JUNE 2019 ISSUE 16.10
The next step Behind the shock election result that will reshape the broker channel /16
Fast money How the demands of SMEs are changing lending /20
SCOTT DURRANT The founder and director of Successful Ways explains how he turned an inspired idea into a productivity and revenue booster /14
In the hot seat Citibank’s head of mortgage distribution on the bank’s mortgage plans /30
ALSO IN THIS ISSUE… News A roundup of developments over the last two weeks /04 Caught on camera All the action from AltFi 2019 /25 Housing market data The latest property analysis from the Northern Territory /26
NEWS
IN THIS SECTION
Lenders French bank returns to Australia /04
Aggregators AFG expands SME lending reach /06
Technology Online SME lender prepares for IPO /10
Regulators ASIC’s rollcall for regtech specialists /12
Market Tasmania continues to lead national market /08
www.brokernews.com.au JUNE 2O19 EDITORIAL Editor Melanie Mingas News Editor Madison Utley Production Editor Roslyn Meredith
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Broker Business Exchange
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Future of Financial Services
BBX returns to the Westin Sydney this June and, in light of Commissioner Hayne’s recommendations, Key Media has waived the registration fee for brokers at the day-long education and networking event. The exchange will comprise conference and workshop sessions and an exhibition of leading industry names.
FinTech Australia’s annual awards ceremony will take place in Melbourne this year as the organisation has moved its HQ. Across the 19 categories at the 2019 event, focus will be on collaboration, with the introduction of new awards such as Deal of the Year, Partnership of the Year and Biggest Raise of the Year.
This event facilitates collaboration between technology, innovation, digital and strategy executives from Australia’s leading banks, insurance and superannuation providers. The aim is to drive dynamic conversations around the opportunities and challenges shaping the space currently, with emphasis on disruptive technologies.
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Taking place at Sydney’s Four Seasons, this day-long event covers negotiating skills and tips for overcoming imposter syndrome. The agenda will also deliver practical case studies designed to address stereotypes and explain how diverse management teams can create benefits.
Concluding this year’s Excellence Awards series, the MFAA will recognise its national winners in a gala ceremony at Melbourne’s Crown Casino. In addition to naming the winners from the state heats, the ceremony will include a number of national-only recognitions.
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National Finance Brokers’ Day
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Taking place for the fourth time in 2019, National Finance Broker’s Day will be marked across Australia, with the theme #brokersareyou. Founder Dino Pacella says this year’s event will showcase the interaction and value that brokers instil in their local communities.
Now in its 29th year, Informa’s annual Credit Law Conference will be held at Sheraton Mirage, Gold Coast, and will focus on the practical implementation of Commissioner Hayne’s recommendations. Representatives from ASIC, the ABA and Deloitte are confirmed to speak.
Next Generation Banking Technology Uniting thought leaders, front-line professionals and developers from across the finance industry, this event will explore AI, open banking API, fintech, cybersecurity and regtech – dubbed banking’s next big thing. Taking place in Melbourne, the event runs from 9am to 6pm.
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NEWS
LENDERS BLUESTONE EXPANDS TO ACCOMMODATE GROWTH
AUSTRALIA NEW HOME LENDING STILL IN DECLINE Source: ABS Housing Finance
Number of loans
has expanded its presence in Australia and New Zealand, increasing its floor space in Sydney and moving into new premises in Auckland. The development follows the recruitment of 80 new team members since the lender was acquired by Cerberus Capital Management in April 2018. CEO Campbell Smyth said, “We want to ensure our staff continue to have the resources they need to serve our borrowers and broker network.” BLUESTONE
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AMP SAVER OFFERS HIGHER RATE has launched a new AMP BANK savings rate for its AMP Saver account, including a 3% per annum four-month introductory rate for new customers on balances of up to $250,000 and an ongoing rate of 2.1% per annum on all balances. CEO Sally Bruce explained, “We know it’s getting harder to save given interest rates are low, so we’re offering a highly competitive ongoing rate to help savers reach their goals faster.”
“Open banking is a once-in-a-generation opportunity to redefine financial services. There is a massive opportunity for brokers to take the lead” Stuart Stoyan Founder and CEO, MoneyPlace
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FRENCH BANK RETURNS TO AUSTRALIA The multinational investment bank is one of Europe’s largest financial services organisations to offer commercial real estate finance as part of its operations third-largest bank in France and one of Europe’s largest financial services organisations, Société Générale has been granted a foreign ADI licence by APRA. The multinational investment bank is now authorised to operate in Australia and has stated its intentions to focus on commercial real estate finance in addition to energy, metals and mining, infrastructure financing, bond issuance and securitisation. The bank has ruled out a retail real estate finance operation in Australia, although it is expected to focus on funding renewable energy projects. In a statement provided to Australian Broker, the bank said it was looking to leverage its THE
international presence in the local market. “Following the authorisation from APRA as a foreign authorised deposit taking institution, Société Générale will be looking to leverage the strength of core and global expertise in a number of areas, including energy, metals and mining and infrastructure financing, together with enhanced product and service offerings such as bond issuance, securitisation/ asset-backed products, and real estate finance,” the bank said. “Our real estate finance will focus on commercial real estate and will not include a retail offering.” This isn’t the first licence Société Générale has held for Australian operations. The bank was active
Sep 2018
Dec 2018
Mar 2019
here until 2013, when it took the decision to service Australian customers from Hong Kong. Today, the bank is present in 67 countries and counts 31 million customers. In February this year, Société Générale announced in its financial results that it planned to reduce costs by €500m, and French newspaper Le Figaro reported that 1,500 jobs (7.5% of the total workforce) could be slashed in the corporate and investment banking parts of the business. However, the bank said it wasn’t possible to comment when pressed by the AFP news agency. The bank’s share price has fluctuated significantly in the last six months, from a high of €33.24 in November to a low of €23.79 on 14 February. The return of Société Générale takes the total number of foreign ADIs operating in Australia to 47. There are a further seven foreign subsidiary banks also present in the local market.
