JULY 2018 ISSUE 15.13
Protecting the silver economy How those on the frontline of finance can prevent ‘inheritance impatience’ /16
FBAA celebrates quarter century Peter White reflects on the association’s 25-year history /18
ROYDEN D’VAZ Bluestone’s national head of sales and marketing explains why the lender is expanding into the near-prime market /14
Caught on camera The Finsure and LoanKit Commercial Conference hits Hobart /25
ALSO IN THIS ISSUE … Movers and shakers The new executive team leading CBA’s demerger /24 Market overview Examining the market resurgence in Perth /26 In the hot seat Nancy Youssef on mentorship and setting career goals /30
NEWS
IN THIS SECTION
Lenders CBA to demerge wealth and mortgage businesses /04
Aggregators “Structural shift” emerges in lending market /06
Associations SME affordable growth capital report released /10
Regulators Banks agree to CCR protections /12
Market Mortgage approvals down in March quarter /08
www.brokernews.com.au JULY 2O18 EDITORIAL
SALES & MARKETING
News Editor Rebecca Pike
Sales Manager Simon Kerslake
Journalist Nicola Middlemiss Production Editor Roslyn Meredith
DATES TO WATCH
Upcoming can’t-miss events
ART & PRODUCTION Designer Martin Cosme Production Manager Alicia Chin
4 – 3 1 J U LY
2 6 J U LY
2 6 J U LY
Vow Academy PD days
Mid-year economic update
Visiting Brisbane, Perth, Hobart, Melbourne and Sydney, Vow Financial will hold a series of professional development days, compliance workshops and webinars throughout July to help brokers stay on top of ongoing regulatory changes. With compliance and governance in the spotlight more than ever, these are must-attend events.
CBA chief economist Michael Blythe will present the Central Economic Development Agency’s annual report on the Australian economy to a public forum at the InterContinental Adelaide. Erma Ranieri, commissioner for public sector employment in SA, and Jarrod Ball, CEDA chief economist, will deliver regional insights from CEDA’s latest research and national polls.
MFAA National Excellence Awards Taking place in Melbourne, the MFAA National Excellence Awards brings together the best of the best from the State Excellence Awards and will feature a number of additional categories, including the aggregator award and support service provider award, in addition to four member voting awards.
Traffic Coordinator Freya Demegilio
Marketing and Communications Manager Michelle Lam
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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7 – 14 AUGUST
10 AUGUST
Regtech
RBA Statement on Monetary Policy
Taking place in Adelaide (7 August), Perth (8 August) and Melbourne (14 August), Regtech will showcase products from banking, financial services and insurance to deliver the latest developments in regulatory and compliance technology – a sector hotly tipped to become ‘the next fintech’.
With potential implications for interest rates, the latest statement on monetary policy from the RBA will set out the bank’s assessment of current economic conditions, both domestic and international, along with the outlook for Australian inflation and output growth.
5 – 7 SEPTEMBER Credit Law Conference The annual Credit Law Conference returns with an industry-leading line-up of speakers, including Anna Bligh, CEO of ABA; Michael Saadat, senior executive leader, deposit takers, credit and insurers, at ASIC; Sally MacKenzie, director of COBA; and Helen Coonan, chair of AFCA.
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30 SEPTEMBER
19 OCTOBER
16 NOVEMBER
Royal commission interim report due
Australian Mortgage Awards
FBAA 2018 National Industry Conference
Commissioner Hayne is due to deliver his interim report no later than 30 September following four rounds of public hearings that have focused on farming finance, SME lending, financial advice and consumer lending. Almost 7,000 submissions have been received by the commission, and the final report is due by 1 February 2019.
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The leading independent awards event for the mortgage industry returns for an action-packed night in October. Highlighting the outstanding achievement of Australia’s leading mortgage brokers, lenders, aggregators and advisers, the 2018 AMAs will be hosted by Lawrence Mooney and feature Furnace and the Fundamentals and Linden Furnell.
The FBAA’s annual conference and awards will be held at Sea World on the Gold Coast. Under the theme ‘evolution’, the conference will support brokers in navigating recent industry changes, while the evening’s Awards of Supremacy will see 500 guests gather to recognise leading industry figures.
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 ADVANTEDGE TO WAIVE ANNUAL FEE
ANZ HOUSE PRICE FORECAST BY STATE Source: CoreLogic, ANZ Research
Total housing prices, YOY % change*
lender Advantedge is to waive its $120 annual fee for the duration of a loan for all new applications received before 28 September and settled before 31 December 2018. The move can save a borrower $1,200 over 10 years. GM Brett Halliwell said, “Highly competitive rates and quality home loan products are central to our white label proposition. By combining these attractive features with quality customer service, Advantedge is empowering brokers to provide the best possible experience to their customers.” WHOLESALE
20% 16% 12% 8% 4% 0% -4% -8%
‘CUSTOMER FIRST’ BANK LAUNCHED Anthony Thomson, who founded the UK’s Metro Bank and Atom Bank, has unveiled a new bank to compete with the big four and “put the customer first”. Named 86 400, after the number of seconds in a day, the bank will open to beta testing later this year. Its founders hope to receive a full banking licence by the end of the year, and a public launch is scheduled for the first quarter of 2019.
-12%
2015
ENTREPRENEUR
“Revenue from stamp duty has doubled over the past eight years. This has added considerably to the cost of buying a home” Shane Garrett Senior economist, HIA
4
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Australia
Sydney
Melbourne
2016
2017
Brisbane 2018 (forecast)
Adelaide
Perth
Hobart
Darwin
Canberra
2019 (forecast)
*Capital city weighted average; calendar year
CBA TO DEMERGE WEALTH MANAGEMENT AND MORTGAGE BROKING CBA hopes initiatives will enable enhanced focus on core businesses and create a “simpler, better bank” announced on 25 June that it would be demerging its wealth management and mortgage broking businesses. As part of the move it will also undertake a strategic review of its general insurance business, including a potential sale. The demerged business, CFS Group, includes CBA’s Colonial First State, Colonial First State Global Asset Management (CFSGAM), Count Financial, Financial Wisdom and Aussie Home Loans. As a result, the previously announced IPO of CFSGAM will no longer proceed. The bank’s CEO, Matt Comyn, said, “The wealth management and mortgage broking businesses are each high-quality franchises. With innovation and disruption in wealth CBA
management increasingly favouring specialist companies, they will benefit from independence and the capacity to focus on new growth options without the constraints of being part of a large banking group.” The demerger of CFS Group will provide investors with a direct investment in the independent wealth management company, including Aussie Home Loans and CBA’s minority shareholdings in ASX-listed companies CountPlus and Mortgage Choice. Comyn said the announcement “also responds to continuing shifts in the external environment and community expectations, and addresses the concerns regarding banks owning wealth management businesses”.
“By allowing CBA and CFS Group to focus on their core businesses and market-leading positions, we believe the plan will unlock value in both groups for our shareholders,” he said. CBA’s salaried financial advice business, Commonwealth Financial Planning, will form part of the consumer financial services business within CBA’s retail banking services division. The demerger does not impact the 20-year strategic distribution partnership with AIA in relation to bank customers. CFS Group’s customers will be able to benefit from AIA’s innovations in life insurance, including a focus on digital engagement, together with the benefits and synergies of global scale and specialisation. CBA will provide further details of its strategy in its 2018 annual results announcement on 8 August. For details on the team that will lead CBA through its demerger, turn to page 24.
