OCTOBER 2018 ISSUE 15.20
Answering to the commission The industry reacts to the royal commission’s interim report /16
Opportunity in the claw hand Iva Rasic explains why millennial brokers have an edge /20
PETER VALA Thinktank’s head of sales and distribution explains how brokers can leverage commercial opportunities /14
The full-service agency Loan Market’s first director of strategic partnerships on his new role /22
ALSO IN THIS ISSUE… Caught on camera All the action from the AFG Awards /24 Market data The latest insights from the Northern Territory /26 In the hot seat Liz Wilson reflects on the meaning of customer service /30
NEWS
IN THIS SECTION
Lenders OnDeck expands equipment finance /04
Associations COBA welcomes draft bill
Technology Australians prefer dentists and traffic to loan applications /10
Regulators Industry responds to “frank and scathing” report /12
/06
Market Generation rent grows as ownership drops 3.7% /08
www.brokernews.com.au OCTOBER 2O18 EDITORIAL
SALES & MARKETING
News Editor Rebecca Pike
Sales Manager Simon Kerslake
Production Editor Roslyn Meredith
DATES TO WATCH
ART & PRODUCTION
Upcoming can’t-miss events
Designer Martin Cosme Production Manager Alicia Chin
2 1 – 2 3 O C T O B E R
26 OCTOBER
30 OCTOBER
Customer Owned Banking Convention
MPA Non-Banks Roundtable 2018
AFG commercial white label launch
Themed ‘The Challenge of Change’, this year’s convention will be held in Melbourne and will feature former prime minister Julia Gillard alongside FINSIA CEO Chris Whitehead; Cognitive Finance Group founder Clara Durodié; Michael Edwards, VP for advocacy at the World Council of Credit Unions; and Bank Australia chair Judith Downes.
Hosted by MPA editor Otiena Ellwand, the line-up features speakers from La Trobe Financial, Liberty Financial, Homeloans Ltd, Mortgage EZY, Pepper Money, Firstmac and Better Mortgage Management. Visit www.mpamagazine.com.au to register for the live stream.
As part of its recent investment in Thinktank, AFG has launched a new product range, AFG Commercial powered by Thinktank. Specialising in commercial property loans, it is exclusive to AFG members. The launch event starts at 10am and includes a light lunch. Brokers who attend will gain two CPD points.
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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Rebecca Pike +61 2 8437 4784 Rebecca.Pike@keymedia.com
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31 OCTOBER
1 6 N O V E M B E R
Understanding CCR for client meetings
FBAA 2018 National Industry Conference
Taking the frights out of comprehensive credit reporting (CCR), the MFAA hosts a webinar covering CCR in the context of customer guidance and lead conversion. The session starts at 11am in Perth, 1pm in Brisbane and 2pm in Sydney/Melbourne.
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 personalities.
2 3 N O V E M B E R MFAA annual golf day The MFAA will host a day of golf and networking at the Wembley Golf Course, WA, followed by the traditional end-of-year sundowners. There will be prizes on the day as well as competition holes and activities, including Longest Drive and Nearest the Pin – and mini golf for those who don’t want to play a full 18 holes.
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20 NOVEMBER
3 – 4 D E C E M B E R
CEDA Annual Dinner
Women in Leadership Summit
FBAA Social Melbourne
Held at the Sofitel Melbourne, the committee’s end-of-year celebration will welcome Reserve Bank Governor Philip Lowe as keynote speaker. He will present a review of the past year and share his economic predictions for 2019. Individual member tickets start at $290, while non-member tables can be purchased for $4,000.
This is a global gathering of women in leadership who have made a difference in their businesses and communities. The Perth edition is followed by eight further gatherings in Auckland, Hong Kong, Singapore, the UK and US. The event focuses on diversity in the workplace and leadership techniques.
Registration starts at 8.45am and the summit will commence at 9am. Morning tea will be provided and the event is due to conclude at 12.30pm. The Melbourne social will be preceded by a Sydney event on 30 November, with further details for both events available on the FBAA website.
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7 D E C E M B E R
This magazine is printed on paper produced from 1OO% sustainable forestry, grown and managed specifically for the paper pulp industry Copyright is reserved throughout. No part of this publication can be reproduced in whole or part without the express permission of the editor. Contributions are invited, but copies of work should be kept, as Australian Broker magazine can accept no responsibility for loss. Australian Broker is the most-often read industry publication, according to independent research carried out by the Ehrenberg-Bass Institute for Marketing Science at the University of South Australia in December 2008. The research also found that brokers rate Australian Broker as the best for both news content and feature articles, followed by sister publication MPA. Overall, on all categories, Australian Broker ranks top followed by MPA. The results were based on a sample of 405 respondents who were the subject of telephone interviews.
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NEWS
LENDERS PEPPER TRANSACTION AN INVESTOR FIRST Group’s I-Prime 2018-2 transaction – the first to offer investors the opportunity to invest in both US and AUD notes – was priced on 5 October at $600m. Prime investment loans comprised 58% of underlying collateral, compared to 42% prime owneroccupier. Group Australian CEO Mario Rehayem said, “This transaction demonstrates our ability to meet not only the underserved needs of our customers but also the needs of our debt investors in an innovative yet responsible manner.” PEPPER
LOWEST RATES IN A GENERATION Source: Reserve Bank, CommSec
Bank variable mortgage interest rate 18% 16% 14% 12% 10% 8% 6%
AMP REMOVES SUPEREDGE PRODUCT has followed similar moves AMP by CBA and Westpac and will discontinue SMSF lending from November. Westpac stopped SMSF home loans for new customers on 31 July, while CBA announced its ban would take effect from 12 October. All three will continue to support existing SMSF loan customers. An AMP spokesperson said, “After careful consideration … we believe it’s prudent to close AMP SuperEdge to new business. We’ll continue to keep the market situation under review.”
“We are forecasting a 10.6% decline in home building in 2019, which would leave new home starts at the still historically high level of 193,600 homes” Diwa Hopkins Economist, Housing Industry Association
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4% Jan 1959
Jan 1967
Jan 1975
Jan 1983
Jan 1991
Jan 1999
ONDECK EXPANDS EQUIPMENT FINANCE PRODUCT SUITE Lender says it is providing a solution for “underserved” market of small business owners, following feedback from existing customers Capital Australia is to expand its equipment finance suite with the launch of a new product offering secured lending with repayment terms of between 24 and 48 months. The product was developed following feedback from small businesses and brokers about the length of typical loan terms, as well as the unavailability of funding from mainstream lenders. The term loan is secured against the value of the equipment and its potential to generate ongoing revenue. It ranges from 24 to 48 months for amounts from $10,000 to $100,000, with no maximum age restrictions on any asset class. Cameron Poolman, CEO of OnDeck Australia, said brokers ONDECK
often spoke to lenders about the challenges they encountered in obtaining traditional finance solutions for non-primary assets. “These include assets such as catering equipment, gym equipment, racking, IT, food processing and fit-outs, which mainstream financiers will not finance because of the asset type or its age,” he said. “Currently, many small business owners must resort to using their valuable working capital, or turn to family and friends. Often the purchase simply doesn’t happen, and that limits the development or even the ongoing operations of the business.” OnDeck group sales manager Michael Burke added, “From
Jan 2007
Jan 2015
speaking to our existing customers we found that 30% were using our facility to buy their plant equipment, and it had a useful life beyond our funding. So they were saying it’d be great if you could finance over a longer term that provides them lower repayments. “Certainly the interest from brokers and small businesses generally is that access to capital is a very important part of delivering on a growth strategy.” The loan has a one-page application process and requires six months’ bank statements for the business. According to OnDeck research, one of the main reasons small businesses borrow from online lenders is to buy equipment. “Our focus is on a small business owner’s overall financial health,” Poolman said. “Our equipment finance solution provides the finance to purchase necessary equipment, frees up cash, and gives owners more opportunity to focus on what’s best for their business.”