NEWS
A G G R E G AT O R S SUBAGGREGATOR SMARTLINE ADDSTEAMS UP WITH TAX GROUP TO LENDER PANEL has added business lender Prospa to its panel of lenders. CEO Sam Boer said, “We know [small business owners are] looking for alternative funding options. Smartline’s new relationship with Prospa will provide our brokers with a broader range of finance solutions to support their clients’ ventures and help them get ahead.” Last year, Boer told Australian Broker that Smartline was preparing to take on 30 new franchisees by mid-2019. SMARTLINE
AFG EXPANDS ITS REACH IN SME LENDING Aggregation head tells Australian Broker that new lenders and new tech will help brokers focus on sector of AFG David Bailey has confirmed the aggregator is placing renewed focus on business lending as thousands of SMEs struggle under current market conditions. “As we helped bring competition into the residential mortgage market, we want to do exactly the same in the small business market, which history proves has been underbanked and needs support,” Bailey explained. His comments are well timed as Scottish Pacific’s latest SME Growth Index has revealed that 58% of small businesses need new finance to fund their expansion opportunities. However, while the demand for finance exists, the solutions to meet it don’t: 22% of SMEs reported CEO
difficulties accessing funding since the royal commission. Further, one in three expect this trend to be more pronounced in future. In response, AFG has boosted the lenders on its business panel from four to more than 20 in only 12 months. “These lenders are helping brokers help small businesses,” said Bailey. “AFG has always been about providing competition and choice, and now we’re just looking at a different market to do more of the same.” Supporting its network of more than 2,900 brokers in adopting more business clients, the group is also expanding its technology and training. “We’re continuing to invest in our
technology platform, as well as our training platform to keep brokers up to date around changing requirements. That’s something we’ve always done, and we will continue to invest in it as part of our value proposition,” said Bailey. “What’s gotten brokers to where they are right now is their ability to service and look after customers. In periods of uncertainty and periods where credit institutions have been less consistent, customers need brokers even more.” According to Bailey, performance by the broker channel over recent years is “paying dividends” now, as the industry engages regulators and politicians in a crucial dialogue. “Uncertainty drives a level of inertia. To break that, you need to have conversations to ensure best outcomes. Without those, no one is fully aware of what the long-term effects could be,” said Bailey. “Fortunately, we’re starting to see that industry consultation. We’re starting to see that engagement with stakeholders improving.”
BROKERAGE EYES NT GROWTH has appointed Corey Drew as state manager SA/NT to strengthen operations in one of the nation’s most challenging markets. CEO James Symond said, “Aussie is performing extremely well in South Australia and the Northern Territory, particularly thanks to the significant focus and extra support provided to the team over the past 18 months.” As of the end of April, loan commitments in the NT were down 14.8% on last year. AUSSIE HOME LOANS
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NEWS
MARKET HOUSING AFFORDABILITY SHOWS GAINS March quarter affordability index from the Housing Industry Association has confirmed the fastest improvement in affordability in six years, with an increase of 2.2%. “The boom in home building of the past five years is a key factor behind the improvement in housing affordability,” said chief economist Tim Reardon. “With completions of new homes remaining at elevated levels, affordability is poised to continue to improve.” THE
MIXED FEELINGS ABOUT FINANCE CAREERS homegrown Australian finance brands have made Randstad’s annual Employer Brand Research list, which surveyed 10,000 workers aged 18 to 65. ANZ, followed by Westpac, claimed the top two spots on the financial services list, with Macquarie also receiving a mention. However, as a sector banking didn’t fare too well. Despite a 2% increase in positive public perception from last year, the industry placed 22 on the list of most attractive sectors to work in. THREE
“Nationally, over the three months to April 2019, 75.6% of properties sold for less than their original list price” Cameron Kusher Research analyst, CoreLogic
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TASMANIA CONTINUES TO LEAD NATIONAL MARKET State final demand figures reached all-time high of $8.58bn in the December quarter, according to data released by MyState Bank housing prices fell by 7.2% nationally in the year ending April 2019, one capital city saw values rise by nearly 4%, the largest increase among the three major cities that experienced any growth at all. According to the MyState Bank Tasmanian Economic Update, Hobart is bucking the national trend. Dwelling values in the city grew by 3.8% in the year ending April 2019, the highest increase seen across all capital cities. Hobart was one of only three capitals to experience growth. Further, Tasmania is also the only state to have seen an increase in mortgage applications over the year to December 2018, with figures up by 1.5%. In contrast, WHILE
mortgage applications in Victoria and NSW fell by 15.4% and 19.1%, respectively, over the same period. MyState Bank CFO David Harradine said, “Australian homeowners see the appeal of selling up in markets like Sydney and Melbourne and buying in Tasmania, where it is more likely they’ll be able to afford a bigger property for a much cheaper price.” According to Harradine, the consumer confidence seen in Tasmania has also led to significantly higher household consumption than across the rest of Australia. “The state’s strong economic conditions and attractiveness as a lifestyle choice are also big drawcards for residents on
mainland Australia, fuelling housing demand,” he said. Supporting his observations, tourism expenditure over the period increased by 5%, reaching $2.46bn, while the average spend per visitor hit $1,864. The state’s Wage Price Index also increased, up 2.5% over the year and 0.3% higher than the national increase over the same period. However, employment growth dipped below the national average: the unemployment rate in Tasmania was 6.5%, above the national average of 5%. That said, population growth is putting pressure on the state’s rental market. Hobart’s rental yield has increased to 5.2%, the highest in the country, and the median weekly house rent is now $10 more than Melbourne, at $450. However, Tasmania leads the nation in the number of residential building approvals, at 24% in the year ending March 2019, so it is unlikely the lack of housing will be a long-term issue.