NEWS
A G G R E G AT O R S RATESETTER JOINS MORTGAGE CHOICE PANEL has joined Mortgage Choice’s panel of more than 20 lenders as part of its drive to grow broker partnerships. RateSetter CEO Daniel Foggo said the fintech lender was focused on growing its partnerships and that this announcement reflected its heightened presence in the broker channel following several other significant aggregation partnerships signed this year. “It’s our mission to give all creditworthy Australian borrowers a better-value alternative to traditional lenders,” he said. RACESETTER
AGGREGATORS WARNED OF LIVING EXPENSE CHANGES have been notified by ANZ that the big four bank has made changes to its minimum living expense values. In an announcement made on 22 June, ANZ outlined credit policy changes for home loan borrowers, including new requirements for up to six months of bank statements and explanations of one-off expenses. Responsibility for the new requirements has been handed to brokers, who in many cases will have to revisit client records to explain. AGGREGATORS
‘STRUCTURAL SHIFT’ EMERGES IN AUSTRALIA’S LENDING MARKET ING and Suncorp take the leading market share as non-major lenders see a surge in business from first home buyers, refinancers and investors latest competition index published by aggregator AFG demonstrates a “structural shift” in the lending market as non-majors reached a record market share of 40.97% in May. Led by ING and Suncorp, which now have a total market share of 6.08% and 5.39% respectively, the shift has been attributed to broker-driven competition in the market, as well as customers looking to achieve a better interest rate. “Mortgage brokers are drivers of competition in the Australian home lending market,” said AFG’s broker and residential GM, Mark Hewitt. “A consumer walking into a bank branch has a choice of a handful of THE
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products that may meet their needs. Consumers talking to an AFG mortgage broker have access to thousands of alternatives, depending upon their individual circumstances. Many of those products are from the non-major lenders, and many of those lenders do not have a branch presence.” Borrowers in search of a better interest rate account for the largest proportion of those switching lenders, taking the non-majors’ market share to 32.57%. Macquarie is the most popular choice for those looking to refinance, recording an overall market share of 5.63% and 8.33% in the refinancing category. Meanwhile, Virgin Money has
made “rapid inroads” in the short time it has featured on AFG’s panel, Hewitt said. Its share of the refinance market increased from 0.1% to 0.86% in three months. Teachers Mutual Bank has proven popular with the first home buyer market, recording an increase in market share in this category from 2.8% to 3.14% in this quarter. Further, non-majors are also meeting demand from investors as regulatory caps continue to suppress performance across the big four. “The major lenders have been pulling back. Non-major market share among investors rose from 33.52% in February to 42.35% at the end of the quarter – an increase of 26%,” Hewitt said. “First home buyers looking for a simple, low-cost mortgage product have found it in AFG Home Loans, with market share for AFG’s white label products rising across the quarter for this category from 4.76% in February to finish at 6.3% by the end of May.”
“Advisers now have real opportunities to showcase their extensive and current market knowledge, allowing them to be able to assist consumers like never before” Dino Pacella Founder, National Finance Brokers Day
NEWS
MARKET FUNDING COSTS PROMPT RATE HIKES the Reserve Bank keeping the cash rate the same, lenders are still increasing their rates. Bank of Queensland (BOQ) is the latest to announce a hike, with Anthony Rose, acting group executive, retail banking, attributing this to the higher cost of funding. Rose said, “Funding costs have significantly risen since February. While the bank has absorbed the costs for some time, these changes will help to offset the ongoing impact of increased funding costs.” DESPITE
MILLENNIALS PUTTING MONEY INTO HOMES number of first-time buyers is on the rise as millennials channel their money into property rather than holidays and life experiences. Data released by Westpac and derived from its millennial Westpac Life customers shows a year-on-year increase in the volume of first home buyer loans issued during May and June. The bank reports that 70% of its millennial customers plan to invest their total savings in their first home. THE
“To add this [affordability levy] to a market that is slowing down will have a very negative impact on the number of new homes that will be built in future years” Chris Johnson CEO, Urban Taskforce
MORTGAGE APPROVALS DOWN IN MARCH QUARTER APRA figures show a decline of 13.5% over the quarter, taking approvals to the lowest rate since 2016 March 2018 quarter saw the lowest value of new mortgage approvals since March 2016, driven by a fall in the value of lending to both owner-occupiers and, to a greater extent, investors. The quarter saw $86.75bn in new mortgage approvals to ADIs, a drop of 13.5% over the quarter and 2.8% when compared year-on-year. According to CoreLogic, macroprudential tightening is “clearly having an impact on riskier types of mortgage lending”. In contrast, data published last month by the MFAA showed that Australian brokers settled $46.1bn in residential home loans over the same quarter, the largest quarter value since data collection started. Year-on-year the value of lending THE
to owner-occupiers was 3.9% higher, while lending to investors was down by 15.3%. Tighter lending policies have also led to an ongoing fall in the share of lending on high loan-tovalue ratios. Over the March 2018 quarter, there was $17.06bn worth of new lending with an LVR greater than 80%, which accounted for 19.7% of total lending over the quarter. This was the lowest quarterly value of lending for an LVR above 80% since March 2013, and a historic low for the share of total lending. “The data highlights how the lending policies currently in place are resulting in fewer investment and interest-only borrowers, general reductions in non-standard
mortgage types, and a reduction on higher-LVR lending,” said CoreLogic research analyst Cameron Kusher. “A potential area for concern is that the value and share of loans approved outside of serviceability is somewhat elevated compared to historic levels. With macro prudential policies remaining in place and the potential for additional policies, such as limits on debt-to-income potentially to be implemented, it is pretty clear that taking out riskier mortgages is becoming less commonplace. This should help to somewhat future-proof the housing market in the event of future shocks, and the focus on principal reduction should help to stall or reduce the recordhigh household debt burden.” With dwelling values falling in Sydney and Melbourne, Kusher said the test for prudential oversight would be whether or not loan quality was maintained as values fell, and whether or not mortgage arrears climbed.
ANNUAL CHANGE IN VALUE OF NEW MORTGAGE LENDING APPROVALS Source: CoreLogic, APRA
60% 40% 20% 0% -20% -40% Mar-09
Mar-10 Owner-occupier
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Mar-11 Investor
Mar-12
Mar-13
Mar-14
Mar-15
Mar-16
Mar-17
Mar-18
THE KNOWLEDGE GAP: WHERE BUYERS GET IT WRONG Source: ME Bank
1,000 people took ME Bank’s propertybuying literacy test
CITIES LEAD PROPERTY PRICE FALLS property prices fell 0.7% in the March quarter, according to the latest figures released by the ABS. ABS chief economist Bruce Hockman said Australia’s two largest cities had led the fall, with Sydney recording the third consecutive quarter of falling property prices and the first annual price fall since the March quarter of 2012. Melbourne property prices fell 0.6%, the first quarterly price fall since the 2012 September quarter.
61%
27%
25%
of first home buyers failed
of owner-occupiers failed
of investors failed
88%
66%
63%
think LMI covers the borrower, not the lender
of FHBs do not know what ‘conveyancing’ means
of FHBs do not know what an offset account is
RESIDENTIAL
Auctions: Cooling off
25%
44%
of FHBs know there is a cooling-off period after auction
of investors know there is a cooling-off period after auction
Auction deposits: Who knows the requirements?
53%
78%
of owner-occupiers know a deposit must be paid on auction day
of FHBs know a deposit must be paid on auction day
PROPERTY BUYERS LACK MARKET LITERACY Survey quizzed 1,000 people on the property purchase and auction process, highlighting knowledge gaps in the areas of fees, insurance and deposits
RENTVESTORS LOOKING TO REFINANCE survey has found that 49% of rentvestors are thinking about refinancing their mortgages in the next six to 12 months. The findings from HashChing also show that 56% of those who rent out their investment properties give the process a minimum stress rating of six out of 10. However, that doesn’t deter those who want to boost their returns, as rentvestment accounts for 24% of first-home purchases in NSW and 20% in Victoria. A
survey of 1,000 Australians by ME Bank found that first home buyers do not know as much as they think about buying property. Home loan lender ME tested the knowledge of 1,000 Australians who were either looking to buy their first home or had already purchased an owner-occupied or investment property. Nearly 70% said they felt confident about making financial decisions, while around 50% said they were confident when it came to the property-buying process and its related costs. However, when faced with a basic property-buying literacy test, 61% of first home buyers A
failed, compared to 27% of owner-occupiers and a quarter of investors. As seen in research and surveys in the past, borrowers are still most confused about lenders mortgage insurance, with 88% of respondents believing it covers the borrower and not the lender. The survey also showed that 85% of first home buyers did not know there was no cooling-off period after buying a house at auction. Meanwhile, 66% of investors thought a cooling-off period was available. ME head of home loans Patrick Nolan said overconfidence and low financial literacy were a risky combination that could be
54%
of investors know a deposit must be paid on auction day
costing first-home owners who “buy blind”. “It’s difficult enough for those trying to get their foot in the door to save up a deposit and decide where to buy. A lack of necessary property-buying knowledge is sure to increase the risk of young Aussies being caught out with unexpected costs, adding to their existing stress,” Nolan said. “Financial literacy is a valuable asset and one of the biggest money savers over time, especially when it comes to buying what is likely to be the biggest investment of your life.” He added, “Some Aussies fail to educate themselves because they find finances dull and complex and think they know best, while others find working with numbers difficult and put their head in the sand. “But like it or not, financial decisions, including buying a property, are best made on facts – a hunch or a guess could lose you thousands.”
