris on 23/03/18 at 10:36 PM

This all is entertaining – no mention of volume paid bonus structures from branch or mobile lenders, nothing about bank staff conferences for “rewarding success”, again based on volume. If this is going to be done correctly the royal commission needs to look into the amount of bonuses paid to branch lenders. Oh, and while they are at it, also check out the multiplier they get to cross-sell products, such as new accounts, insurances and credit cards. Make it fair. Review both sides of the fence. Jaime Savory on 23/03/18 at 8:41 AM

This is obviously CBA policy, as one of the earlier well-paid CBA executives said they supported a customer-paid fee as preferable to current broker remuneration. He also said they wouldn’t be game to do anything unless the whole industry did the same. In other words: “Mr Commissioner, can you please make this one of your recommendations?” Mark Harris on 22/03/18 at 11:55 PM

Another attack, brokers, it seems. The lenders should tidy their own house first. Wayne Dalli on 23/03/18 at 9:34 AM

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FE AT URES

CAUGHT ON CAMERA The MFAA held its annual Qld Race Day on Wednesday 21 March at Doomben Racecourse. The iconic event has been the key networking event in Qld for the entire industry, with over 260 gathering to celebrate the finance broking industry. Some of the attendees had flown in from interstate to connect with many of the top brokers in Qld, along with aggregator and lender partners. The day included a competitive side, with Fashions in the Field hotly contested on the day.

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DATA

WESTERN AUSTRALIA

VIC SPOTLIGHT

Job creation on the rise, but prices unlikely to follow Some areas of Perth saw house values increase at the end of 2017. The central subregion’s median house price soared by 8.1% from September to December, and Stirling East, Joondalup North and Serpentine-Jarrahdale also experienced considerable growth during this period. “It’s pleasing the Perth market appears to have finally turned a corner. We expect market conditions to moderately and steadily improve throughout 2018, although we caution against expectations of rapid growth this year,” says Hayden Groves, president of the Real Estate Institute of WA. Metropole Property Strategists CEO Michael Yardney notes that about 50,000 jobs were created over 2017, but he cautions buyers against making hasty investments. “While the market may bottom out in 2018, it’s much too early for a countercyclical investment in the west – I can’t see prices rising significantly for a number of years,” Yardney says. Area

Type Median value

Quarterly

12-month

growth

Perth

$510,000

1.4%

-1.9%

WA country

$350,000

4.5%

-3.3%

Perth

$405,000

3.8%

-3.8%

WA country

$240,000

-3.8%

-1.8%

QUEENSLAND

Increase in taxes brings clouds for Sunshine State A proposal to increase property taxes could put the brakes on growth in Queensland. A suggestion has been made to elevate land and foreign investor tax rates, and it is a factor that may have contributed to deflating consumer confidence, according to the ANZ/Property Council survey released in January 2018. As a result, Queensland now records the lowest confidence levels in the country. “At a time when we need to do more to catch up with other markets, increasing taxes on property is a big economic risk,” says Chris Mountford, executive director of the Property Council of Queensland. Highlighting the effect of the proposal on consumers, particularly on potential commercial investors, predictions for Queensland’s economic growth appear bleak. “The impact of these proposed tax increases can already be seen in the figures,” Mountford added. Area

Type Median value

Quarterly

12-month

growth

MELBOURNE MASTERS SUPPLY After 144,00O new residents moved to Melbourne in 2017, Victoria now sits comfortably at the top of the national property market as confidence levels skyrocket the slowdown of the national property market, as of January 2018 Melbourne remains one of the 10 fastest-growing large cities in the developed world. This puts the city in the same category as metropolises like London and the Big Apple. The demand created by the 144,000 new residents who moved into Melbourne over 2017 has been met by the high levels of apartment stock that have generated oversupply fears in the past. “The Melbourne property market grew an impressive 57% over the last five years and now has moved from fifth gear into second gear, but it’s not going into reverse any time soon,” says Michael Yardney, CEO of Metropole Property Strategists. “In fact, Melbourne is likely to once again be among the best-performing property markets in 2018.” OpenCorp director Matthew Lewison supports this outlook, noting that Melbourne has toppled Sydney in the national property market. “Melbourne has now firmly overtaken Sydney as the leading housing market in the country. While growth is more modest than it was a year earlier, reflecting that the growth is now being driven by different segments of the market, it is still reflecting a sellers’ market,” he says. The city’s population is expected to increase by approximately 10% over the next four years. Growth is primarily observed in the Western Growth Corridor, where there are affordable properties that are ideal for first home buyers. For investors seeking highly profitable investments, however, the suburbs in the inner east, southeast and inner north are still the best bet. According to the findings of the ANZ/ Property Council Survey released in January 2018, Victoria’s property market has shown the highest levels of confidence in the country. AB DESPITE

$536,000

1.1%

2.5%

Median price (houses)