NEWS
TECHNOLOGY
NEOBANK SEEKS NEW SHAREHOLDERS “aspiring neobank” 86 400 is entering into a new phase of capital raising, in line with its plans to raise more than $250m in the first three years of operation. To facilitate this stage of growth beyond the launch, 86 400 has appointed Morgan Stanley Australia to assist with the fundraising efforts. CEO Robert Bell explained, “We’ve invested heavily in building proprietary technology that will change the way retail banking is delivered in Australia.” THE
ONLINE SME LENDER PREPARES FOR NEW IPO Prospa is preparing to list on the ASX, a year after its initial IPO was postponed is to list on the ASX. The online SME lender announced an offer of new shares priced at $3.78 with the goal of raising $110m for a $610m market capitalisation. The funds will be allocated to backing the equity portion of the loan book, investing in new products and geographies, and repaying corporate debt. The offer has been made available to institutional investors and certain retail clients in Australia and New Zealand, as well as Prospa employees. There will not be a general public offer of shares. The deal is fully underwritten by joint lead managers Macquarie Capital and UBS. Last year Prospa raised PROSPA
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$146.5m for a $576.3m market capitalisation, before revoking the IPO and returning the funds to investors. The company was due to commence trading on 6 June 2018 but held back after ASIC requested information on some of its loans as part of an ongoing investigation. A statement released at the time read, “Prospa is satisfied that the issues discussed with ASIC are not material to the IPO and no additional disclosure is required in the prospectus. “ASIC has not raised further queries on the prospectus.” The following month, Prospa was one of six fintech lenders to sign the Code of Lending Practice.
Commenting on this year’s potential IPO, chairman Gail Pemberton AO said, “From the outset, Prospa recognised people would power its success, and they have invested in building the right team and culture for the company to succeed.” Several long-term investors are to appear on the share register, including current shareholder AustralianSuper and venture capital investor Entrée Capital. Entrée Capital and Prospa co-CEOs Greg Moshal and Beau Bertoli will be subject to escrow until the company’s financial results for the year ending 30 June 2020 have been released to the ASX. “Prospa’s success has been the result of a group of smart, talented and passionate people united around a common mission to keep small business moving,’’ Moshal said. “We’ll continue to invest heavily in our people and award-winning culture.”
SUNCORP LOOKS TO PARTNER WITH FINTECHS is seeking fintech start-ups to collaborate with on “new and innovative projects” as part of its newly launched Digital Incubator Program based out of Brisbane. The intention is for the threemonth partnership to provide the resources needed by start-ups to make their innovative ideas a reality. Suncorp CIO Sarah Harland said the aim was to “provide value to Suncorp’s nine million customers across Australia and New Zealand”. The program is open for applications. SUNCORP
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NEWS
R E G U L AT O R S
ASIC’S ROLL CALL FOR SPECIALISTS IN REGTECH Regulator announces “problem-solving” events series to boost regulation and compliance across financial services
ASIC HOLDS 2019 ANNUAL FORUM chair James Shipton opened the 2019 ASIC Annual Forum with an address that highlighted the need to be mindful of the industry’s end users and their financial goals. “We want to explore how we can ensure finance stays true to its ultimate function of serving the economy, and people individually and collectively. In other words, expand the discussion beyond finance’s economic role and explore its societal one.” This year’s event, themed ‘Other People’s Money’, was held in collaboration with the International Organisation of Securities Commissions. ASIC
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has made renewed efforts to push regulatory technology adoption across the financial services industry with the announcement of three events to be held before the end of the year. Currently, the regulator is searching for innovative regtech solutions to be demonstrated in front of representatives of both the public and private sectors – including government, finance, technology, media and other stakeholders – at events in Sydney this August. ASIC commissioner John Price said, “There is a real need for new regulatory approaches, which is why ASIC strongly supports the development and adoption of regtech solutions in the financial services sector to provide better ASIC
outcomes for consumers. “Regtech is something we are keenly interested in, both as a consumer of products and a facilitator of engagement more generally to ensure innovation in this area is utilised.” As fintech solutions reach further across the financial services industry, demand for regtech is also increasing. Traditionally, it is used for account verification, monitoring and reporting, although new applications are being realised. According to ASIC, regtech can help organisations build a culture of compliance, identify learning opportunities, and save time and money when it comes to meeting their regulatory obligations. ASIC’s three events will kick off with the Monitoring Financial
Promotions session scheduled to be held in Sydney on 2 August. The aim is to focus on identifying and analysing financial advertising promotions to determine compliance. This will be followed by the Financial Advice Files, to be held on 22 August. This event will centre on improving the detection of problematic financial advice in data sets and will be followed by a third event concerning the regulatory benefits and costs of voice analytics and voice-to-text research and analysis. This final event in the series is scheduled to be held before the end of 2019, with more details to be announced soon. Only 10 regtech demonstrators will be selected to present at the events, but all applicants will be granted access to the test data set. Observers are also invited to join the sessions. Interested parties can register their interest in demonstrating at an event through ASIC’s online Innovation Hub.
FE AT URES
SPECIAL REPORT
WORK SMARTER, NOT HARDER
Scott Durrant, the founder and director of Successful Ways, explains how he created a cutting-edge software solution that helped him to settle $104m in loans in half the time
AREAS OF BUSINESS
2003
Education services
2004
Home loans
2006
Legal services
2008
Buyer’s agent services
2011
Financial planning
2016
Property management
2018
Alexus CRM incorporated as a company
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years ago, broker Scott Durrant had an idea for an IT system so advanced it would essentially become a virtual broking assistant capable of reducing run-off, managing client data and flagging new sales opportunities. Fully aware that he wasn’t an IT expert, Durrant pitched the idea to his aggregator. But when the aggregator said it couldn’t be done, he took matters into his own hands. A few years (and dollars) later, Durrant’s system, Alexus CRM, is now the backbone of his fully integrated property purchase and wealth business, Successful Ways – and he reportedly works half the hours of the average broker while writing just as many loans. “It’s about working smarter, not harder. My phone is off at 7pm, whereas when I first started as a broker, at 11pm I was still punching orders,” Durrant says. “A lot of brokers want to control everything, but if you have good systems, and the right people are trained correctly, it works more efficiently.” Alexus CRM features a variety of tools and tricks, allowing Durrant to identify and target clients based on any of the dozens of data points held on them. These include interest rate, lending bank, income, type of loan, LVR, value, cross securitisation and referral sources, to name a few. Further, client contact post-settlement is automated. Brokers are prompted on new sales opportunities and refinance requirements, and all related services the client has within the business are also listed. The formula supports broker SEVEN
diversification and client retention, and drastically minimises the risk of channel conflict. Because of the depth of information held, the system also facilitates greater collaboration between the six other areas in which Successful Ways operates (see box). The result isn’t simply that Durrant is able to talk to a client about every step of their financial life; the systems and services within the business are also talking to each other. However, the real USP is that each of the client’s data points –
confident about the value that could be achieved, and he was right – in the last financial year he settled $104m. Alexus CRM can now be adopted by other brokers on a subscription basis, implemented and even tailored to the processes of individual brokers and their firms. “All the information I had in my aggregator system was stuck in there. As most brokers will tell you, there isn’t much value in half a story. This system I use gives you everything you need. It’s very easy to work out and it’s user-friendly. That’s why it works for me,” he says. Points of difference Client retention is critical at any time, but in a post royal commission lending environment it takes on new meaning. Durrant calculates that, by leveraging the information in Alexus CRM, run-off can be reduced from a ballpark of 30% to 5%.