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NEWS
A S S O C I AT I O N S BROKER GROUPS MEET NEW TREASURER CEO Mike Felton and FBAA executive director Peter White joined senior leaders of Mortgage Choice, Smartline, FAST, AFG, Connective and other broker groups in a meeting with the new federal treasurer, Josh Frydenberg. Hosted by Aussie Home Loans, the meeting took place on 26 September. Aussie CEO James Symond said, “We appreciate the treasurer taking time to meet with us and discuss the future of this most important part of the Australian economy.” MFAA
Michael Lawrence, CEO, Customer Owned Banking Association
COBA WELCOMES DRAFT BILL TO REDUCE BARRIERS TO CAPITAL RAISING Amendments to Corporations Act would define mutual banks and lower barriers to capital for mutuals, unions and building societies CEO of the Customer Owned Banking Association, Michael Lawrence, has welcomed a draft bill that proposes to lower barriers to raising capital for mutual banks, credit unions and building societies, through an amendment of the Corporations Act. Now under consultation, the draft would also see mutual banks defined under the Act. Lawrence said it was “a historic reform”. “Customer-owned businesses are particularly well placed to deliver THE
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competition and choice in banking because we naturally put the customer first. We are profit-making but not profit-maximising,” he said. “We are not trying to squeeze our customers to please shareholders. We are not perfect, but we are not conflicted about who we are working for. Access to capital, particularly regulatory capital, is critical to our sector’s capacity to compete and grow. “Greater access to regulatory capital means that customer-owned banking
institutions are able to grow more quickly and undertake important investments, while remaining well capitalised. This allows our sector to write more loans and provide better-quality services to current and prospective members, and will increase competition in the banking sector,” Lawrence added. Currently, mutual companies are not explicitly defined in the Corporations Act, and the Act does not distinguish between mutuals and non-mutuals, except for the demutualisation provisions in part five of schedule four. “These demutualisation provisions are to be retained for actual demutualisation proposals but are to be amended to make sure they don’t capture capital-raising proposals that do not change a
company’s mutual identity,” Lawrence said. The announcement is the latest step in a process following the 2016 Senate Mutuals Inquiry; the March 2017 Hammond Report on reforms for mutual; the government’s November 2017 policy announcement ‘Backing co-ops, mutuals and customer owned banks to increase competition’; and APRA’s November 2017 ‘Changes to the capital framework for mutual ADIs’. Lawrence added, “We will now consult with our members and other stakeholders on the draft bill, and we look forward to seeing the legislation finalised and introduced into Parliament as soon as possible.” Responses to the consultation are welcome from interested parties until 1 November 2018.
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NEWS
MARKET RBA WARNS AGAINST BORROWER COMPLACENCY governor Philip Lowe has continued to warn mortgage holders not to be complacent about rates. His comments followed 15 separate speeches and statements this year, in which he sounded a warning bell that the next move in interest rates would be up, rather than down. Announcing another hold on 2 October, he said, “The board judged that holding … would be consistent with sustainable growth in the economy and achieving the inflation target over time.” RBA
FBAA SHORTLISTED IN BUSINESS AWARDS FBAA and its executive director Peter White have been shortlisted as finalists in the Optus My Business Awards, to be held on 9 November in Sydney. White has been nominated in the category of Business Leader of the Year, while the FBAA has been nominated for the Finance Business of the Year award. White said, “The FBAA has a focus on improving standards, training and education so that the clients of members get the best possible service available.” THE
“Banks accept responsibility for their failures, and right now they are working day and night to make things right for their customers” Anna Bligh CEO, Australian Banking Association
Doron Peleg, CEO, RiskWise Property Research
GENERATION RENT GROWS AS OWNERSHIP DROPS 3.7% Latest HILDA survey data could indicate rising affordability issues for young people, according to research house CEO to the Household Income and Labour Dynamics in Australia (HILDA) survey, there has been a rise in the number of renters, particularly in the younger age groups, as overall homeownership has declined. The HILDA survey shows that between 2001 and 2004 and 2013 and 2016 homeownership fell overall by -3.7%, but there was a larger drop of -5.9% for the 18–24 age group and -5.2% for 35–44s. RiskWise Property Research CEO Doron Peleg said that while this could reflect that young people were staying in the parental home longer, it could also mean they simply could not afford to purchase in such an unaffordable market. He said, “In NSW investors are ACCORDING
the minority, as investor lending has been falling since mid-2017 due to credit restrictions and uncertainty over the outcome of the banking royal commission.” However, he also observed that in areas of lower investor activity, house prices were lower and more first home buyers were able to enter the market. Currently, FHBs make up around 18.1% of the market, an increase from 13.2% in July 2016. However, Peleg warns that this is not a solution to overall national ownership trends, as chronic undersupply of family housing is likely to push prices out of the reach of FHBs. He added, “This is high on the agenda for the federal government;
however, a coordinated strategy should be put in place to encourage a better spread of the population across Australia, as well as the construction of owner-occupierappropriate dwellings in the middle-ring suburbs in our major capital cities. “Without a strategic and comprehensive solution, it is likely that the current supply and demand patterns will once again lead to escalating prices, deteriorating housing affordability and a reduction in homeownership in Australia.” Peleg said other measures should be undertaken at the state level, particularly in relation to planning, greenfield land releases, rezoning and a more coordinated approach between the states and the local governments in relation to those matters. In addition, federal to state governments and state to local governments should provide incentives for meeting pre-approved development targets and increasing dwelling supply.
AUCTION CLEARANCE RATE – COMBINED CAPITALS Source: CoreLogic
Weekly clearance rate – combined capital cities Weekly auction clearance rate
4-week average
90% 80% 70% 60% 50% 40% 30% Sept 2008
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Sept 2009
Sept 2010
Sept 2011
Sept 2012
Sept 2013
Sept 2014
Sept 2015
Sept 2016
Sept 2017
Sept 18
VALUE OF DWELLING COMMITMENTS Source: ABS
Value of dwelling commitments, total dwellings Trend
$m
Seasonally adjusted
35,000 34,000 33,000 32,000 31,000 30,000 Aug 2017
Nov 2017
Feb 2018
May 2018
Aug 2018
No. of dwelling commitments, owner-occupied housing Trend
No.