NEWS
A S S O C I AT I O N S
ABC CLARIFICATION AN ‘AFFRONT’ TO INDUSTRY Peter White has made fresh calls for ABC to make a public apology following its misreporting of introducer schemes during the 13 March edition of Matter of Fact. ABC issued an online clarification in June in relation to the show. White said the notice “on an obscure web page that no one will read” is an “affront” to thousands of finance brokers who provide a highly professional service under a strict regulatory environment. FBAA
REPORT ON AFFORDABLE GROWTH CAPITAL FOR SMES RELEASED
banks can draw on for security; APRA prudential measures that diversify from the current approach; the introduction of a capital fund to provide tier two capital instruments to banks; and an overhaul of the Personal Property Security Register. Under demand, other suggestions cover open banking reforms; giving SMEs scope to work with trusted advisers; and an Ombudsmandeveloped guide to financial providers and products to be made available online and on social media. The report quotes ABS statistics showing that a mere 15% of all businesses apply for debt or equity finance, with around 90% approved. Responding to the report, Scottish Pacific’s chief customer officer, Ben Cutler, said: “This finding is backed up by our SME Growth Index research, which shows that fewer than 5% of business owners actively keep an eye out for credit facilities that fit best with their business. Half don’t ever get around to reviewing their primary bank relationship, and only 20% review this regularly.”
Ombudman Kate Carnell highlights “market failure” and funding gaps in SME finance, announcing eight recommendations to address this Australian Small Business and Family Enterprise Ombudsman, Kate Carnell, has made a series of recommendations to help improve the flow of capital to small businesses and assist owners in accessing finance beyond traditional banking. The recommendations, outlined in the Ombudsman’s Affordable Capital for SME Growth report, are intended to “address market failure”, increase the supply of capital for SME lending, and grow competition between financial providers. “The UK, Canada and the US – jurisdictions similar to Australia – have addressed this market failure, which is worldwide, with successful initiatives that have increased access to affordable growth capital THE
to SMEs,” Carnell said. “In Australia, lenders consider SMEs high risk and offer capital with restrictive terms and conditions at high interest rates and demand bricks and mortar as security – which is usually the family home. Unfortunately, the unintended consequences of the financial services royal commission for SMEs might be an increase in banking regulation, making it even more difficult for them to access affordable growth capital.” The recommendations are categorised into supply and demand, and under the former they cover the creation of a private sector growth fund focused on long-term funding solutions for SMEs; a Government Guarantee Scheme that member
SME SNAPSHOT Source: ASBFEO’s Affordable Capital for SME Growth report
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56%
50%
67%
57%
of SMEs are operated by Gen X or millennial owners
have been in business less than 10 years
of the nation’s workforce are employed by SMEs
of GDP is generated by SMEs
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CONSUMER TRUST IN BIG FOUR DOWN 47% half of all Australians have less trust in the big banks because of the royal commission. According to data from the Customer Owned Banking Association (COBA), 47% of 1,000 surveyed Australians have less trust in the big four banks, while trust in credit unions has increased 18%. Additionally, trust in mutuals is up 17% and in building societies 15%. COBA CEO Michael Lawrence said, “Australians want a banking institution they can trust to put them first.” ALMOST
NEWS
R E G U L AT O R S
DISTRICT COURT SENTENCES INVESTMENT ADVISER adviser Sarah Jane Busteed has been sentenced following an ASIC investigation. In court she admitted to dishonestly obtaining $57,000 from a law firm and $36,000 from a client’s SMSF, and to dealing with $163,968 that she knew to be the proceeds of crime. It is alleged the funds were used for various purposes, including personal expenses. Busteed was employed by Murphy Dawson & Partners Pty Ltd, which is now deregistered. INVESTMENT
BANKS AGREE TO CCR PROTECTIONS FOR CUSTOMERS Australia’s major banks reach “critical” agreement on notification of hardship payments under CCR changes
four major banks have reached an agreement that will protect vulnerable customers from being unfairly treated under the new mandatory comprehensive credit reporting (CCR) framework. The agreement means that major banks – which will all be required to report the credit history of 50% of customers by the end of September this year – will not include customers who have reached an agreement on hardship payments with their banks. This will continue for the first 12 months of the phased rollout of CCR, while the attorney-general is conducting a review into the issue. Australian Banking Association THE
FARMING FINANCE HEARINGS EXTENDED royal commission extended its fourth-round hearings on farm finance, involving CBA, Bankwest, Rabobank, NAB, Bendigo and Adelaide (Rural Bank) and Landmark, after pressure from farmers. The hearings focused on issues affecting those in remote and regional communities and were related to farm finance as well as interactions between Aboriginal and Torres Strait Islander people and financial services entities. Natural disaster insurance will be covered under the round-six hearings scheduled for September.
CEO Anna Bligh said this was a “critical” issue for Australia’s major banks, who were united behind this arrangement to ensure all customers were treated fairly in what would be an important change in credit history reporting. She said, “Australia’s banks have been working closely with the federal government and other stakeholders to ensure we get this major reform right, without unfairly treating some customers, and implemented without delay. “Australia’s banks are fully behind this new regime and see the great benefit it can bring in helping customers quickly and easily get a great deal on their personal loans, home loans and
CONSUMERS ON SMSFS
THE
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credits cards. The four major banks are committed to meeting the start date of 30 September in accordance with the CCR regime. “Currently, if you have a great credit history, the only organisation who knows this is your bank. This new regime takes that powerful information and places it into the hands of customers, who can ensure they get the best deal possible from a financial institution,” Bligh said. “As with all major reforms in banking it’s important we don’t leave people behind. “Those who have experienced hardship through no fault of their own, such as losing a job, sickness, natural disasters or relationship breakdown, need to be protected in this new regime. “Unexpected events happen in life, which banks understand, therefore it’s important that we can discreetly show this on credit histories to make sure customers don’t have further difficulty in the future.”
Source: ASIC
ASIC survey of 485 SMSF consumers demonstrates lack of knowledge on risks and obligations 38% of respondents say running an SMSF is more time-consuming than expected
32% say SMSF management is more expensive than expected
33% do not know the law requires an SMSF to have investment strategies
29% mistakenly believe SMSFs have the same level of protection as prudentially regulated superannuation funds in the event of fraud
FE AT URES
SPECIAL REPORT
BLUE-SKY THINKING With new ownership, new products and new rates, Bluestone is geared up to bring new lending solutions to a broader customer base. National head of sales and marketing Royden D’Vaz talks about the developments
KEY BUSINESS METRICS
138%
year-on-year increase in near-prime applications for March, April and May 2018
68%
increase in overall volumes over the last 12 months
58.3%
of applicants are self-employed borrowers looking for alt-doc solutions
61%
of applicants have a clear credit history
100%
ownership of APAC business by Cerberus Capital Management
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tightening of lending conditions isn’t the best news that a borrower – or broker – can receive. Beyond personal lending, the negative effects can echo through the economy for years as they did when the post-GFC credit crunch hit the US, UK and Europe. A decade on, house prices, economic growth and even public spending are still muted. In Australia, where pace and sentiment have dampened somewhat in recent months, the impact is now being felt in the housing market, with the combined capital cities recording their first decline in property values since 2012. Add business lending to the mix and even the Reserve Bank is braced for a decline in GDP within a year. However, for every door that closes another door opens, and for the alternative, non-bank lenders, business is booming. Australia’s alternative finance market experienced year-on-year growth of 136% from 2015 to 2016, and in the three years to 2017 small business lending by the non-banks doubled. According to KPMG, “Australia is fast becoming a regional leader” in the alternative finance space. Currently, Australia’s alternative finance market is the second largest in the Asia-Pacific region behind China. Figures published by KPMG valued the Australian sector at US$610m in 2016, with sharp increases across balance sheet business lending, P2P lending and invoice trading of 80%, 250% and 16% respectively. “What I’m really happy and excited about is that the non-bank A
sector is really making an impact and increasing their market share,” says Royden D’Vaz, national head of sales and marketing at Bluestone. “We are doing really well and brokers like dealing with us. In the past we haven’t had that opportunity to compete or be spoken about in the same context as the mainstream lenders, but now we have better rates, better ability to serve the customer, and we are giving brokers and their customers outcomes they are looking for,” he says.