“Right now, brokers are blindfolded. We have to be smarter, cleverer and ahead of the banks” including their current interest rate – is live. “This is the difference with a good system. What I started to realise after working the way I work is that systems run the business and people run the systems. If you have a great system and processes, and admin staff to administrate, then it frees up time for the broker to get in front of more people, tell their story and build up relationships,” Durrant says. “If I had my time again I would join a business that had in-house referrals, better systems and processors, and admin staff to take care of the back end.” While a near decade of development time would push many to give up, Durrant was
“Every lender will send a letter or make a phone call to a homeowner one month out from a fixed rate expiry or interest-only expiry. Our system can be automated to do that at two months out. As another example, once a client’s LVR drops below 75% it will trigger a task to get in touch with your client and look for either equity release or a better deal,” he says. Since February, the issue of channel conflict has taken on added meaning, and brokers are increasingly wary of how banks are able to use the live data they hold on each broker-originated customer. In this increasingly competitive environment, any advantage is a welcome one. “The banks pay us commission
In partnership with
AlexusCRM
then getting referrals becomes a lot easier,” he says.
Scott Durrant, founder and director of Successful Ways and creator of Alexus CRM
to introduce the client, but they are also using their own information that we can’t see, and they are using it in a smart way,” Durrant says. “Right now, brokers are blindfolded. We have to be smarter, cleverer and ahead of the banks.” Removing conflicts and promoting integration is a core philosophy of Durrant’s business model, and the idea of collaborative working echoes through all areas of the business. He says, “That’s how you win business. Everybody can offer interest rates, but what’s your point of difference?” As a natural progression from his time in real estate, Durrant
launched Successful Ways with education for first home buyers. With a captive audience he then branched out to broking and home loans, quickly followed by legal
easier. Every professional involved in a real estate deal thinks they are in charge of it, and that creates conflicts and a stressful customer experience.
“There isn’t much value in half a story. This system I use gives you everything you need” services and financial planning, building the business piece by piece to what it is today. “I knew bringing services in-house would make business
The idea here is that people at different points of the chain need to work together, and working in-house allows that. If you get the first part right the rest flows,
Modernising broking What this means for the future of aggregation is unclear. Durrant is far from the first broker to tire of the pace of innovation in finance, and he won’t be the last. While the aggregators will likely retain their market dominance based on relationships, their days as the sole developers of broker tech look to be numbered. “If I were to start my broking career again, I would select my aggregator based on who has the best sales system, with AI and real-time updates,” Durrant says. Regardless, his proposition for other brokers is strong: work less, make more and keep clients throughout your life. “My whole goal was to bring in more brokers and give brokers the opportunity to have better systems – because if they don’t they are going to lose their clients and miss out on the opportunity to increase their revenue,” he says. Noting the high levels of fragmentation throughout the broking space currently, Durrant sees further opportunity for brokers to collaborate to achieve economies of scale, whether through complementary services, better rates from the banks, or shared resources. “You will get better service from the banks, the clients will get a better experience, and collaborative working means better ideas within the team,” he says. Durrant will be showcasing Alexus CRM during BBX 2019, taking place at The Westin Sydney on 5 June. But for now, his message to brokers is clear: “The banks thought brokers would do all the heavy lifting for a commission, and then they could take the client after the first loan. “But we are doing a better job than they expected, and that’s why brokers have gained market share.” AB www.brokernews.com.au
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NE WS ANALYSIS
THE NEXT STEPS
The pressure may be off after last month’s shock election result, but the 2022 review, the implementation of a best interest duty and the threat of an economic downturn remain on the cards
has been dubbed the ‘Morrison Miracle’ – a shock election win that defied the opinion polls. But while the nation continues with business as usual, many are celebrating the start of a new era. “It’s what we were hoping for, a best-case scenario,” says Connective director Mark Haron. “The bottom line is there was a fundamental difference between the Liberal policies around mortgage brokers and the Labor policies. From an industry perspective, from a mortgage broker perspective, having the Liberals winning this election means that for the next three years … they will not be banning the trail commission, which was a fundamental difference with Labor.” Haron isn’t the only one breathing a sigh of relief. Regardless of political persuasion, the result was the one brokers across Australia were looking for. However, as MFAA CEO Mike Felton reminded the industry in a IT
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letter issued on 20 May, there is work still to be done. “Now is not the time to rest on our laurels. If we’re going to continue to be an industry with outstanding data
observed an impact on both new-to-industry and veteran brokers. He says the consequences of another review are already being felt in investment and innovation.
“The three-year review provides a process to extinguish, once and for all, any further debate around the current model” David Bailey, CEO, AFG on customer satisfaction and growing market share, we must continue to reform and evolve,” Felton wrote. Are brokers off the hook? While remuneration is safe for now, the introduction of a best interest duty and a review of remuneration in 2022 remain on the table. When it comes to the actual business of broking, FBAA managing director Peter White has already
“Having that hanging over us has had an impact on people coming into the industry, and established brokers aren’t investing in their businesses as they should because they don’t know what the future looks like,” he says. “That recommendation must go. It’s holding back and in part destroying the industry because of the uncertainty it causes.” Further issues remain around who will conduct the review.