Seasonally adjusted
58,000 56,400 54,800 53,200 51,600 50,000 Aug 2017
Nov 2017
Feb 2018
May 2018
Aug 2018
AUCTIONS DROP TO NEAR-SIX-YEAR LOW number of houses sold at auction has dropped below 50% for the first time since December 2012, and since house prices peaked 12 months ago. A total of 889 auctions were held across the country in the week to 30 September, compared to 2,404 the previous week, according to CoreLogic, which attributed the drop to AFL and NRL games and public holidays in a number of states. Head of research Tim Lawless said, “While the downturn is well entrenched across Darwin and Perth, Sydney and Melbourne are now the primary drag.� THE
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NEWS
TECHNOLOGY
UBANK ROLLS OUT DIGIDOCS division UBank will now offer DigiDocs through a partnership with MSA National. The development allows eligible customers to quickly and securely review and sign loan documents on their computer or mobile device at any time. Powered by MSA National and using the DocuSign platform, DigiDocs uses encryption and two-factor authentication. MSA National CEO Ayhan Baba said, “Now more than ever, consumers are expecting fast and convenient service on demand.” NAB
AUSTRALIANS PREFER DENTISTS AND TRAFFIC TO LOAN APPLICATIONS Bank develops online tool to make loan applications more fun than pulling teeth
has developed an online tool to help make it easier for borrowers to apply for home loans, after research showed that instead of completing a traditional home loan application 18% of Australians would rather to sit in peak-hour traffic; 16% would endure a 14-hour flight without entertainment; and 20% would rather go to the dentist. The new platform will give St. George applicants a personalised home loan snapshot showing how much they can borrow, any upfront costs and monthly repayments, and the best interest rate personalised to each buyer’s circumstances. ST. GEORGE BANK
Buyers who find themselves stuck along the way can now also connect with a St. George home loan expert during extended hours, as well as seven days a week via web chat or phone. St. George’s general manager Ross Miller said, “Our research suggests homebuyers, particularly first home buyers, are still optimistic about owning a home, but the actual application process is forcing Aussies to throw it in the too-hard basket. “So we’ve built an entirely new online application platform to combat these frustrations and put the power back in the buyers’ hands.” According to the results of the 2018 St. George Home Buying
Survey, 2.2 million Australians plan to buy their first home in the next five years, yet 48% of first home buyers admit they’re deterred because the application process is too daunting. The research shows that too much red tape or paperwork (25%), not knowing where you actually stand (20%), and the length of the process (20%) are the most frustrating aspects of the traditional application process. Miller added, “As a family bank, it’s important that customers can talk to an expert at a time that’s convenient for them, whether that’s after work, on a Saturday, or even from the sofa. “When you also consider 90% of homebuyers start their home loan search online, digitising the experience was a no-brainer for us, bringing together the best of new technology and our 80 years of experience to help Aussies feel confident and supported throughout the entire home loan process.”
ASIC’S INTERNATIONAL FINTECH AGREEMENTS ASIC’s Innovation Hub + US Commodity Futures Trading Commission’s LabCFTC C ooperate S upport innovation P romote collaboration between initiatives ASIC + Luxembourg’s Commission de Surveillance du Secteur Financier U nderstand financial innovation in each jurisdiction S hare information on fintech and regtech P rovide international opportunities for national firms
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ASIC SIGNS AGREEMENTS WITH US AND LUXEMBOURG fintechs are set to benefit from new agreements signed by ASIC with the US Commodity Futures Trading Commission and Luxembourg’s Commission de Surveillance du Secteur Financier, which include different points of collaboration (see boxout). ASIC chair James Shipton said, “Technological changes are reshaping financial services, markets and the regulatory landscape. [This] arrangement assists innovative businesses to grow across borders and allows for greater information sharing and cooperation by the two regulators.” AUSTRALIAN
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NEWS
R E G U L AT O R S
FINANCIAL PENALTY CHANGES UNDER REVIEW legislation to strengthen penalties for financial sector misconduct and increase ASIC’s powers has been released by the government for public consultation. Proposed changes include doubling maximum imprisonment penalties and significantly increasing financial penalties for more serious ‘white collar’ criminal offences. The legislation also seeks to introduce criminal offences alongside strict and absolute liability offences; expand the infringement notice regime; and introduce a new test to all dishonesty offences under the Corporations Act 2001. DRAFT
INDUSTRY RESPONDS TO ‘FRANK AND SCATHING’ REPORT Royal commission’s interim report released to schedule, covering four of six rounds of hearings
royal commission’s interim report on conduct in financial services, banking, superannuation and insurance highlighted a string of issues in relation to mortgage broking and lending practices. Speaking at a press conference in Melbourne ahead of the public release, Treasurer Josh Frydenberg called it “frank and scathing” and thanked Commissioner Hayne for his work. He said, “Almost every piece of conduct identified and criticised in this report can be conducted directly to some monetary benefit from engaging in the conduct.” In relation to lending and brokers, the report highlighted four issues: confusion over roles and responsibilities; customer needs; THE
$50K PENALTY FOR MISLEADING FHBS Homes Pty has paid $50,400 in penalties after ASIC issued four infringement notices for misleading advertising aimed at first home buyers. The ruling found the ‘2K on your way’ campaign for Metricon’s HomeSolution house and land packages contained misleading representations about eligibility to qualify. Consumers were required to fund the balance of the prescribed 5% deposit – from $30,000 to $41,000 – through an unsecured personal loan arranged by a Metricon-associated broker. METRICON
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‘unsuitable’ lending; and processing errors. As expected, it also discusses the use of the HEM benchmark. An MFAA statement contested the report’s summations that loans written through mortgage brokers had higher leverage and risk. The MFAA also accused the report of being silent on many of the changes industry groups were already adopting, and not taking these into account when forming its questions and considerations. It added, “The MFAA believes the issues raised around remuneration can be effectively dealt with by the specific reforms being proposed by the CIF, a stronger customer duty and a governance framework with an enforceable industry code focused on conduct and culture.”
FBAA executive director Peter White said the report did not find any systemic evidence to suggest that conflict of interest in commission directly disadvantaged clients. He also said adequate penalties were already in place. “I would argue that the cancellation or suspension of a broker’s licence by ASIC is a substantial penalty in itself,” he said. However, Professor Janek Ratnatunga, CEO of the Institute of Certified Management Accountants, said the report missed “the biggest fraudulent act” carried out by banks when it came to calculating interest. “The finance equations used … are either erroneous, or skewed to provide answers in the bank’s favour.” He cited examples of where a monthly P&I repayment in a bank’s mortgage statement was different to that obtained by using the bank’s own loan calculator. A seventh round of hearings commences on 19 November. For more on this story, turn to p16.