“People just want to be understood and have someone take their situation into consideration. Brokers should embrace this growing part of the market and help these customers find solutions by becoming familiar with the products that we provide,” D’Vaz says. Getting down to business The last 12 months have seen major developments at Bluestone. In February, New York-based Cerberus Capital Management acquired Bluestone APAC, consisting of Australia, New Zealand and the Philippines – along with its $6bn loan book. Giving Cerberus a foot in Australia’s lucrative lending market, the deal also paved the way for Bluestone’s diversification from specialist lending to near prime.
“The opportunity has always been there; it is just that the solution comes from a different angle now” Royden D’Vaz, national head of sales and marketing, Bluestone These trends aren’t exclusively pegged to the banks’ lending criteria. Even before credit started to tighten, borrower profiles were changing drastically – and rapidly – and therefore swathes of applicants no longer fit the typical vanilla loan profile. Data published by the ABS confirms the number of sole traders and gig economy workers is rising steadily, and while these self-starters do not lack ambition, they often lack the paperwork required to give their enterprise or personal life a cash boost. In addition, people experience unplanned life events such as divorce, illness and bereavement – which can negatively impact a borrower’s credit score.
Marking its entry into the space, Bluestone launched the Crystal Blue portfolio in April of this year, comprising full- and altdoc products geared to support established self-employed borrowers and PAYG borrowers with a clear credit history. “Near-prime borrowers are those that don’t fit the mainstream lenders’ criteria and have a clear credit history, and in the last few months the criteria of mainstream has tightened,” D’Vaz explains. “It’s for people with unusual income; it’s for people who have been in employment for a short amount of time or who are selfemployed. Any unusual policy item where a customer doesn’t fit the credit score cards or the lending
In partnership with
Royden D’Vaz, national head of sales and marketing, Bluestone
guidelines of the majors or the mainstream lenders, they have to give it a crack with us.” For an alternative lender that built its name in the specialist space, the move into near prime is a significant expansion of both the operations and values of the wider brand. To grab the industry’s attention, the lender cut rates by 225 basis points across the entire product suite. “There are a lot of people who have been with their banks for many years, coming out of their interestonly [term] or their investment lending, and the banks aren’t willing to redo their loans for them. Brokers should know there are options
available for these borrowers, and we want to position in that space,” says D’Vaz. So high is demand from nearprime borrowers that Bluestone is now breaking its own monthly volume records in a week, and because record results demand record investments, focus is now falling on showing the world that Bluestone means business. In April, the lender moved into new offices in central Sydney and is now focused on expanding the team in order to meet the growing demand for its products. To date, three new BDMs have joined both the NSW and Victoria teams, and one new BDM has been appointed
in Queensland. The head count of the credit team has also increased, and there are plans for further growth. From there, D’Vaz says it is likely the next development will see Bluestone move into auto, equipment and commercial finance. “The volume is coming in and we’re focused on getting the near-prime message out. We can’t lose the momentum, we can’t let the back end fall away, because then we’re sending the wrong message,” D’Vaz says. “There are many things we are working on. We want to make sure that whatever we do is fully scoped and fully resourced, and that’s very important.”
High-touch philosophy Helping brokers get a handle on near prime, Bluestone has taken the decision to make its underwriters, as well as BDMs, available to answer questions, field queries and “walk brokers through the process”, D’Vaz says. “Brokers are starting to see more of our type of deals every day; the onus is on our teams to remove any fear, uncertainty or doubt they may have, if they haven’t dealt with us in the past.” Under what D’Vaz describes as a “high-touch” model, the aim is to nurture collaboration between lender and broker and give brokers a second chance at customer satisfaction when their clients are declined elsewhere. “Brokers can call our underwriters, explain and clarify parts of an application, and the underwriter can mostly mitigate their concerns on the spot. Then the broker can go back and tell the customer what is happening with more detail than before. If you ask us what our unique proposition is, I would say it’s that,” D’Vaz says. “The way we deliver our products to the borrower is so important to make the broker look good in the customer’s eyes.” Offering such clarity at a time of almost overwhelming levels of change in the broking industry is invaluable, to say the least. Observing growing fatigue and information overload following the royal commission and Sedgwick report, D’Vaz maintains that the focus for brokers moving forward should remain on customer outcomes, clear communication, and their own continued education regarding the products and solutions in the marketplace. His message to the industry is clear: “The opportunity has always been there; it is just that the solution comes from a different angle now. Brokers need to be aware that there are other lenders who will do a deal.” AB www.brokernews.com.au
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NE WS ANALYSIS
PROTECTING THE SILVER ECONOMY The Australian Banking Association is leading a campaign to tackle financial abuse of the elderly, calling on banks and staff to spot the signs and speak out. Australian Broker examines the implications for those on the industry’s frontline
of elderly people being tricked, forced or emotionally blackmailed to hand over their money make headlines with alarming frequency. In June, the Australian Banking Association (ABA) kicked off its latest campaign to raise awareness of the issue, in collaboration with National Seniors, the Council on the Ageing (COTA), the Older Persons Action Network and the Finance Sector Union. Together, this coalition wants finance professionals to be empowered to “properly detect and safely report elder financial abuse”. Calling on the general public to write to their federal, state and territory governments, the campaign is pushing for key policy changes to be enacted by Christmas, including standardised power of attorney orders across states and territories; an online register of power of attorney orders; and a “safe place” to report suspected financial abuse to. “There are far too many heartbreaking stories of elderly, vulnerable Australians who have been financially exploited by family members or close friends. This is a really difficult, complex problem, but there are things that can be done about it,” says ABA CEO Anna Bligh. In Australia, there are eight million consumers aged 50 years or older. Referred to by COTA as the “silver economy”, it is estimated that as many as 10% have experienced financial, legal, emotional or physical abuse. Financial abuse can include a friend or family member pension STORIES
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skimming, spending an older person’s money without permission, forging their signature, coercing them to sign paperwork, using their bank accounts and credit cards without consent, and
untoward intentions. He says, “Older Australians are among those most susceptible to financial abuse, and more often than not incidences go unnoticed. The situation as it stands is
“The broker has always been the first line of defence when it comes to detecting unusual behaviour” William Ngo, finance specialist, Finance Garage denying them access to money or bank statements. COTA chief executive Ian Yates has referred to such behaviour as “inheritance impatience”, and there is the added challenge of close familial ties masking
completely unacceptable, and we need to do much more.” It isn’t the first time this year the ABA has called for reform, and momentum is starting to build. The latest federal budget allocated funds to a national online register
and a dedicated national financial abuse body that suspected cases can be reported to. Elsewhere, ASIC has issued its own guidance online and provides contact details for major national hotlines and charities that can offer advice to those worried about a client, customer or family member. Major lenders are also taking action. At CBA the Safe and Savvy program, launched in early June, covers financial abuse, scams and fraud against the elderly. The bank has also issued a guide to help staff and customers identify suspicious transactions. “The program will improve the skills of our employees to identify elder financial abuse and provide practical advice on tips and traps to older customers and their families,” says the bank’s customer advocate, Brendan French.