QLD country

$435,000

1.2%

1.4%

$507,951

Brisbane

$410,000

-0.2%

-2.1%

QLD country

$381,250

-1%

2.8%

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2018 is shaping up to be another strong year for Victorian property Population growth rates in Victoria remain the highest in the country, and I expect this to continue, consequently driving housing demand. Melbourne remained strong throughout 2017, while a previously strong Sydney had a noticeably slower growth rate towards the end of the year. Most commentators indicate a year of growth for Victoria, ranging from close to flat up to 10%. While that would suggest slower growth than previous years – circa 15% – it’s still fairly solid when you consider what the market has done over recent years. I’m at the optimistic end of the scale in the 8-10% range. The apartment market is a different story, being more exposed to changes made by lenders as a result of APRA’s regulatory intervention. There is still a large amount of stock to hit the market, and I am picking flat to slightly positive growth. These regulations have slowed Sydney and Melbourne markets and are currently challenging for both lenders and borrowers to navigate. However, they are designed to strengthen the property market in the long term.

Don Crellin MD, Resolve Finance

SUBURB TO WATCH: CAPEL SOUND

Brisbane

BROKER PERSPECTIVE

Median price (units) $489,276

Source: CoreLogic

12-month growth

3-year growth

5-year growth

Indicative gross rental yield

12.7%

37.9%

51.8%

3.4%

12-month growth

3-year growth

5-year growth

Indicative gross rental yield

30%

45.7%

55.7%

3.3%

AUSTRALIAN CAPITAL TERRITORY

Land tax warning for investors as unit values tail inflation OPPORTUNITIES AND KEY INFRASTRUCTURE

Melbourne is one of the 10 fastest growing cities

The population increased by 144,000 last year

A further 10% growth is expected to 2022

Property market has demonstrated 57% growth since 2013

HIGHEST-YIELD SUBURBS IN VICTORIA Suburb

Type

Median price

12-month growth

Gross rental yield

Inverloch

$365,000

16%

17%

Dimboola

$102,000

-19%

10%

Warracknabeal

$109,000

-11%

Donald

$117,750

-19%

Nhill

$133,250

-1%

Yardney considers Canberra a quiet achiever in 2017. However, the landscape is uneven, with the house market experiencing considerably more demand than units. “Houses are rising at more than double the rate of unit values, with house values up 5.8% over the year, while unit values are only just beating inflation at 2.1%,” Yardney says. “Having said that, I don’t consider Canberra a good place to invest, as their horrendous land tax rates chew into your cash flow more than anywhere else in Australia.” The outlook for the ACT in 2018 remains optimistic. For Property Council of ACT director Adina Cirson, the show of confidence displayed places pressure on the ACT government’s ability to respond quickly to market demand by limiting red tape, implementing fair taxation and minimising planning delays brought about by rising approval levels. Area

Type Median value

Quarterly

12-month

growth

Canberra

$698,500

7.5%

7.2%

Canberra

$444,000

2.1%

0.6%

www.brokernews.com.au

DATA

NEW SOUTH WALES

A window of opportunity before further price rises

CAPITAL CITY AUCTION CLEARANCE RATES

Sydney may be experiencing a downturn, but experts say it is unlikely to collapse. The city still offers key growth drivers, including a strong economy and jobs growth – around 140,000 jobs were created in 2017. Sydney’s population growth will support its continued property price growth over the next few years, although data suggests this will happen at a slower pace. While most of the migrants coming into Sydney start out as tenants, they are expected to become homebuyers in time. “I expect the value of well-located Sydney properties to be higher at the end of 2018 than they are today. This means the current shift from a seller’s market to a buyer’s market is offering homebuyers and property investors with a long-term focus a window of opportunity to get into the market before it starts rising again in the second half of the year,” Yardney says.

2.2%

7.1%

Sydney

$722,000

0.3%

4.3%

NSW country

$385,000

-1.8%

6.9%

MEDIAN HOUSE AND UNIT PRICES

Adelaide remains the most affordable capital city based on median house values

$1,000,000

Adelaide’s stagnant job market means its prospects for progress are not bright. “I know some investors are looking for opportunities in Adelaide, hoping, or speculating, that prices will increase, but there are few growth drivers in Adelaide, which is experiencing about average unemployment rates and poor employment growth,” says Yardney. Overall, there has been some growth in this market. House prices went up slightly, by 3%, in 2017, whereas unit values rose by just 0.9%. “Areas that offer a larger number of properties on the market have remained stable. Demand for character-style dwellings in proximity to the CBD has continued to remain high due to low stock levels,” states Herron Todd White’s Month in Review report for December 2017. Even with prices getting a slight boost, Adelaide remains the most affordable capital city based on median house value.