30/06/2003
ADI PROPERTY EXPOSURES, JUNE 2018 Source: APRA
Key statistics for ADIs with greater than $1bn in housing loans for June 2018 June 2017
June 2018
+1.7%
Change
+4.0%
-4.1%
$98.7bn 5,801,300
$94.6bn
5,900,100 $261,100
Number of housing loans
$271,600
Average balance of housing loans
New housing loans approved in the quarter
POSITIVE REVENUE TREND Source: Department of Finance, CommSec
Budget revenue and expenses, smoothed rolling annual total % Expenses
Revenue
10%
8%
6%
4%
2%
0%
-2% Jan ’15 Jul ’15 Jan ’16 Jul ’16 Jan ’17 Jul ’17 Jan ’18 Jul ’18
BANK CEOs FACE THE MUSIC CEOs of the four major banks have answered to the House of Representatives Standing Committee on Economics in a series of public hearings that took place on 11, 12 and 19 October in Canberra. The committee was established to look into the four major banks’ processes for identifying and investigating the misconduct highlighted by the royal commission. Committee chair Tim Wilson, MP, said the commission had unearthed “appalling conduct contrary to law”. In the first hearings, jeering and laughing from the gallery erupted on several occasions throughout the questioning of CBA’s Matt Comyn. THE
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SPECIAL REPORT
CAPTURING COMMERCIAL Brokers may have the mortgage market cornered, but when it comes to commercial, 83% of loans are arranged directly with a lender. Thinktank head of sales and distribution Peter Vala explains how to turn the tables
KEY BUSINESS METRICS increase
steady
decrease
$659,000
Average loan size
$3.93M —
Maximum loan
63.1%
Weighted average LVR
15.0%
SMSF loans
86.5% —
Self-employed borrowers
$68.3M
Current group turnover
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residential loans accounted for 55.7% of all new mortgages in the September 2017 quarter, according to figures released by the MFAA. However, when it comes to commercial lending, only 17% of deals originate through a broker. On one hand, the trend confirms commercial loan distribution is dominated by bank and non-bank lenders. On the other, it demonstrates an unparalleled opportunity for brokers to tap. “There are a number of factors in our view which have most likely contributed to the sizeable disparity,” says Peter Vala, head of sales and distribution at Thinktank. “We believe the banks have been very effective over a long period of time in positioning themselves to be the go-to source for assistance when it comes to any form of commercial or business finance, and in doing so they have worked hard to retain as much control over their customer relationships as possible.” This positioning has paid off, particularly as rules around residential lending have continued to tighten in recent months and focus has shifted to other loan types. ABS data for July 2018 shows the total value of owner-occupier housing commitments excluding alterations and additions was flat in trend terms, while seasonally adjusted commitments increased 1.3%. Meanwhile, the value of total lease finance commitments increased by 3.8% and the seasonally adjusted series increased 1.9%, following a rise of 2.4% in June. Vala says the process of brokering a commercial deal is part of the reason BROKER-ORIGINATED
why broker input in a high-demand sector remains low. “Commercial deals are often more involved and take longer to come together. Establishing and building a broker business based on commercial has historically been largely confined to ex-bankers and property finance specialists,” he says. “The market and lending practices have changed a lot in the last five to 10 years and that penetration is lifting all the time as more and more brokers see the potential
who would have easily obtained a very keenly priced deal out of banks not that long ago now having to hunt further afield and pay more, even though their underlying creditworthiness hasn’t changed,” Vala says. Further changes in appetite have even extended to SMSF loan products. Data released by the ATO confirms SMSF investments in commercial property increased almost 47% between 2012 and 2017. However, CBA, Westpac and AMP have all withdrawn their SMSF lending facilities in the last two quarters. Advising brokers to develop close relationships with their aggregators’ commercial BDMs in order to keep ahead of the developments, Vala adds: “Now more than ever it is vital for brokers to have access to a wide panel of effective and reliable lenders. “With these trends, and expectations of further changes
“Brokers and aggregators need to be actively maintaining sufficiently deep and wide lender coverage to cater for the full realm of client needs” Peter Vala, head of sales and distribution, Thinktank and reach into the space.” Despite the dominance of the banks in commercial, there has been a reduction in lender appetite over recent months – something Vala says is rooted in “greater attention to detail”, specifically with regard to serviceability and compliance. That isn’t to say credit is difficult to come by – as ABS statistics demonstrate – but the terms around the bank’s new appetite mean it is becoming more expensive in certain situations. “High-quality credit is still in good demand. However, with strong competition between lenders, the gradient drop has become much more pronounced, with borrowers
in lender appetite still hanging in the wind, brokers and aggregators need to be actively maintaining sufficiently deep and wide lender coverage to cater for the full realm of client needs,” he says. Reversing the trend As witnessed by Vala, when it comes to commercial deals there are three types of brokers: there are those who refer the deals to another broker; others who have some experience but only take on commercial deals reactively; and those who have a genuine interest in seeking new, commercial business. Thinktank has taken a proactive approach to plugging knowledge gaps
In partnership with
Peter Vala, head of sales and distribution, Thinktank
through mentorship and training that offers professional development points, and it also operates an agile sales and credit team, supported by relationship managers. The focus is to transition the first two types of broker into type threes, and to also tap the potential of the established type-three brokers. ““We work closely with aggregators and industry bodies to bring brokers together in a very interactive way that takes practical, everyday examples of client activation opportunities and illustrates how easy it can be to turn on the commercial solutions switch,” Vala says. This is backed by a network of relationship managers who are
available to provide as much support as required during the transaction. Further, for the type-three brokers this also extends to mentorship and hands-on training, covering such skills as portfolio management techniques. All training is delivered in conjunction with aggregators and other, complementary lenders. Regardless of the type of broker, when it comes to converting leads into deals the same rules apply in all cases. “Conversion is all about communicating a deliverable and suitable financial solution,” Vala says. To do this, he says the first step is to fully understand a client’s needs and circumstances. Secondly, it
involves presenting funding options suited to the client’s requirements, and finally, making sure the selected funder is likely to be supportive so as to ensure the probability of a loan approval on terms as high as possible. Target sectors Thinktank’s observations relate to commercial lending, which includes finance secured by real property. However, the sector also spans a range of options, from small business and unsecured loans to asset finance, cash flow and debenture-secured lending, construction facilities, and all manner of commercial property loans. At Thinktank, where the average
loan is $659,000, industrial property dominates, with funding also in demand for retail, office residential, mixed and specialised property. Strong demand has also been witnessed from the services and trades sectors, as well as manufacturing supporting construction and infrastructure. Meanwhile, the individual business sectors demonstrating consistent demand among self-employed borrowers include childcare, student accommodation and boarding houses, education, engineering, financial services, health, IT, general retail, food retail and restaurants, and wholesaling. Looking ahead, Vala expects the market’s potential to be underpinned by solid economic growth, a continuation of low interest rates, low unemployment, and a positive business expectations and investment outlook for “the next year or two at least”. What is not certain, he says, is how the finance supply side will play out. Despite this, it’s almost a given that the non-banks will capitalise on commercial lending, just as they have residential, and, as a result, brokers are on track to boost their 17% origination share. In-house, Thinktank is working on “a number of initiatives”, following a fifth consecutive year of 30%-plus year-on-year growth. The company has further expanded its national presence across Sydney, Melbourne and Brisbane, and new team members have boosted the head count to 40, with a forecast to reach 48 by June next year. Another public securitisation will follow in the short term, along with further wholesale funding lines, and there are plans to bring new products to the market in the last quarter. Additionally, heavy investments will be made in a new loan-processing platform to facilitate continued digitisation, and Vala promises a “number of interesting announcements before calendar year end”. AB www.brokernews.com.au
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NE WS ANALYSIS
REACTING TO THE ROYAL COMMISSION Providing the clearest indication of what could lie ahead for the broking industry, the royal commission’s interim report posed some challenging questions. Australian Broker examines its contents and impact
finance and banking sector’s annus horribilis took another turn on 28 September when the royal commission’s interim report was released. "Frank and scathing", in the words of Treasurer Josh Frydenberg, it focuses on four issues related to broking: confusion over roles and responsibilities; customer needs; 'unsuitable' lending; and processing errors. Industry associations were quick to point out the gaps. MFAA CEO Mike Felton says the real debate should be around how changes to distribution would redraw the industry’s competition dynamics. In a statement, he said, “Ignoring competition when considering further changes to the financial system could lead to unintended consequences, and risks driving customers back to bank branches.” In its response, FBAA executive director Peter White said, “On first glance it appears the commission does not fully understand the finance broking sector. “We expected an interim report like this and we will work through the points, but nowhere is there any suggestion that the broking sector is systemically broken.” The association also rejected claims that lenders paying value-based upfront and trail commissions could be in breach of NCCP legislation. Noting the industry’s achievements over the last two decades, founder and principal of Astute Ability Finance Group Mhairi MacLeod says, “The whole financial services sector seems to have been tarred with the same brush.” THE
16
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Mhairi MacLeod, founder and principal, Astute Ability Finance Group
Commissioner Hayne’s scathing attack on upfront and trail commissions would appear to be calculated towards that. “Was the royal commission set up to deliver this outcome from the very beginning? Lots of bluster, headlines and a few scalps, but when the dust has settled, could it be, once again, a case of business as usual for the banks? With reduced competition, higher fees and higher interest rates, making even more profit than ever before – it’s not as bizarre as you might think.”