THREE WARNING SIGNS OF FINANCIAL ABUSE Source: CBA
CHANGES
CONFUSION
COERCION
Making sudden, atypical financial decisions, such as transferring large sums of money or giving someone access to an account
Feeling surprised, unsure or overwhelmed about financial decisions being made on the older person’s behalf
Suspecting there is a third party who is dictating to and pushing an older person to make financial decisions, such as filling out paperwork or accompanying them to an ATM to withdraw money
“Training will soon be rolled out to our teams in nearly 1,000 branches nationwide so they can recognise and report the signs.” The role of the broker Like branch staff, brokers also have a role to play. According to Heartland Seniors Finance CEO Andrew Ford, brokers are well positioned to spot financial abuse, particularly when it comes to dealing with reverse mortgages, or elderly customers trying to take out loans after falling for a scam. He advises, “Look out for those potential red flags. If a broker becomes aware of something, we recommend that they talk to an elder financial abuse hotline in each state.” As banks look to cut branch staff and move more services online, the role of brokers in identifying and reporting red-flag transactions will only become more important. “The broker has always been the first line of defence when it comes to detecting unusual behaviour, such as fraud and laundering, so it would be no different to ensure brokers are trained up to keep our elderly safe from abuse,” says William Ngo, finance specialist at Finance Garage. “Brokers are expected to speak out and report suspicions, but why are we not given the same reporting lines, procedures and training to help real people that need it the most? Taking advantage of an elderly family member or friend is as bad as robbing them. It should be taken very seriously, and prevention is key.” Mojo Mortgages principal Betty Preshaw recently spoke to a
number of major and non-major banks on behalf of a client who wanted to purchase a property with his grandmother. It would have been the first purchase for both borrowers and was intended to be partly funded with inheritance money that belonged to the grandmother. According to Preshaw, no bank was interested in lending money secured on an owner-occupied house that would be purchased with an
Although unofficial, brokers do have a role to play in tackling the issue of financial abuse. However, knowing how to approach difficult conversations requires knowledge as well as confidence. “Under our responsible lending obligations, it is incredibly important brokers meet the elderly applicant and have a detailed discussion to explain all of the implications,” Preshaw says. “As brokers, we can explain the
“Under our responsible lending obligations, it is incredibly important brokers meet the elderly applicant and have a detailed discussion” Betty Preshaw, principal, Mojo Mortgages elderly relative. While she says the client was coming from a “genuine place”, she praises the default protection the bank provided as a matter of due diligence. “Bank policy when it comes to senior owner-occupied properties is very tight, as no bank ever wants to have to foreclose on an elderly person’s home in a worstcase scenario. “However, when it comes to investment properties, policies are less conservative. Provided there is a strong exit strategy, such as the sale of the investment property, banks can lend to applicants or guarantors over a 30-year term that takes the loan past the retirement age of 75,” Preshaw says.
options available to all applicant parties and workshop other solutions that are not as imposing financially on the elderly party. Also, speak to other brokers and ask for advice, particularly if you feel uncomfortable about a particular scenario.” Ngo adds, “I do not believe at this stage enough is being done to address this issue, but the ball is rolling and I believe changes are coming. I believe brokers can play a major role in helping with the monitoring and reporting of elderly financial abuse and, if given the tools to do so – appropriate training, awareness, reporting procedures – we can slowly chip away at this problem.” AB
TYPES OF FINANCIAL ABUSE Source: ABA/COTA
Spending an older person’s money without permission
Forging signatures to gain access to money
Coercing an elderly person to sign paperwork
Pension-skimming
Using bank accounts and credit cards without consent
Denying access to money or bank statements
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IN THE NE WS
BY BROKERS FOR BROKERS This year, the FBAA celebrates its silver anniversary as the voice of finance brokers across Australia. Executive director Peter White reflects on the association’s 25-year history, highlights and hopes for the future of the industry membership increased from 1,000 to more than 8,300 members currently. “The attraction for many is the real-life practical knowledge and experience we have in the industry,” says White. “FBAA does not take in major banks as corporate sponsors, which enables us to hold independent control
The FBAA National Industry Conference is a key driver of this. Growing from 150 delegates at the inaugural event in 2012 to 1,000 people in 2017, the Brisbane-based conference is a highlight in many brokers’ annual calendars. After a turbulent 12 months for the industry,
“There are a lot of people who are up in arms over today’s issues, but we’re the ones unreservedly out there” Peter White, executive director, FBAA
Peter White, executive director, FBAA
the winter of 1992, a small group of brokers gathered in a church hall in Bowen Hills, Brisbane, with the intention of discussing the industry issues that mattered to them. With an agenda to improve professional standards and establish a voice for brokers in Queensland, the initial focus centred on representation for chattel-mortgage and plant and equipment brokers. Under the name Finance Brokers Association of Queensland, the six-strong cohort each pledged $50 to the cause and started to contact other brokers within their networks to arrange a second, bigger meeting. Momentum soon grew, and in June 1993, thanks to a large donation from founding member and international businessman Geoff Thomas, Australia’s first association for finance brokers was established. “Since the early 1990s, we have gone through three significant changes in consumer lending regulations, and the professional IN
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standards of brokers today are of the highest integrity and professionalism ever,” says executive director Peter White, who joined in 2003 as the FBAA’s scope widened to encompass residential mortgage brokers. Since then, White has held the roles of NSW president, national VP, national president, and chairman of the board of directors. Following his appointment to CEO in 2010, FBAA
of our own voice in the marketplace.” The FBAA maintains its position as an association run ‘by brokers for brokers’ and has a firm grasp of the challenges faced currently. Taking an active role in driving the continued development of the industry, the body is currently working to encourage more women into finance broking, create an attractive student pathway, continuously elevate professional standards, and support members through their early years in the business. “There are a lot of people who are up in arms over today’s issues, but we’re the ones unreservedly out there taking on those concerns at the top end of town – taking the bull by its horns,” says White.
White promises the 2018 conference will be “unlike anything anyone has done in our industry”, covering changes imposed by technology, regulation, customer preferences and the royal commission. “The FBAA has shaped the voice of the broker versus that of the lender, and over 15 years or more has continually challenged the status quo. In 2005, we were the sole voice in our industry supporting one legislation piece without state variations, with others following suit some years later, and we have continued to influence many pieces of legislation. Our lives would be a lot worse if not for the undertakings and outcomes of the work the FBAA does with regulators and government,” White says. AB
BEHIND THE FBAA
1993
8,300
1,000
year established
brokers are FBAA members today
brokers attended 2017 conference
9
5
27
16
board members
state presidents
councillors
employees
19 October • The Star Sydney
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19
PEOPLE
Have an interesting deal? Had a particularly difficult or interesting deal? Why not share it with us? Email:
rebecca.pike@keymedia.com
A BIG DEAL
THE SOLUTION
Faced with a complex deal, commercial broker Kevin Wheatley drew on his background as a business owner, logistician and economics lecturer to make the impossible happen. He tells Australian Broker how persistence and patience paid dividends
THE FACTS
Loan size
Loan term
Client
Goal
Location
Lender
$70m
15 years
Family business with six stakeholders
Funding for large development project
Sydney
Choice Aggregation
Regardless of the short time frame, I was able to syndicate the funding from our investor pool within two days and release the funds, which allowed the client to eventually secure the DA approval. The funding strategy was designed to restructure and consolidate their various loans into a more streamlined facility. The client was also in need of accounting advice as the family’s business had grown quickly in a short period of time. I offered my chief financial officer at Bayside Residential and Commercial Mortgages to assist the client with their accounting difficulties as well. Together we helped them transition into MYOB and organised and updated all financial data. This was a satisfying exercise which helped the client transition into a new web-based application, as well as restructuring and correctly managing their accounting process. THE TAKEAWAY
to urgently access additional liquidity to push through the final stages of negotiation with the Land and Environment Court. I was thrilled that the client had finally chosen me, but the project didn’t come without its challenges. They had a large
THE SCENARIO
As a commercial broker, I’ve had to draw from my experience as a business owner, logistician and economics lecturer to service my clients. I have worked with clients completing residential development projects, specialised development projects and finance facilities for business clients looking to grow internationally. Leveraging these experiences was particularly important with one of my most challenging and rewarding projects to date, something that has been ongoing for the past eight years. My client is a large property developer who used to work with another broker. They had come to me with occasional pricing and structural queries over several years and I had previously advised them on their financial structure, funding options and market pricing. I wanted to win their business and work with them in the future, but I knew it wasn’t something that would happen overnight. I spent eight years being ‘the other broker’. Over time the relationship strengthened, and the client eventually approached me to help them raise $6m by refinancing their existing loans when their previous broker could not. The client was pushing for a DA approval to provide additional capacities for a development project. They were asset rich but cash poor and needed 20
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Being a commercial broker is about presenting options to your clients that will work in the short and long term. We built trust by being reliable, consistent and present whenever there were challenges. There are a lot of consequences for a client if things don’t go to plan or if you’re unable to deliver a result. Building that
Being a commercial broker is about presenting options to your clients that will work in the short and long term
Kevin Wheatley Commercial broker of Bayside Residential and Commercial Mortgages
portfolio with lots of assets to account for, and there were a few curve balls thrown at me as well. There was another private debt that was originally unaccounted for, and new requirements throughout the financing due to the previous and dated accounting processes in place. There was a lot of information that I needed to include and update. Despite this, I managed to meet every demand the client asked for, including raising short-term finance within two days to the value of $6m for legislation expenses. Without this financing, the development project would have certainly stalled. It was an extremely stressful time. I had to make countless calls and organise various meetings to discuss the proposal with a range of investors due to such a short time frame.