“The royal commission wrote it in a way that says it would be a review by the Council of Financial Regulators and the ACCC to look at moving things to a consumer-pays model, so fee-for-service; that is in principle the directive they have been given. I said it to both sides – that has to go,” White says. However, for AFG CEO David Bailey it could also be an opportunity to lay old demons to rest. Bailey has pledged that AFG will remain “at the forefront of consultations” during the review process; his goal is to ensure that industry voices continue to highlight the benefits of an active third party channel. “The three-year review provides a process to extinguish, once and for all, any further debate around the current model,” Bailey says. “To my knowledge, no other industry has ever gone through such an extensive analysis of how it is remunerated. To borrow a phrase, brokers are not from the
top end of town; they are small businesses, which are the heartbeat of our economy. “Constant analysis and the ensuing paralysis is not good for any business, let alone small business operators who have enough stresses in their working life without constantly being challenged around how they are remunerated.” What also needs to be considered is that three years brings us conveniently to the next election cycle. “Effectively what they are saying is that we will look at it next time we are elected. It’s well and truly kicking the can down the road, so to speak,” says Trail Homes founder Nick Young. However, Young maintains that linguistics are key to determining the extent of the review. “What this really seems to say is that we aren’t going to do an inquiry; a review means we are happy to continue as we are today. We will review the mortgage broking
industry and come back to this, but if the industry continues to perform in the wonderful way it does, then there is no reason why it shouldn’t continue with the same
such statement has been made by the Coalition, it has yet to be ruled out. “We can now concentrate on this very important issue, and if it is done well the discussion and conclusions
“This is where we still have a lot of work to do, and why we will still have consultants working for us from a lobbying perspective” Mark Haron, director, Connective remuneration arrangements that we currently have in place,” he says. Proving best interest As Australian Broker reported in February, the introduction of a best interest duty may be a welcome opportunity to prove value, but it’s not as easy as it first sounds. Labor’s response to the royal commission stated the duty would be introduced “as a matter of priority”. Although no
and changes that are put in place will truly benefit everybody. Consumers, lenders, brokers can all end up with a better playing field,” says Young. “If it is not handled well, we could end up with a bit of a mess.” He adds that the issue has not received nearly as much attention as it warrants. In 2016, Canada’s regulatory body, the Canadian Securities Administrators, announced it would
introduce a best interest standard after a four-year investigation exploring how the requirement would alter the market. Within two years, each of the country’s regional regulators had scrapped the duty, having failed to define “best” or sufficiently demonstrate how the value judgment could be enforced. The challenge is the concept of principle- rather than rules-based regulation, and for Samantha Gale, CEO of the Canadian Mortgage Brokers Association in British Columbia, it raises more questions than it answers. “When you’re talking about the ‘best’, it’s just an impossible standard. How are you supposed to nail down all the options? Not having the duty in place does not mean that people aren’t going to get the best advice in any event,” she says. For Gale, there are several key questions around best interest: What does it mean? What does it look like? Is it doable? Does it
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HOW THE ELECTION RESULT INFLUENCED SHARE MARKET PERFORMANCE Source: CommSec
Australian share market 6,500
All Ordinaries since election was called
compromise the actual goal? “If you make something too difficult, then people are not going to service their clients very well at all,” she says. Her concerns are echoed in Australia. However, White says the real catch 22 occurs when clawbacks are added to the equation. For example, moving lenders in month 14 in the interests of the client would cause the broker to suffer a clawback as a result. “There is a lot of work to be done on the best interest duty. There are things we need to watch in how this plays out,” White says. In a webinar held on 23 May, Connective advised its brokers to consider covering this eventuality with a one-off fee. According to Haron, the duty could have far wider impacts, and his concerns extend to brokers being liable for advice. Connective’s position is that the necessary work to define and implement best interest cannot just shoehorn FOFA
6,450
6,400
6,350
6,300
April 12
the industry,” Haron says. “The worst thing we could have now is a best interest duty that stifles or reduces the desire for banks and mortgage brokers to help customers borrow money.
“Effectively what they are saying is that we will look at it next time we are elected. It’s well and truly kicking the can down the road” Nick Young, founder, Trail Homes reforms into the broker channel. “This is where we still have a lot of work to do, and why we will still have consultants working for us from a lobbying perspective in Canberra, to ensure that the best interest duty plays out in a way that continues to protect the structure of
We need to get the economy going a bit more again.” Fresh sentiment The final piece of the puzzle is the economy; specifically, the role of the property market within it. While Labor’s policies on negative gearing,
April 24
May 6
franking credits and taxation will remain on the shelf for now, issues remain for the Liberal-led Coalition. “There is no doubt the Coalition’s policy position provides greater certainty for Australia’s mortgage broking sector and home loan customers,” says Bailey. “Uncertainty creates inertia around investment and growth and discourages new entrants. With the Coalition retaining government, we now have an opportunity to move forward with more clarity and certainty.” The week before the election the Housing Industry Association called for action to address the domino effect of a tighter credit environment. HIA research reveals that the market is currently experiencing the lowest home construction levels since 2013 and a 19.4% drop in finance commitments for the construction
May 16
and purchase of new homes. There was also a nationwide drop in lending to owner-occupiers in the three months to March. While the government’s First Home Loan Deposit Scheme has been welcomed by many, much more will be needed to boost activity, specifically around the availability of credit and the supply of new, affordable homes. With an elected leader and government now firmly in place, the formula says market sentiment should start to recover. To help things along, while the election results were still being counted APRA announced it would potentially defer serviceability calculations back to lenders. However, with fear of a recession simmering away and interest rates inching closer to a cut, there’s an expectation of more chaos before there is calm. AB
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BUSINESS TALK
FAST MONEY
Demanding SMEs are turning business finance on its head, giving banks, non-banks and even brokers a run for their money. Lenders from across the board explain what has changed and what it could mean for the future of business finance