“Brokers have brought real competition, and the royal commission should appreciate that and be cautious about any future findings it makes which may effectively push customers back to the banks.”
The structural shift While the report asks a number of questions related to intermediaries, the biggest one is: ‘Is structural change in the industry necessary?’ MoneyQuest MD Michael Russell believes the Combined Industry Forum proposals are
She adds, “From an industry perspective, I think there was a lot of food for thought, but there was also some misinformation about broking and the industry’s relationship with consumers.
The repeated claims of misinformation and misunderstanding – not to mention the events that unfolded in the dock – have led many to believe that brokers have become
“From an industry perspective, I think there was a lot of food for thought, but there was also some misinformation” scapegoats for the banks. Kevin Lee, buyer’s agent and mentor at Smart Property Adviser, worked as a BDM and branch manager at a major bank in the late 1990s. He says, “The scapegoat may well be the broking industry.
ROYAL COMMISSION: KEY FIGURES 10,140 submissions received, related to:
9% Financial advice
12% 61% Banking
Superannuation
extensive enough to address regulator concerns, but that other changes could be useful. “The change needs to come culturally, top down, in all financial services organisations, where people in charge lead always with ‘customers first’. Not only is this always the right way to do business, it’s the smart way to do business in the long term,” he says. Meanwhile, Lee advises removing vertical ownership and placing a greater focus on education and training, to secure wider recognition of broking as a career path. “Broking needs to be perceived as a genuine career path that can place individuals who hold both the qualifications and licence as trusted advisers and a cornerstone of society.” A degree should be required, along with a minimum of two years’ industry experience, he says. To support this, incentives and greater access to education are both required. Noting how Australia has become a benchmark for brokers in New Zealand and Canada, MacLeod agrees that education and training should be enhanced, but the future lies in the attitudes of the next generation. Advising private businesses to address the rising demand for ethical operations and corporate social responsibility, when looking to attract customers and talent, she says, “I have pushed for our industry to place a much greater emphasis on CSR. Younger people are much more conscious of the CSR programs and ethics of the
companies they work for and use. This is something the broking sector should be aware of in order to ensure the longevity and popularity of the profession.” Profit before people In its executive summary, the commission blamed the conduct of the banks on a culture of greed and the pursuit of profit, “at the expense of basic standards of honesty”. The human impact of their actions was widely documented. The commission heard from one man, Robert Regan, who was dependent on charity for food, and Nalini Thiruvangadam, who was forced to borrow from her family and sell her jewellery. Another
public,” said CEO Anna Bligh. For Russell, the profit over people conclusion was inevitable. He says, “It all started when strategically they shifted far too quickly from being customer service organisations to product manufacturers. “The latter would have been fine but for the fact they also wanted to replace customer face-to-face interactions with technology and soon-to-be artificial intelligence. All of this adds up to staff not having enough personal interaction with customers, which in a B2C business is not a great ingredient to foster care and empathy for customers.” In fixing their tarred reputations, Lee advises that the banks should
“Lots of bluster, headlines and a few scalps, but when the dust has settled, could it be, once again, a case of business as usual for the banks?”
THE NEXT STEPS
1 Commissioner Hayne submitted his interim report to the governor-general on 28 September
2 Additional topics, including superannuation and insurance, will be covered in the final report due by 1 February 2019
3 Public submissions in response to the interim report will be accepted until 5pm on 25 October
Kevin Lee, buyer’s agent and mentor, Smart Property Adviser man, David Harris, revealed that when he admitted to his bank that he had a gambling problem, they offered him more credit. In their initial responses, the banks were remorseful; however, others didn’t hold back the punches. The Australian Banking Association simply referred to the report as the banks’ day of shame. “We will fix these problems and make them right without delay, to earn back the trust of the Australian
cap, and increase transparency around, senior and executive salaries – allowing shareholders to decide what is paid to the top 10 executives in each entity. He further suggests separating banks from the companies they own, including stockbroking and merchant banking; minimum fines and compensation frameworks; and clear and simple financial results reporting. In rebuilding their public
4 Round 7 hearings are scheduled to be held in Sydney from 19 to 23 November 2018 and Melbourne from 26 to 30 November 2018, and will focus on policy questions arising from the first six rounds.
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FE AT URES
THE MAJORS RESPOND Shayne Elliott CEO, ANZ
images, the banks have been quick to announce changes, with leadership shake-ups and exits, new policies, public apologies and promises. But the question of whether this level of misconduct could occur again will cast a shadow for some time yet. To prevent a repeat, Russell
prove to be a wonderful circuitbreaker for the banks and those now in control who are driving change with a steely focus on customers,” he says. Public submissions in response to the interim report will be accepted before 25 October (see box, p16, for details). The next
“The change needs to come culturally, top down, in all financial services organisations, where people in charge lead always with ‘customers first’” Michael Russell, managing director, MoneyQuest makes three suggestions: top-down cultural change to drive an agenda of fairness; empowerment of key management to make the right decision over the profitable one; and close collaboration with regulators, backed by a self-reporting regime. “I’m absolutely certain this will 18
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and final round of hearings will take place in Sydney from 19 to 23 November, and Melbourne from 26 to 30 November 2018. They will explore the questions to be considered in the final report, due to be submitted to the governorgeneral by 1 February 2019. AB
“ANZ is taking action to fast-track changes – leadership, strategic, systems, people and cultural. We will make the investments required to build a bank worthy of the trust and respect of our customers and the community.” Matt Comy CEO, CBA “The interim report is confronting and rightly critical of our industry and our bank. We have seen too many examples of unacceptable behaviour and unacceptable customer outcomes … I am committed to making sure that we learn from the failures detailed in this report to fix what went wrong and put things right for our customers.” Brian Hartzer CEO, Westpac “This report marks a significant step in the royal commission process. We’re reviewing it carefully and are focused on learning from the mistakes of the past and preventing them from happening again. I apologise to any customers who have been impacted by mistakes that we have made.” Andrew Thorburn CEO, NAB “It is difficult to face the statement of ‘profits before people’, but this is exactly what we need to confront. Banking was built on putting people first and earning the trust of customers. We must return to these principles once again, rather than continuing to be short-term managers.”