client relationship and trust over time and providing them with the best advice solutions for their needs is exactly what I did to win over this developer. Having the patience to be the other broker for the last eight years and finding the capability to meet the developer’s needs in the lead-up to financing the development project has allowed me to become their number one. It has been a great achievement and experience, which resulted in a huge growth in volume for my business. We have been able to fund various other projects of theirs in the tens of millions. Being able to help your clients achieve their business goals is a rewarding experience. If you can be persistent, understand their position and demonstrate how you can add value to their business, over the long term that investment will pay dividends. AB
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OPINION
THE REAL IMPACT OF ALT LENDING As non-banks and alt lenders inch towards a greater market share, they are paving the way for a customer-centric banking model and are better positioned to explore digital lending, automation and compliance. Parth Pandya, CTO at Technobrain Solutions, explains
the days before the digital age took hold, oligopoly was the norm in most industries, the face of which was the frustrated end-consumer who typically faced a startling lack of choices. This is certainly not the case any more – not at least in the banking industry. The rise of non-bank and alt lenders has now been well documented, and the facts are there for all to see. The question is the same as with all trends – will it die out or will it be the new norm? I for one see the recent trend auguring well for all stakeholders – customers, brokers, alt lenders, and yes, even the big banks. The fact that a majority of these lenders are technology driven and have low fixed costs means they can respond to the ever-changing customer needs at breakneck speed. And this is exciting. The non-bank and alt lenders bring an agile and open culture into what has traditionally been a change-averse banking industry. Having low fixed costs enables non-bank and alt lenders to charge the customer low fees and present competitive rates. They are also able to deliver personalised loan assessments within continually shrinking turnaround times. The customer needs a compelling reason to not be attracted to these players. Considering all this, their growth is really a no-brainer. But is it here to stay?
and resolve issues in a timely manner, the entire loan processing cycle is becoming more efficient. And this has become the battle every financial player wants to win. Currently, the non-bank and alt lenders seem be streets ahead of others in this space. There is tremendous room for growth
IN
The financial crystal ball Today’s broker is armed with more options, passing them all downstream to the customer. With a wider range of product options and a direct communication channel that allows brokers to meet customer expectations 22
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investments. We might also see some acquisitions by the big players in coming years. All of this will benefit the customer, which is exactly how it should be. How does the broker fit into all of this? As this trend plays out to its full potential in the future, I see brokers thriving and increasing their influence in the market. They will simply have more choices to create the right solutions for their customers. They will have access to better products, a service offering that is quick and personalised, and the power of more potent systems, which will lead to smarter working opportunities across the entire broker space. We can already see the impact of digital ID verification, the delivery of secure and trustworthy bank statements, and smarter document collection systems making the broker system more efficient. However, to fully capitalise on the opportunities, brokers themselves will need to become more technologically savvy. Investing in education and
Technology will provide new opportunities, and if the broker channel can grab it with both hands, then we will see a new world order
Parth Pandya CTO at Technobrain
in this customer-centric model. I see opportunities to expand in the areas of personal finance management, lending and deposits, accompanied by an overall increase in compliance and more automation in ensuring regulatory requirements are met. The royal commission hearings have come at a good time, forcing the big banks to reflect on their practices while the customer is beginning to reward the ‘customer-first’ approach of the non-banks and alt lenders. I see technology-driven innovation initiatives taking centre stage in the near future. Neobanks and alt lenders are already introducing the next generation of core banking products in Australia. They are making investments in open banking and fintech services, specifically in the identification, financial data analysis and aggregation, analytics and AI space, to name a few. This trend is certainly on a growth trajectory, and I expect an increase in
upskilling can present the banking world with brokers who work smarter and not just harder. Brokers have typically spent days on end laboriously inputting data, shuffling through emails for documents, enduring the painful experience of using aggregator software, and – the big one - trying to recover applications that have disappeared into the black hole of their large back-office team. I expect to see those days behind us as the years pass by. Technology will provide new opportunities, and if the broker channel can grab it with both hands, then we will see a new world order. The bottom line is that customers are being placed at the heart of the entire financial industry, and key players will continue to grow, posing a challenge to the big banks. There are opportunities galore for the broker channel, and if they are to delight the customer they must stay in touch with the continued advent of new technologies. AB
2018
ARE YOU AUSTRALIA’S TOP COMMERCIAL BROKER? If you have celebrated a successful year of strong commercial deals, we want to hear from you. Simply share some basic figures for the 2017/18 financial year and you could be named one of MPA’s Top 10 Commercial Brokers.
Entries open 23 July at www.mpamagazine.com.au
0 1 P TO RCIAL E M COM OKERS BR www.brokernews.com.au
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PEOPLE
MOVERS AND SHAKERS
CBA UNVEILS NEW EXECUTIVE TEAM New team comprises ex-ANZ and Deutsche Bank execs, in addition to internal appointments
HERITAGE NAMES CHIEF RISK OFFICER has appointed Kerry Beebe to the newly created role of chief risk officer. With 30 years’ experience in finance across Australia, Canada and the US, Beebe’s appointment has been described by CEO Peter Lock as “a major addition to the bank’s senior management team”. “Heritage is placing an increasing emphasis on managing risk as an essential enabler of our business,” he added. Based in Heritage’s Toowoomba head office, Beebe started the new role on 5 June. HERITAGE BANK
FORMER BDM JOINS FINTECH FINANCEMI From left: Nigel Williams, Angus Sullivan, Sian Lewis, Matt Comyn, and Andrew Hinchliff
of Commonwealth Bank of Australia Matt Comyn has named the all-new executive team that will lead the bank through its demerger and impending reforms. The six-strong team will be “critical to continuing the changes and improvements we need to make to earn the trust of our customers and the community”, Comyn said. The new make-up of the team will also streamline and simplify the bank’s leadership structure. Former ANZ exec Nigel Williams will join CBA in the role of chief risk officer on 5 November. Bringing with him more than 30 years’ experience, he will be focused on credit risk, operational risk and compliance. Tasked with delivering CBA’s future technology and operations strategy, former Deutsche Bank CIO Pascal Boillat will take on the role of group executive enterprise services CEO
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and CIO from 1 October. He will be responsible for all technology and operations across CBA. Boillat and Williams will be joined by existing team members who will assume roles in the executive leadership team over the coming months. Angus Sullivan, who was acting in the position, stepped up to become CBA’s group executive retail banking services on 1 July. Sullivan, who joined CBA in 2012, has already led the bank’s retail strategy, retail products division, payments innovation and, most recently, its retail branch network. From 1 August, Sian Lewis will move to the role of group executive HR, and Andrew Hinchliff will become group executive of institutional banking. Lewis currently leads more than 2,500 people across CBA’s customer contact centres; prior to joining the
Latitude Financial BDM Cameron Parker has joined fintech Financemi as national sales director responsible for third party distribution. Parker is initially tasked with encouraging growth in the third party online referral channel, followed by growth in other areas. Financemi CEO Michael Lim said, “Cameron brings a wealth of experience to the business. This is a huge win for us and we look forward to the opportunities Cameron will bring. He is a welcome addition to our senior executive group.” Parker started his career at ING in 2003 and has also worked as a relationship executive at Commonwealth Bank of Australia and the Royal Bank of Scotland. He will be based at Financemi’s head office in Perth. FORMER
bank in 2014, she spent nine years in Westpac’s retail and business banking division. Hinchliff, who joined CBA in 2015 as executive GM of global markets, will be responsible for leading the banking and global markets divisions servicing institutional clients. Leading the demerger of the Colonial First State Group, as well as the M&A team and other responsibilities, David Cohen has been appointed deputy CEO and will move from his current role as chief risk officer, effective 5 November 2018. The appointments were announced as CBA confirmed it would be demerging its wealth management and broking business. This will see the bank shed Colonial First State, Colonial First State Global Asset Management, Count Financial, Financial Wisdom and Aussie Home Loans. AB
CAUGHT ON CAMERA The 2018 Finsure and LoanKit Commercial Conference took place in Hobart, Tasmania, on 31 May. Welcoming brokers from across Australia, sessions covered compliance, SMSFs and securities, with market updates from ANZ and CoreLogic, a partner update from NAB, and an economic snapshot delivered by Michael Pascoe. After a full day of professional development, the brokers were treated to a private tour of Mona, the highly acclaimed Museum of Old and New Art, followed by a gala dinner and awards. Reflecting on the event, Simon Bednar, Finsure’s GM of sales, said, “Finsure has always encouraged our brokers to push the boundaries and enhance their service offering. With the residential market starting to tighten, it makes sense to explore other revenue channels, and commercial lending provides that ideal alternative solution.”