$800,000

Type Median value

Quarterly

12-month

growth

Adelaide

$450,000

1.1%

3.4%

SA country

$284,000

-0.4%

2.7%

Adelaide

$380,000

1.3%

6.2%

SA country

$174,000

-8.4%

-4.3%

www.brokernews.com.au

Sold

Not sold

Clearance rate

SOUTH AUSTRALIA

Area

Total auctions

35.5%

Houses

$300,000 $200,000 $100,000 $0

$525,750

$500,000 $400,000

$725,000

$600,000

$715,000

$700,000

$885,000

$900,000

Sydney Melbourne Brisbane Adelaide

Perth

Hobart

Darwin

Units

$420,000

$460,000

PERTH

$644,000

65.3%

$342,500

NSW country

$525,000

7.4%

Not sold

$322,000

3.8%

$442,000

$1,001,500

Sold

$405,000

growth

108

$515,000

growth

Sydney

Total auctions

Clearance rate

$300,000

12-month

ADELAIDE

$449,000

Quarterly

$367,000

Type Median value

Auction markets softened over the past week, recording a preliminary clearance rate of 65.9% There were 2,980 homes taken to auction across the combined capital cities this week, returning a preliminary auction clearance rate of 65.9%, while last week, 3,313 auctions were held and the final clearance rate came in at 66.8%. Over the same week last year, auction volumes were slightly lower with 2,907 homes going under the hammer across the combined capital cities, although the clearance rate was a stronger 74.6%.

$517,500

Area

WEEK ENDING 1 MARCH 2018

Canberra

CAPITAL CITY HOME VALUE CHANGES Capital city

Weekly change

Monthly change

Year-to-date change

12-month change

-0.1%

-0.5%

-1.5%

-0.8%

0.1%

-0.1%

-0.2%

6.5%

Brisbane

-0.1%

-0.2%

1.6%

Adelaide

-0.2%

2.2%

-0.1%

-0.5%

-2.7%

-0.3%

-0.8%

1.7%

Sydney Melbourne

Perth Combined 5 capitals

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

BRISBANE CANBERRA Total auctions

128

Sold

Not sold

Clearance rate

Total auctions

165

Sold

Not sold

Clearance rate

50.7%

66.4%

SYDNEY Total auctions

1,259

Sold

722

Not sold

387

Clearance rate

TASMANIA

MELBOURNE Total auctions

65.1%

1,606

Total auctions

Sold

988

Sold

Not sold

411

Not sold

Clearance rate

70.6%

NORTHERN TERRITORY

Area

First home buyers buoy market in Darwin despite vendor losses In Palmerston, Darwin many first home owners are opting for new house and land packages instead of strata duplexes or townhouses, according to Herron Todd White’s Month in Review report for December 2017. Given the high levels of supply and the low population growth, the unit market has gone downhill. Nonetheless, the first home buyer activity observed is a positive sign. “The positive signs are the increased sales activity, and while for many participants these sales are confirming a loss, it does provide opportunities for first home owners and there has been a marked reduction in cost of living pressures,” the report states. Taking advantage of Darwin’s transient population could be a smart move, given that there is an abundance of tenants.

66.7%

Type

Median value

Quarterly growth

12-month growth

Darwin

$500,000

3.1%

-3.3%

NT country

$430,000

-4.2%

7.5%

Darwin

$370,000

-20.6%

-8.9%

NT country

$310,000

4.2%

1.9%

All data sourced from CoreLogic.com.au

www.brokernews.com.au

PEOPLE

IN THE HOT SEAT Last month, Hero Broker completed the first crowdsourced funding round undertaken by a mortgage start-up in Australia. Founder Clint Howen talks about customer innovation and enhancing lives through better financial management

Hero Broker is the ﬁrst mortgage focused start-up to venture into crowdsourced funding. Was that nerve-racking? It’s not critical to the business, so it’s more exciting than A anything. We have had a lot of support for what we are doing, so it’s exciting to see if we can make it work to get our fans involved.

Why do you think this has not been done before? There has definitely been an interest from companies and fans A to do crowd fundraising for a long time; the main hold back was legislation and laws. Now that the laws have changed, it’s a new frontier for business and early investors. There are risks involved, of course, but I hope for everyone that crowdsourced funding works in the long run.

What’s the reaction from the finance and mortgage space? I find that mortgage brokers that don’t like Hero Broker, also A don’t like the idea of a customer walking into a bank or organising their own finance, so they are against anything that doesn’t involve a broker – it’s not just me. Then there are other brokers, and those more from a banking background, or the general public and they really love the concept. So it’s been a mixed response, but I’m not focused on pleasing brokers; I’m focused on building something awesome for the consumer.

What inspired you to get into the finance industry? What inspires me about the finance industry is not the nuts and A bolts of how it runs, but the outcome it generates. Finance can massively enhance lives or cripple them with debt. Growing up in a very cash-strapped family, with both parents working, I have seen the negative sides of finance and the struggle it can have on a family. I believe in smart lending practices with transparency, and what drives me is the opportunity to make it easier for Australian families to have more control over their finances, and make being smart with your money easy and rewarding. This is why I only focus on making better outcomes for consumers. AB

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