19 October • The Star Sydney
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OPINION
OPPORTUNITY IN THE CLAW HAND Brokers are often advised on how to attract millennial clients, but how can millennial brokers win the business of customers 10 years their senior? BorrowRight broker Iva Rasic explains why the answer could be in the claw hand
are inundated with tips on how to secure millennial clients, but what if the tables were turned and instead we spoke about attracting millennials to the industry as brokers? Gen Y, millennials or, as others call us, ‘those kids who are always on their phones’ – whatever the preferred term, our advantage is clear: we know our market, we know what we do and don’t like, and we have our own networks of young potential clients. What we don’t know is how to get business from everyone else. Let’s face it, most of the big-ticket clients with multiple properties and large savings pots are over the age of 35. Why would someone as much as a decade older than the average millennial trust us with their finances? Well, here are a few reasons why they should.
writing the articles personally. Send links to this content to your existing database, and be consistent. Don’t send or upload five articles one week then none for a month; instead pick the days you’ll share content, and download a media management
BROKERS
Experience isn’t everything While I’d never dismiss veteran brokers who have bravely weathered several financial crises, experience can only get you so far in this industry. I think we can all agree that the never-ending policy changes, industry rules and market conditions make broking a somewhat dynamic job. What was true yesterday is not always true today. This puts the new entrant on a level pegging with their experienced peers, but you can’t tell a customer that, actually, experience isn’t everything. The simplest way is to show that you know your stuff. Flood all of your socials with articles, tips, tricks and industry news. Make sure they’re insightful and from reputable sources – and give yourself extra points if you’re 20
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For example, one of my first clients sent me a text at around 9pm asking if he could call. Both of my parents who work in mortgages said that maybe I shouldn’t call this late, but honestly, I didn’t see a problem with it. I’m on my phone anyway? Clearly he is too. Millennials are used to being switched on almost 24/7, and the anxious client benefits from that. However, not everyone likes being contacted after hours, and as brokers we have to be good at reading people. We can usually gauge which customers are happy to have their call returned in the evening and which ones we should leave until the morning. Although we millennials are criticised for our obsession with technology – and we will all, most likely, develop permanent claw hand from overusing our mobile phones – there are positives for the client. Being available and responsive is key to getting and keeping business. In my opinion, claw hand is a small price to pay for a successful and lucrative brokerage. Masters of the universe OK, masters of the universe may be
Whatever the preferred term, our advantage is clear: we know our market, we know what we do and don’t like, and we have our own networks of young potential clients platform to help you along the way. It also helps to actually know your stuff so when you’re chatting to clients you are professional, informed and competent. The plus side to a lack of experience is that you’re often underestimated, meaning it’s easy to dazzle clients with extensive industry knowledge.
Iva Rasic Mortgage broker, BorrowRight
We are always on our phones I sometimes ask my clients why they stuck with me rather than a bank or competing broker, and their answer is always the response times. Unless it’s roughly between the hours of 10pm and 7am, we’re in an appointment, or the internet is down, we are usually (always) on our devices. Many customers understand – and expect – that we will be responsive outside of normal office hours, and as millennials we are already used to it.
pushing it, but we are the most educated generation to date. Growing up in the Information Age, with the world at our fingertips, has positioned us well for the dynamic and contact-driven profession of broking. The industry is forever evolving, and we are not only open to change but very fast at learning how to navigate and leverage change. Our multitasking skills are advanced, making us incredibly resourceful, and we are the kind of people you want around if you need something done fast and efficiently. All in all, millennials have a lot to bring to the table. We are tech-savvy problem-solvers who are always looking for a way to complete tasks more efficiently and effectively. We are the motivated, bright-eyed and bushy-tailed future, and we are up for any challenge thrown at us – unless you ask us to give up our phones. AB
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PEOPLE
IN THE NE WS
THE FULL-SERVICE AGENCY Appointed to execute a plan that has been 20 years in the making, Loan Market’s first director of strategic partnerships, Peter Camphin, is changing how real estate, broking and wealth management integrate
Peter Camphin, director of strategic partnerships, Loan Market
of the White Family group of companies, Ray White, Loan Market and Wealth Market dominate in their respective fields. According to the latest financial results, in the year to June 2018 the Ray White Group sold $45.42bn worth of property across Australia and New Zealand, almost matching the $45.7bn achieved in the previous fiscal year. In July, Loan Market’s 650 brokers lodged $1.27bn in applications and $922m in approvals, with $846m in settled loans – an increase of more than 10% year-on-year. For more than 20 years the familyowned group of businesses has been trying to integrate real estate and broking, but has struggled to strike the right balance. Now, after 25 years with the group, Peter Camphin has taken on a newly created role in which he will do just that. “I was petrified but confident. I think if you’re not scared by a new role there would be something wrong,” he tells Australian Broker. PART
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As Loan Market’s new – and first – director of strategic partnerships, Camphin’s aim is to simplify referral processes between the companies for brokers, agents and property managers. “The broker finds things out about the client, which helps them understand how the agent can work better. For example, can this buyer afford this property? Have they got the
ability to perform on the contracts? Normally agents would get a contract signed subject to finance and cross their fingers, but last month 78,000 applications for housing finance across Australia failed,” he says. Observing the changes that have occurred since the royal commission started, he adds that “it takes more than four times longer now to get deals over the line on loan applications than it did two years ago”. While the move will bring significant growth opportunities for all three companies, the intention is to “create a culture for the convenience of customers”. However, Camphin believes this is the start of a new way to integrate broking and home sales, and it’s only a matter of time before it catches on. “This provides real value to the buyer, confidence is reassured in the vendor, and the investors can get the best ROI possible. We see that there is so much potential now that we haven’t identified before,” he says. Customer-facing team members throughout the group will learn how to refer clients for home loans, personal financial planning, SMSFs, investment strategy advice and other services, through the three businesses. Targets for the first 12 months are currently being devised and work will centre on two goals: looking after buyers, and increasing the percentage of people
who buy through a Ray White agent and borrow through a Loan Market broker. The bonus is that buyers will have to prove much earlier in the buying process that they can put their money where their mouth is. “We want to be able to provide a great customer experience through the confidence and professionalism of our agents and brokers – and we want to eliminate those people who are buying at auctions but aren’t approved for finance. Property and finance just go together,” Camphin explains. The integration will also see additional benefits for investors, who can expect higher ROIs through the added-value services of accounting and tax advice and loan reviews. However, creating a full-service agency starts with culture, and agent and broker training will be paramount. Existing programs are being adapted to include updates on the new integration strategy, as well as the direct benefits collaboration can achieve, with a focus on training real estate agents. “Every time an agent does an inspection or contract negotiation, there are touchpoints that need to be initiated so the agent understands and has a better control of the sales process,” Camphin says. “They know what’s going on, and they are not dealing with people who are not in a position to perform on their contracts.” AB
THE WHITE FAMILY GROUP OF COMPANIES
Founded
1902
13,000
people employed globally
35+
lenders on panel
650
brokers in network
Founded
2014
Offers financial planning and wealth services
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23
PEOPLE
CAUGHT ON CAMERA Australian Finance Group celebrated a successful year by hosting its annual NSW/ACT awards ceremony at the Hyatt Regency Hotel in Sydney on 24 August. Winners and finalists were recognised based on a number of quality measures. Nathan Aird (pictured), director of Universal Mortgage Experts, took home the coveted Champion Broker award, and ACA Mortgage Solutions was named Champion Broker Group. Stephen Doyle, AFG’s NSW/ACT state manager, said, “We were delighted to implement a number of new measures into our awards this year and can only say they were very well received by brokers and lenders. The day was a resounding success, and I congratulate all the finalists and the winners for the 2017–2018 financial year.”