Hamlet mused over whether it is better “to be, or not to be”, Australian SMEs are currently asking whether it is better to bank or not to bank when looking to secure extra cash. Pressed for time and expertise, most SMEs select their lender based on speed, service and flexibility of terms, rather than price or brand loyalty, and these trends are placing added pressure on all players to rapidly digitise the business lending environment. “Customers across the board are demanding more personalised, seamless experiences – from the way they watch TV or transfer money to accessing funding,” says Prospa’s EGM of sales and business development, Matt Bauld. “Small business owners want a fast response and funding, excellent customer experience, and a simple, frictionless application process that doesn’t require property security or a 20-page form.” The latest Scottish Pacific SME Growth Index reports that fewer than 20% of SMEs now turn to their primary bank for funding. Further, the index calculates that 96% of SMEs are drawn to alternative lenders mainly because they believe their credit approvals are faster. A decade ago, a similar trend emerged in the US. There, the rise in non-bank lenders was also driven by the mainstream banks’ inability to provide bespoke solutions to the business sector. The outcome was a proliferation of alternative lenders. “The industry in Australia has been a fast follower of global best practice, and the willingness of Australia’s SMEs to embrace new WHILE
20
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technology has made this country an ideal fit for lenders such as us,” says Cameron Poolman, CEO of OnDeck Australia. “Overlay this onto the indifferent
banks continue to see growth in business loans. According to NAB’s latest financial results, business lending increased 5.3% year-on-year – a
“We are seeing continued growth in the SME space. Over the next decade, we may see SME lending fully digitised” Chris Thomas, GM, commercial broker, NAB attitude of the banks towards SMEs and it’s clear the alternative finance sector will continue to accelerate.” Yet despite these clear and quantifiable trends, the mainstream
figure Thomas says is “well ahead” of other majors. Currently, NAB lends around $3bn a month to SMEs. “Whether you are looking at banks or non-banks, what we are
seeing is how much small business values quick and easy access to funds through a digital platform,” says Chris Thomas, GM for commercial broker at NAB. NAB has seen demand spread across a variety of products, with customers in the commercial space applying for everything from small loans for single proprietors to significant funding lines for larger companies. After speaking directly to business owners, the bank knows that speed and efficiency are key to its competitive edge, and that is dictating how it innovates this important part of its operations. “From NAB’s perspective, we are seeing continued growth in the SME space. Over the next decade,
SOLID BUSINESS LENDING GROWTH Business credit, annual % change
Source: CommSec
8%
7%
6% 2-year high 5%
4%
3%
2% Feb 15
Feb 16
Feb 17
Feb 18
Feb 19
Chris Thomas, general manager, commercial broker, NAB
we may see SME lending fully digitised,” says Thomas. Covering the market While SME owners have in the past been forced to use overdrafts and credit cards to plug funding gaps, today the banks and non-banks have unofficially divided the needs of businesses between them as the market has allowed, rolling out a series of new products in the process to meet almost any need. For example, in recent months Prospa has increased its maximum loan amount to $300,000; launched the Small Business Loan Express for sums of up to $150,000; and announced a 48-hour turnaround for loans of between $150,000 and $300,000. It has also introduced a line of credit for between $2,000 and $25,000 and recently joined three new aggregator panels to boost the reach of its products. Last year, NAB launched its QuickBiz for Broker platform,
which allows broker SME customers to access funds within a single day, once documents are signed and returned. Further, the bank has 400 broker-aligned business bankers across the country who are “ready and available” to provide support. NAB is also working to meet new
Cameron Poolman, CEO, OnDeck Australia
development are reflecting lower demand,” says Thomas. Specialising in niches where the banks are absent, OnDeck now offers a dedicated Equipment Loan of up to $250,000 when aggregated with its Unsecured Loan. Typical values sit between $50,000 and $100,000, and funding is available
“We are seeing continued growth in the SME space. Over the next decade, we may see SME lending fully digitised” Chris Thomas, GM, commercial broker, NAB demand across a number of sectors. “Business customers aligned to industries like health, professional services, government infrastructure projects and agriculture are all showing upward trends in demand. Meanwhile, retail trade and some aspects of residential property
within three business days. “This sweet spot hasn’t happened by chance,” says Poolman. “A lot of newer players in the market prefer to limit their exposure to loans below $50,000, and of course it isn’t economically viable for the banks to work in this
space – certainly when loans are below $100,000.” According to Poolman, the average SME customer at OnDeck has annual revenue of $1m, and the maximum leverage typically seen is 10% of annualised revenue. “Banks don’t serve this end of the market, or indeed SMEs with annual revenue between $2m and $2.5m,” he explains. Helping brokers to promote the vast array of products currently on offer, this year the MFAA launched a digital campaign to market broker services to SME owners. Using LinkedIn, the association is targeting 510,000 business owners, operators and finance professionals throughout April, May and June. The MFAA then plans to analyse the insights and customer feedback to formulate future campaigns. “This is an excellent initiative that comes at a good time. There is every reason to expect the share of broker-introduced SME finance to increase significantly from what is a www.brokernews.com.au
21
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comparatively low base now at less than 20%, and the non-banks will likely see a greater proportional share of that uplift,” says Thinktank CEO Jonathan Street, who notes that non-banks are “genuinely committed” to innovation. “This in turn will feed more investment by the non-banks in further improving products, range, policy flexibility, pricing and technology. In short, the non-banks will continue to grow in size, capability and importance relative to ADIs,” he adds. Over the past year, Thinktank has seen commercial and residential SMSF finance for business owners account for around 20% of overall flow. Not only has it been the largest individual product stream but Street reports that it has also been the best-
self-employed as well as other borrowers. This increased uptake of the non-bank’s clear credit products by 85% over the year, whereas interest in other products catering to varying levels of credit impairment decreased. The average loan size sits at around $520,000. “[Changes have] created a more even playing field for lenders and translate into more competition. This results in a wider range of innovative solutions for more borrowers and, ultimately, in better outcomes for our customers,” D’Vaz says. Finance is rarely a one-off requirement. Mindful that repeat business is key to their proposition, business lenders are designing their service proposition with client retention at the core.