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DATA
VICTORIA
WA SPOTLIGHT
New hotspots are driven by population demand and agriculture output The spectre of a downturn follows Melbourne, but this could benefit the more far-flung areas of the city. “Official data shows that there are a few Melbourne pockets where pressure still exists. This includes the outer-east suburbs and the outer north,” says Simon Pressley, managing director of Propertyology. With the metro struggling to maintain property prices, the regional market has been grabbing the opportunities created. “Ballarat’s property market has risen to become Victoria’s best over the year to April 2018,” Pressley says. By the end of 2017, the median house price in this area had risen by a remarkable 11.7% to just over $300,000. Houses are affordable while having growth potential, and the population has been increasing, potentially adding to demand. Shepparton is another region Pressley sees as a hotspot, in part due to its thriving agricultural sector, which includes one of the world’s largest fruit manufacturing plants. Area
Type Median value
Quarterly
12-month
growth
growth
Melbourne
H
$722,000
-5.6%
13.0%
Vic country
H
$355,000
0.6%
7.1%
Melbourne
U
$527,500
-2.3%
6.0%
Vic country
U
$270,000
-3.6%
4.9%
NORTHERN TERRITORY
Darwin’s oversupply and low migration are hurting a fragile property market As residential projects wrap up construction, more and more stock is being poured into Darwin, exacerbating the already-fragile property market. “Darwin faces an oversupplied situation currently as a result, with more properties being delivered to the market than are being sought,” says Kate Forbes, national director of property strategy at Metropole Property Strategists. Demand has been heavily stunted for years as the NT has not been able to recover economically since the mining sector went under. “Poor growth and employment prospects have meant that Darwin hasn’t benefited from either internal or international migration,” Forbes says. “This zero population growth is unlikely to change soon.” Though property values are continuing to nosedive, Darwin has the highest returns in Australia, with the average for houses being 5.6% and for units 6.3%. However, this is more the result of prices dropping faster than it is of rents increasing. Area
Type Median value
Quarterly
12-month
growth
growth
PERTH MARKET HEATING UP Things are gathering pace in the Perth housing market, and, according to the experts, those who make the first move could see the highest returns in Perth can finally breathe easy as the property market begins its long-awaited resurgence, with the rental market leading the way. “Perth’s rental market appears to be building on the momentum of the latter half of 2017, which is very encouraging – not just for the rental market but also for the overall property market,” says Hayden Groves, president of the Real Estate Institute of WA. In general, rental rates were stable for the 12 months to April 2018, and finally they are slowly on the rise. “All subregions experienced stable median prices, except for the South West subregion. It bodes well for landlords that the house and unit median rents are improving simultaneously,” Groves says. During that period, the number of rental properties in Perth passed the 14,000 mark, with the suburbs of East Cannington, St James, North Fremantle, Booragoon and Ellenbrook recording the greatest increases in leasing activity. “Four out of the five subregions saw an improvement in leasing volumes, with standout markets in the Central subregion up 7.7% and the North East subregion up 6.1%,” Groves says. With things heating up in Perth, buyers should not delay entering the market. “Perth’s market often goes through two to three years of correction, followed by two to three years of growth,” explains Matthew Lewison, director of OpenCorp. “When the market starts to move in Perth you want to be involved early as the upswing usually goes quickly but doesn’t last a long time.” It’s not just investors who need to get in there – owner-occupiers should, too, in order to address the issue of oversupply in the face of high vacancy rates. AB BUYERS
H
$505,000
-1.0%
-1.0%
Median price (houses)
NT country
H
$405,000
-6.9%
0.6%
$1,188,752
Darwin
U
$350,000
-4.9%
-8.9%
NT country
U
$348,000
13.2%
-1.3%
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Increasing market activity and a more positive business outlook suggest the tide is turning in WA Feedback from AFG brokers is that business expectations are improving and they are seeing an uplift in market activity. With a long-standing reliance on mining, the WA business cycle slowed as the sector wound down. The impact of reduced credit demand and more stringent lending assessment criteria has meant declining loan settlements over the past four years, from a peak in July 2014. Brokers are still facing challenges with property valuations, which rely on comparable sales evidence. The other pleasing indicator that the cycle is turning is increased demand from first home buyers. We are seeing a jump in loan applications to the state government funder Keystart, and this is a good barometer of first home buyer activity as their share of the overall market nearly doubled in the last financial year, albeit from a low base. We see this as a strong indicator of affordability returning to the market, which will begin to support the broader market activity.
Jeremy Wealleans State manager, AFG, WA
SUBURB TO WATCH: SUBIACO
Darwin
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BROKER PERSPECTIVE
Median price (units) $482,494
Source: CoreLogic
12-month growth
3-year growth
5-year growth
Indicative gross rental yield
-0.1%
8.9%
0.9%
3.0%
12-month growth
3-year growth
5-year growth
Indicative gross rental yield
-10.2%
-21.7%
-13.8%
4.0%
AUSTRALIAN CAPITAL TERRITORY
Buyers need to look at growth potential rather than price tag OPPORTUNITIES AND KEY INFRASTRUCTURE
Property growth
Population
Construction
Mining
Perth now boasts more than 14,000 rental properties
It is the fourth-mostpopulous Australian city, with 2.02 million residents
Micro plots allow the city to build non-strata-titled terrace-style homes
$8.6bn boom on horizon as BHP backs WA mining sector
HIGHEST-YIELD SUBURBS IN WESTERN AUSTRALIA Suburb
Type
Median price
12-month growth
Gross rental yield
South Hedland
U
$80,000
7%
18%
Rangeway
H
$93,500
-27%
11%
Utakarra
H
$128,000
-24%
10%
Nulsen
H
$125,000
-22%
10%
Port Hedland
U
$197,500
19%
9%
The Canberra property market has benefited significantly from economic and population boosts; however, it isn’t reaping the rewards in a uniform way. “Growth has been quite polarised, with houses significantly outperforming units,” says Kate Forbes, national director of property strategy at Metropole Property Strategists. The limited demand for apartments could be the result of oversupply; 78% of new dwelling approvals in Canberra over the last three years were for attached dwellings. Median unit prices have only increased by 6% since 2015, whereas median house values have soared 20%. The house market may help maintain Canberra’s status as one of Australia's most expensive cities. CoreLogic’s May 2018 Property Pulse report highlights the lack of affordable options, noting that in Canberra only one suburb has a median house value under $500,000. Area
Type Median value
Quarterly
12-month
growth
growth
Canberra
H
$690,000
-1.4%
7.5%
Canberra
U
$435,000
-2.2%
0.2%
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DATA
NEW SOUTH WALES
H
$465,000
-0.9%
5.3%
Sydney
U
$709,000
-1.3%
2.9%
NSW country
U
$385,000
-0.6%
4.0%
MEDIAN HOUSE AND UNIT PRICES
Adelaide’s affordability and convenience combine to put suburbs on a roll
$1,000,000
Area
Type Median value
Quarterly
12-month
growth
growth
Adelaide
H
$462,150
0.9%
3.4%
SA country
H
$310,000
5.1%
3.5%
Adelaide
U
$383,000
-0.5%
5.6%
SA country
U
$216,000
20.0%
0.5%
28
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PERTH Total auctions
44
Cleared
8
Uncleared
14
Clearance rate
SOUTH AUSTRALIA
36.4%
Houses
$600,000 $500,000 $400,000 $300,000 $200,000 $100,000 $0
$550,000
$700,000
$720,500
$800,000
$698,800
$900,000
$885,000
Adelaide may not have the strongest economy, but it compensates with affordability and convenience and boasts several suburbs below $500,000 within 5km of the CBD. Adelaide is the one capital with an abundance of affordable suburbs, such as Adelaide Hills. “Buyer activity data across all of Australia shows some of the largest increases in pressure within a market are occurring in the Adelaide Hills, plus middle-ring city councils such as Marion, Prospect, West Torrens and Salisbury,” says Simon Pressley, MD of Propertyology. Prospect has been on a roll, recording 20% price growth from 2015 to 2017, and the average time on market fell from 57 days to 36. The weekly median rental yield has increased by 4% to $395. Gregg Harris, GM of NAB retail, SA, says, “Prospect is now also zoned for the city’s high-demand Adelaide High School. A number of high-profile commercial developments have recently been completed, which has helped modernise the suburb and increase interest.”