Nathan Aird 24
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25
DATA
WESTERN AUSTRALIA
NT SPOTLIGHT
Perth pushes for recovery, offering countercyclical buying opportunities Despite being the city that has driven down national averages, Perth continues to push towards a recovery. Supply levels are also coming under control, which is likely helping the market regain its footing. CoreLogic’s Property Pulse report notes the number of new listings in July fell 1% year-on-year. Rental returns are on the up, according to its July 2018 Total Returns Index, which indicates that total returns in Perth increased to 1.6% from 2017’s 1.2%. In suburbs like Wembley, Ardross and Floreat, demand may even be outpacing supply, says Jeremy Sheppard of Empower Wealth. “Wembley has a ripple-effect potential of over 20% per kilometre, which is extremely high. Eighty per cent of all Ardross houses have open inspections, which indicates interest is high. Floreat houses have a 75% auction clearance rate, which is typical for markets experiencing strong demand. If countercyclical buying is your strategy, aim high in Perth right now,” Sheppard says. Area
Type Median value
Quarterly
12-month
growth
growth
Perth
H
$505,000
-1.0%
-1.0%
WA Country
H
$325,000
-6.1%
-3.7%
Perth
U
$390,000
0.0%
-3.7%
WA Country
U
$235,000
-9.6%
-11.5%
SOUTH AUSTRALIA
Education facilities boost job creation to kick-start the market While recent plant closures have had a significant effect on the economy, confidence seems to be creeping back into this state, with job creation, especially in education, pegged to change everything. Suburbs that have seen a tremendous upswing over the 12 months to June include Henley Beach, Smithfield, Athelstone and Norwood. Meanwhile, Morphett Vale, Mawson Lakes and Parafield Gardens are on the list of top sellers. However, real growth comes down to Adelaide’s ability to stabilise its economy. Real Estate Institute of Australia president Malcolm Gunning emphasises how important this is. “What has driven the decline in Adelaide is jobs. After a five-year period of decline, Adelaide is now starting to stabilise. But until there is more work in Adelaide we don’t see any major growth in prices,” he says. “One of the biggest industries in Adelaide now is education. Adelaide University is a major income producer, and you’ve got wine and tourist industries as well, although tourism hasn’t been as popular.”
Area
Type Median value
Quarterly
12-month
growth
growth
MUTED PROSPECTS
The price decline is slowing in the Northern Territory, but values are still on a downward spiral, according to the analysts
Total Returns Index for July 2018 showed the total returns for Darwin fell from 2.5% in the 12 months to July to just -0.8%. However, the report indicates that, even with this drop, the decrease in values was less sharp over the previous two months. Regional pockets recorded much more positive results, with total annual returns jumping from 1.4% to 12.3%, supporting the view that rental yields are one of the state’s best advantages. However, while returns favour landlords, rental rates do not. CoreLogic’s Home Value Index showed that Darwin had one of the weakest rental markets among the capital cities, alongside Sydney. Over the 12 months to July 2018, rents fell by 2.2%. CoreLogic’s Property Pulse report for August 2018 indicated that Darwin has had one of the weakest decades among the capital cities. Since March 2013, real dwelling values have fallen by a total of 29%. “We can’t see any factors that may halt or reverse the housing markets’ trajectory of subtle declines over the second half of 2018,” says Tim Lawless, CoreLogic’s head of research. That Darwin’s property market still doesn’t seem to have hit the bottom spotlights a problem with the local economy. “Unless there are real job creators out there – major projects – that market will continue to slide,” warns Real Estate Institute of Australia president Malcolm Gunning. “It’s not necessarily a destination for retirees – any increase in population is driven by work opportunities,” he adds. Nonetheless, Darwin is still recording fairly steady sales of houses in the $1m range. While lower than the peak figure of 5.9% of all house sales in 2015, the proportion of houses sold at a minimum of $1m in 2018 was 3.8% – a number that remained consistent over the 12 months to June. AB CORELOGIC'S
H
$463,000
0.7%
3.4%
Median price (houses)
SA Country
H
$287,750
-7.2%
0.7%
$776,887
Adelaide
U
$384,000
-0.3%
4.1%
SA Country
U
$220,000
2.3%
0.0%
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Silver linings emerge despite dampened performance In the rental market, the substantial drop in yields witnessed over the last few years is starting to plateau. Landlords have adjusted to those decreases and the market has, too. Now we see an increased willingness from landlords to spend money on properties to secure higher rents. In the owner-occupier market, we are definitely moving towards a trajectory of prices continuing to decrease – in a consistent manner to the previous three years – and there doesn’t appear to be anything in the market to cushion that. Regarding the sale of houses in the $1m range, we have a pocket of the market targeted at lower-price buyers – renovators and first home buyers – but there are still premium properties for sale and demand for them remains because of their low supply. When a property has all the right things, and is priced at $1m or more, it meets the demands of the market and it will sell.
Carmine Rauseo Broker, Rauseo Group
SUBURB TO WATCH: PARAP
Adelaide
26
BROKER PERSPECTIVE
Median price (units) $371,866
Source: CoreLogic
12-month growth
3-year growth
5-year growth
Indicative gross rental yield
-1.9%
-2.8%
-3.9%
4.6%
12-month growth
3-year growth
5-year growth
Indicative gross rental yield
-8.3%
-17.9%
-10.4%
6.9%
AUSTRALIAN CAPITAL TERRITORY
Canberra’s rental market is stable, although annual returns have declined OPPORTUNITIES AND KEY INFRASTRUCTURE
Population
Growth strategy
Infrastructure
Jobs
Projected to reach 246,786 by the end of June
$50m government strategy to incentivise inbound migration
$300m expansion plan launched for NT airports
Resources and energy continue to drive job market activity
HIGHEST-YIELD SUBURBS IN NORTHERN TERRITORY Suburb
Type
Median price
Quarterly growth
12-month growth
Tennant Creek
H
$214,000
-1%
-9%
Katherine
H
$314,000
-2%
-3%
Gillen
U
$303,000
-1%
-5%
Sadadeen
U
$284,250
22%
-5%
Moulden
H
$300,000
-3%
-14%
The proportion of income necessary to meet the median rental rate has not risen significantly, suggesting that the rental market in Canberra is still in a good place. The findings of CoreLogic’s Total Returns Index for July 2018 indicate that total annual returns decreased 5.8% on the previous year but have remained steady over recent months. The number of new listings on the market as of July was also the lowest since 2016. This reduced stock could explain the stability of the rental market, given demand. By contrast, things are looking more difficult for buyers. CoreLogic suggests falling stock could be a reaction to declining housing demand, causing potential vendors to refrain from bringing new supply to market. The premium sector is recording particularly high sales, however, with 14.1% being for properties priced at $1m or higher. Area
Type Median value
Quarterly
12-month
growth
growth
Canberra
H
$689,000
-1.7%
6.2%
Canberra
U
$435,000
-1.1%
0.3%
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DATA
NEW SOUTH WALES
CAPITAL CITY AUCTION CLEARANCE RATES
12-month
growth
growth
Sydney
H
$960,000
-0.5%
0.8%
NSW Country
H
$470,000
0.0%
4.5%
Sydney
U
$712,000
0.3%
-1.4%
NSW Country
U
$387,500
-0.4%
1.3%
VICTORIA
MEDIAN HOUSE AND UNIT PRICES
Affordability is steady, but not all areas offer the same amenities
$1,000,000
Type Median value
Quarterly
12-month
growth
growth
Melbourne
H
$735,000
-0.7%
7.7%
VIC Country
H
$357,000
-0.8%
6.1%
Melbourne
U
$535,000
0.6%
5.5%
VIC Country
U
$270,000
0.4%
4.5%
28
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Total auctions
121
Sold
49
Not sold
28
Clearance rate
63.6%
PERTH Total auctions
30
Sold
4
Not sold
9
Clearance rate
30.8%
$1,100,000
Houses
Units
Sydney Melbourne Brisbane Adelaide
Perth
Hobart
$502,500
$417,000
$326,500
$0
$370,000
$100,000
$480,000
$200,000
$325,000
$300,000
$440,000
$500,000 $400,000
$545,000
$700,000 $600,000
$715,000
$800,000
$674,000
$900,000
$865,000
The economy provides a well-needed crutch for Melbourne’s housing market. “Despite the lower socio-economic demographic, Montmorency, Wattle Glen and Doreen are standouts for houses. For units, look to Flemington, Footscray and Maidstone,” says Jeremy Sheppard, research director at Empower Wealth. Not every affordable suburb is a good deal, and it remains important to stay close to areas that can offer amenities and employment opportunities. For example, Casey and the Yarra Ranges are problem suburbs for this reason. Melbourne’s housing downturn has also resulted in poorer rental returns. CoreLogic’s Total Returns Index shows that yields dropped by 2.4% in the 12 months to July – the lowest since October 2012. In the wake of Melbourne’s decline, regional areas of the state have remained steady, with rental returns only falling from 10.4% to 9.8% in the same period. The general stability of the housing market has contributed to these better yields.