“Customers across the board are demanding more personalised, seamless experiences – from the way they watch TV or transfer money to accessing funding” Matt Bauld, EGM of sales and business development, Prospa performing part of the loan book, with zero arrears or losses to date. Rising demands At Bluestone, self-employed borrowers are a core segment of the business, accounting for 61% of all customers. While Royden D’Vaz, Bluestone’s head of sales and marketing, says the royal commission and housing downturn have certainly made the market tougher for borrowers of all types, the demands of business owners are drastically reshaping how lenders operate. “In recent years, consumers have started to become increasingly discerning in the service levels they are willing to accept, and with growing technological literacy they are becoming more comfortable in researching and accessing lenders and financial products that are not necessarily available via a branch network,” says D’Vaz. Last year, Bluestone moved into low-rate near prime lending for 22
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Thomas explains, “A key trend we are seeing across the board is that many business customers have requirements that go beyond just a single asset or transaction. Therefore, business customers are looking to create strong relationships both with their commercial broker as well as the bank the broker chooses for them.” Supporting this, NAB provides access to specialist business bankers across a broad range of industries, and brokers benefit from having dedicated relationship and credit teams. As well as boosting business for Australia’s two million small and mid-sized enterprises, SME lending is good for broker businesses too. “Diversifying into small business lending is non-negotiable for brokers who want to increase revenue. Prospa has been helping our partners take this next step for years, providing the tools and resources to spot a prospect using their existing client database and
Jonathan Street, CEO, Thinktank
to strengthen those relationships,” says Bauld. New approach Political promises and legislative changes have also redrawn the dynamics of business lending. In the 2019 federal budget, the Coalition government pledged tax cuts for SMEs and an extension of the instant asset write-off. These measures came only weeks after the announcement of a $2bn SME securitisation fund expected to increase the availability of credit and lower borrowing costs for business owners. While the new initiatives were welcomed by SMEs, Street says there are other ways that government can boost private sector funding lines. “We are of the opinion that the government doesn’t necessarily need to be providing direct financial support to SMEs to be of assistance. Instead, it could do a better job of making it less onerous for bank and
non-bank lenders to offer a wide range of suitable SME finance products, which are less costly to fund,” he says. According to Street, the cost and availability of SME finance is adversely impacted by direct and indirect regulatory overlays and the “significant amount of capital lenders must commit”. He adds, “Essentially there is a disincentive to be active at scale in this area. Finance should always be priced according to risk, yet Australian businesses are additionally paying the price one way or another for an overly conservative, unsympathetic and largely indifferent stance by regulators whose approach has barely changed in decades. “In real terms, we’ve been going backwards.” Regardless of what Australia’s new government sees as the most pressing issues for SME finance, the lenders – and the brokers who support their businesses – are
Matt Bauld, EGM of sales and business development, Prospa
fully aware that SME owners are driving a new approach from all those involved. No longer are business owners wooed by brand loyalty; they value speed, service, efficiency, assessment criteria and credit policy, and they assess their experience on a transaction-to-
Crucially, in this fickle and turbulent market it is these factors that are driving the development of the SME finance space, meaning brokers – as well as banks – need to be aware of the changing demands of discerning entrepreneurs. “The shift away from traditional lenders means the role of brokers as
“In recent years, consumers have started to become increasingly discerning in the service levels they are willing to accept”
Royden D’Vaz, head of sales and marketing, Bluestone APAC
SMES’ FAVOURITE ALTERNATIVE FINANCE PRODUCTS Source: Scottish Pacific SME Growth Index, April 2019; 1,257 sample size
33%
9%
Trade and import finance
Debtor or invoice finance
5.8%
2.5%
Fintech and other funding methods
Merchant cash advances
Royden D’Vaz, head of sales and marketing, Bluestone APAC transaction basis. This means that while some SMEs still turn to their primary banks as the default option, that number is shrinking as more and more depend on their brokers to present suitable alternatives.
trusted advisers is more important than ever. There has never been a better time for brokers to partner with alternative lenders, and we’re here to support them with the tools and resources to grow their business,” says Bauld. AB
1.4%
0.9%
Peer-to-peer lending
Crowdfunding
0.7%
Other online lending options
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23
PEOPLE
CAUGHT ON CAMERA The AltFi Australasia Summit took place on 15 April, with hundreds of delegates in attendance at Sydney’s Doltone House. Speakers included Volt Bank CEO Steve Weston, FBAA managing director Peter White, OnDeck global CEO Noah Breslow, and NAB’s executive GM of digital innovation, Jonathan Davey. AltFi executive director Glenn Hodgeman said, “The AltFi Australasia Summit 2019 brought together the key thought leaders and companies who are creating the future of online and non-bank lending in Australia. With the traditional banking industry experiencing challenging times, suffering from diminished trust and a demand for greater customer experiences, the summit provided the ideal forum to discuss the financial technology innovations in lending, across partnerships, AI, regulation and open banking.”