72.7%
Sydney Melbourne Brisbane Adelaide
Perth
Hobart
Darwin
Units
$415,000
NSW country
Clearance rate
$650,000
6.4%
12
$380,000
-10.7%
Uncleared
$485,000
$920,000
32
$308,500
growth
H
Cleared
$450,000
growth
Sydney
87
$395,000
12-month
Total auctions
$520,000
Quarterly
ADELAIDE
$305,500
Type Median value
Auction volumes increased significantly over the week ending 17 June, with 1,991 homes taken to auction across the combined capital cities, up from just 904 the previous week. The preliminary clearance rate was recorded at 56.9% this week, after last week saw the final clearance rate revised down to just 53.8%, the lowest level recorded across the combined capitals since 2012. Melbourne was the busiest city for auctions, with 988 homes going under the hammer, returning a preliminary clearance rate of 58.7%, compared to the week before when 54.9% of 275 auctions were successful. Over the same week last year, there were 1,129 auctions held in Melbourne, returning a clearance rate of 71%. There were 701 auctions held in Sydney this week, returning a preliminary auction clearance rate of 55.8%. In comparison, in the previous week there were just 415 auctions held and a final clearance rate of 56%, while this time last year 68% of the 927 auctions held were successful.
$453,000
Area
WEEK ENDING 17 JUNE 2018
$390,000
Sydney’s property market has been in a downturn since late 2017, and it looks like other major regional cities in NSW could be starting along the same path. “Big-city neighbours Newcastle, Central Coast and Wollongong are also showing clear signs of the growth cycle being well and truly over,” says Simon Pressley, managing director of Propertyology. “But it’s a different story in many middle-tier regional NSW cities. Places like Orange, Dubbo, Bathurst, Armidale, Tamworth, Wagga Wagga are at the early stages of their cycle.” The affordability of these pockets is what draws buyers. “The cooling in the market is due more to the market hitting its affordability limit than to oversupply or running out of willing buyers,” says OpenCorp director Matthew Lewison. “The market has been pulled from the top and middle markets for the last few years, and those buyers just can’t afford to spend any more.”
CAPITAL CITY AUCTION CLEARANCE RATES
$535,000
Price growth falls in the big cities while regional markets start upward curve
Canberra
CAPITAL CITY HOME VALUE CHANGES Capital city
Weekly change
Monthly change
Year-to-date change
12-month change
Sydney
-0.1%
-0.2%
-2.4%
-4.4%
Melbourne
-0.1%
-0.4%
-1.6%
1.6%
Brisbane
0.1%
0.5%
0.3%
1.0%
Adelaide
0.1%
0.4%
0.3%
0.7%
-0.1%
-0.3%
-0.6%
-2.0%
-0.1%
-0.2%
-1.5%
-1.5%
Perth Combined 5 capitals
*The monthly change is the change over the past 28 days
BRISBANE CANBERRA Total auctions
54
Cleared
26
Uncleared
20
Clearance rate
Total auctions
116
Cleared
30
Uncleared
37
Clearance rate
44.8%
56.5%
SYDNEY Total auctions
701
Cleared
274
Uncleared
217
Clearance rate
55.8%
TASMANIA
MELBOURNE Total auctions
988
Total auctions
1
Cleared
474
Cleared
0
Uncleared
333
Uncleared
0
Clearance rate
Clearance rate
58.7%
TASMANIA
Area
Apple Isle defies national trends as Hobart eyes new record According to the ABS, the number of housing loans taken out over the six months to March dropped in most states, except in the Apple Isle. “In trend terms, decreases were recorded in all states and territories except Tasmania, where lending increased by 7.2%,” says Malcolm Gunning, president of the Real Estate Institute of Australia. This is just one of many indicators of how much the Hobart property market is flourishing, supported by its stellar economy. Aside from the strong inflow of visitors, Hobart has seen a lot of interstate migrants, and this population growth is helping anchor the excellent performance of this property market. “There’s every possibility that 2018 might be the year that metropolitan Hobart becomes the first Australian capital city in the post-GFC era to produce 20% price growth,” predicts Propertyology MD Simon Pressley.
n.a.
Type
Median value
Quarterly growth
12-month growth
Hobart
H
$445,500
4.8%
8.9%
TAS country
H
$285,000
0.0%
6.9%
Hobart
U
$330,000
3.1%
5.0%
TAS country
U
$239,000
-0.2%
1.7%
All data sourced from CoreLogic.com.au
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29
PEOPLE
Aggregator Connective
IN THE HOT SEAT Founder and mentor Nancy Youssef has added many strings to her bow over recent years, including philanthropist and author. Celebrating 15 years in the industry, she tells Australian Broker about her career highlights and goals What’s one of your recent career highlights? Most recently, my biggest highlight has been finishing my book. A I’ve always wanted to be an author, and after 15 years in this industry, facing many fears, reaching many milestones and learning countless lessons along the way, I have finally done it.
Q
What is your business philosophy and what inspired it? I’ve got two businesses, Classic Finance and Classic Mentoring. A My philosophy has always been anchored to my underlying message, which is education. Having been an investor who jumped into my first property not knowing anything, I’m passionate about giving people and small business owners the educational support they need to succeed, so I’ve built my whole business model around an abundance of education. My business philosophy has always been very high-touch – relationships are key; they are the core of everything. My goal to empower people to take charge of their financial future has a really wide reach, too. Whether it’s eliminating debt and therefore eliminating stress, helping someone get into their dream home or assisting them in building wealth by investing in property, my business exists to help people make positive and proactive financial decisions. This also extends to my philanthropic work in Africa with the Human Kind Project.
Q
What is one piece of advice you often give your mentee brokers? I think it comes back to this: don’t let fear stop you. Always A surround yourself with people who you aspire to be like, who can help you on your journey. And don’t be afraid to ask for help, because there’s a lot of it out there.
Q
What are your top three career goals for this year? Firstly, writing my book! I’ll be releasing it to coincide with our A 15-year anniversary in November, which is my second goal. Surviving and thriving for 15 years in this competitive, challenging, volatile and rewarding industry is a huge achievement. We’re going through a massive change as an industry, but as Classic Finance we’re doing our bit to remain relevant, consistent and agile, to move with changing market conditions and inspire new-to-industry brokers. I’m also midway through organising our fourth gala event this September, which exists solely to raise money for the Human Kind Project. AB
Q
30
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