Area
ADELAIDE
Darwin
$420,000
Quarterly
$387,500
Type Median value
There were 2,404 homes taken to auction across the combined capital cities this week, increasing from 1,983 in the previous week. Despite the fact that auction volumes have been increasing over the month, 378 fewer auctions were held compared to the same week last year, predominantly due to the decline in volumes across Sydney and Melbourne, Australia’s two largest auction markets. Preliminary results show a clearance rate of 55.5% across the combined capital cities this week, increasing from last week’s final clearance rate of 51.8%, although this will revise lower as the remaining results are collected. The finalised clearance rates have stayed in the low- to mid-50% range for the last eight weeks, and it’s likely that this week will return a similar result. Over the same week last year the final clearance rate was 66.2%. In Melbourne this time last year, 1,361 auctions were held, returning a clearance rate of 70.6%. This compares with 1,158 auctions held this week, with a preliminary clearance rate of 55.5%. In Sydney, 850 auctions were held this week, returning a preliminary clearance rate of 57.3%. This will revise down as more results are collected. In comparison, 669 auctions were held over the previous week, and the final clearance rate was just 48.6%, the lowest seen since mid-July. One year ago, 1,033 auctions were held and the clearance rate was 65.9%.
$540,000
Area
WEEK ENDING 23 SEPTEMBER 2018
$655,000
According to CoreLogic research analyst Cameron Kusher, growth has slowed in places like Illawarra, Lake Macquarie, the Southern Highlands and Shoalhaven. “In regional NSW total returns increased 6.7% over the past year, the smallest annual increase since February 2013. Annual returns have slowed from 17.1% a year ago,” he says. For a long time, Sydney enjoyed an advantage in that demand considerably outstripped the available supply, keeping competition hot and putting pressure on prices. However, many construction projects are well underway in this capital, which boosts the local economy but also bridges the gap between demand and supply to limit growth. “Right now in Sydney there is a significant amount of new dwellings under construction. Even though the population is growing quickly, this under-construction stock will be ready for inhabiting over the next 12 months,” says Matthew Lewison, director of OpenCorp.
$395,000
Regional NSW has benefited from Sydney’s stumble, but it may not last
Canberra
CAPITAL CITY HOME VALUE CHANGES Capital city
Weekly change
Monthly change
Year-to-date change
12-month change
Sydney
-0.2%
-0.5%
-4.0%
-6.1%
Melbourne
-0.2%
-0.6%
-4.0%
-2.9%
Brisbane
0.1%
0.1%
0.4%
0.8%
Adelaide
-0.2%
-0.1%
0.6%
0.8%
Perth
-0.1%
-0.7%
-2.8%
-2.6%
Combined 5 capitals
-0.2%
-0.5%
-3.2%
-3.7%
*The monthly change is the change over the past 28 days
BRISBANE CANBERRA Total auctions
118
Sold
52
Not sold
41
Clearance rate
Total auctions
124
Sold
37
Not sold
49
Clearance rate
43.0%
55.9%
SYDNEY Total auctions
850
Sold
590
Not sold
252
Clearance rate
57.3%
TASMANIA
MELBOURNE Total auctions
1,158
Total auctions
3
Sold
530
Sold
0
Not sold
425
Not sold
0
Clearance rate
Clearance rate
55.5%
TASMANIA
Area
Storm clouds could be gathering over the Apple Isle Hobart remains one of Australia’s strongest markets, but investors need to keep a careful eye on where the wind is blowing. Being one of the smallest capitals in Australia, with around 200,000 residents, the city is susceptible to more volatility than its larger counterparts. Further, while generally performing better than major capitals Sydney and Melbourne, Hobart could already be affected by the nationwide slowdown. But those who have invested are reaping the fruits now. The city had the highest total returns in Australia at 17.1%, though this is lower than in the previous year, suggesting the state’s long-term growth prospects could be shaky. Nevertheless, low prices and stock could keep demand going for a while yet, as Hobart still has the country’s most affordable capital city properties. The total number of properties on the market in 2018 has also declined since 2017.
N/A
Type
Median value
Quarterly growth
12-month growth
Hobart
H
$445,000
-1.7%
11.4%
TAS Country
H
$293,300
-0.6%
6.7%
Hobart
U
$338,700
2.2%
9.0%
TAS Country
U
$240,000
-0.8%
0.0%
All data sourced from CoreLogic.com.au
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29
PEOPLE
Aggregator Astute Financial
IN THE HOT SEAT Inspired by her first-hand experiences of customer banking, Liz Wilson, director at Wilson Financial, reflects on the meaning of customer service and the importance of forging personal connections with clients
Who inspired you to become a broker? Working in-branch for a bank gave me an insider’s view of what A customer service in banking was really like, and it was nothing like how I remembered it as a child, visiting the bank with my parents. We would walk into the back of the branch, behind the tellers, with mum and dad, to the manager’s office and figure out how to finance their build. The manager knew and respected them, and I wondered how the system had become so broken and sales-focused that we had lost that personal touch. I knew I loved working with numbers and people, so moving across to become self-employed as a broker felt like a natural progression.
Q
What’s one of your recent career highlights? Finding my tribe and my mentor. I was really on my own with my A first aggregator, but when my mentor found me he brought me into Astute Financial and I found a family of like-minded people who support me.
Q
What’s the greatest challenge for brokers at this time? Adapting to change! Compliance, systems, processes, policy – it’s all A changing right now. Do not fight change; embrace it and spend time on building a better business.
Q
If you won $1m, how would you spend it? I think I’d need a holiday to figure that out. I really, really, really A need a holiday with my family, so I’d start with that. Clarity is a valuable asset, and my head spins most days.
Q
Q A
What do you wish you’d known when you started out as a broker? The simple philosophy of taking risks: if you fail you learn; if you succeed you reap the returns. Zero loss.
What are your top survival tips for working in finance? Forget about the details, and work on forging personal connections A with your clients. We all hate paperwork and change, but people are where we can share real stories and find common values. In a climate like the one we are in currently, connection is even more important. AB
Q
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