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NOMINATIONS NOW OPEN
Josh Bartlett Loan Market – Bayside 2018 Winner – Australian Broker Of The Year
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25
DATA
VICTORIA
NT SPOTLIGHT
Supply pipeline just strong enough to keep buyers competing Melbourne’s rate of decline could go into double digits soon, as the downturn doesn’t seem to be letting up. However, with demand staying largely on track, supply has been just low enough to keep buyers, especially owner-occupiers, competing. “With investors retreating from the market, the best performance for prices is expected to be in those markets where owner-occupiers have a bigger influence,” says Geof Snell, principal property economist at BIS Oxford Economics. “NSW and Victoria have both experienced extended periods of undersupply, and, despite record dwelling commencements over the past few years, we are forecasting that these markets will both remain in a situation of undersupply over the coming four years.” To balance existing supply and expected demand, Victoria needs to continue releasing new homes into the market. Meanwhile, even though further decline is expected, the demand–supply situation could keep it from sliding too far. Area
Type Median value
Quarterly
12-month
growth
growth
Melbourne
H
$685,000
-1.3%
0.8%
Vic country
H
$365,000
0.3%
4.7%
Melbourne
U
$515,000
0.0%
1.0%
Vic country
U
$265,000
-1.5%
-1.9%
NEW SOUTH WALES
Infrastructure projects can be a double-edged sword The good news is that strong economic conditions are preventing a truly significant downturn by maintaining demand. Infrastructure spending is also boosting appeal in areas like Bankstown, where the completion of the Bankstown Airport redevelopment will create 2,000 jobs. Roadworks are also upping interest in other regions of NSW. “Gymea in the Sutherland Shire and North Richmond in the northwest will also show continued growth due to affordable entry points compared to surrounding areas, and due to major transport upgrades such as the F7 extension and the Outer Sydney Orbital Ring Road, respectively,” says Propertybuyer CEO Rich Harvey. However, Harvey warns buyers to avoid properties that may be adversely affected by the new development. “Caution must be taken because properties too close to the upgraded roads can be negatively affected. Other possible negative side effects include obscured views and increased traffic, noise and pollution from increased development.” Area
Type Median value
Quarterly
12-month
growth
growth
Sydney
H
$890,000
-1.6%
-3.6%
NSW country
H
$457,000
0.0%
2.2%
Sydney
U
$690,000
0.0%
-1.4%
NSW country
U
$390,000
0.1%
0.3%
26
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BREAKING NEW GROUND Job market instability and credit scarcity continue to fuel Darwin’s decline, but a rush on land sales brings some good news hard to feel optimistic about Darwin, but despite the slump it’s in there continues to be hope that the tide will turn. With prices falling lower and lower, it is unsurprising that nearly half of the sales recorded in Darwin in 2018 were of properties priced below $400,000. CoreLogic pointed out in its Hedonic Home Value Index for March 2019 that the annual rate of decline in Darwin had worsened due to job market instability and credit scarcity. The Top End also recorded the weakest rental market in the year to February 2019 as rents nosedived by 6.1%. However, the city’s values recorded a slight increase of 0.2% in the same period. Regional pockets of the NT fared a bit better, with 39% of sales made up of dwellings in the $400,000 to $600,000 price range. Overall, the sales volumes of houses in Greater Darwin increased by 14%, and sales in Palmerston comprised a big part of this. “Vacant land sales were up by 14% in the December 2018 quarter – 40 house-sized blocks that were under 600sqm in size were sold, with over half of these sold in Palmerston at a median price of $167,000,” says Quentin Kilian, CEO of the Real Estate Institute of the NT. At the same time, sales volumes are falling in Alice Springs, Katherine and Tennant Creek. Median prices are also dropping like flies all over the NT. “Across the board, we saw, yet again, lower median prices for houses in all jurisdictions except Alice Springs, with the median price for the Greater Darwin market falling by just under a percent to $493,750,” Kilian says. AB
BROKER PERSPECTIVE
IT'S
Buyer incentives and affordable prices combine to create spark of demand The Real Estate Institute of the Northern Territory has reported that the median Darwin house price increased by 1.8% in the March quarter, the first rise in 15 months. The NT government has introduced incentives to attract residents and broadened assistance packages to homebuyers with the aim of stimulating demand for both new and established property. Recent months have seen first home buyers active in the market as current prices convey affordability and value to buyers eligible for incentive payments. In addition, there is evident demand for quality renovated homes in established locations where existing homeowners are seeking to upgrade their residences. At current prices the opportunity exists for wise investors to take a long-term position and pick up a good asset. The potential relocation of Charles Darwin University to the CBD may see the inner-city residential unit market turn around sooner than expected. A buoyant economic outlook and population growth are required to release the handbrake on demand for property and subsequently our property values. I believe that 2019 should see Darwin reach the bottom of its current cycle and stability will be achieved in the years ahead.
Andrew Carmichael Director, Connected Finance
SUBURB TO WATCH: COCONUT GROVE Median price (houses) $491,384
Median price (units) $275,241
12-month growth
3-year growth
5-year growth
Indicative gross rental yield
-9.0%
-27.1%
-28.2%
5.3%
12-month growth
3-year growth
5-year growth
Indicative gross rental yield
-9.1%
-17.1%
-26.6%
6.1%
, OPPORTUNITIES AND KEY INFRASTRUCTURE
HIGHEST-YIELD SUBURBS IN NORTHERN TERRITORY Suburb
Type
Median price
Quarterly growth
12-month growth
Tennant Creek
H
$189,000
24%
2%
Katherine
H
$275,000
0%
-5%
Bakewell
U
$235,000
2%
-10%
Driver
U
$224,500
21%
7%
Parap
U
$325,000
-4%
-21%
Katherine East
H
$325,000
8%
2%
Rosebery
U
$290,000
-3%
-23%
Bayview
U
$383,500
-10%
-34%
Araluen
U
$337,500
7%
-15%
Moulden
H
$300,000
-3%
-2%
The Gap
H
$362,500
1%
3%
Ludmilla
H
$460,000
-15%
-36%
AUSTRALIAN CAPITAL TERRITORY
Area
Population
Economy
Targets in place to reach four to five million people by 2060
New recovery plans focus on greenfield supply chains across agriculture and aquaculture
Infrastructure
Business
Loans will be provided from the Commonwealth Government’s $5bn fund
$2.5m has been pledged to foster links with Indonesia, PNG and Timor-Leste
Type
Median value
Quarterly growth
12-month growth
Canberra
H
$669,000
1.2%
2.8%
Canberra
U
$420,000
-0.2%
1.2%
Home versus apartment balance starting to shift Houses have generally been the dominant property type in the ACT, but units have been catching up due to their relative affordability. “Both are in strong demand, but there’s been a change, perhaps to more affordable properties, and now units seem to have a slight edge over houses,” says Jeremy Sheppard, head of research at Select Residential Property. High prices have affected demand in some respects, but a decrease in supply has compensated for this. “Although demand has dropped marginally from slower selling times and lower auction clearance rates, there’s been a proportional decrease in supply too, which has helped to maintain a high demand-to-supply ratio,” Sheppard says. “There are two standout metrics in this area. Firstly, discounting is very low. Buyers have little luck getting sellers to come down on price. And secondly, vacancy rates are very tight at around 1%.” As a result, Canberra’s property market remains largely stable, with strong growth opportunities still on the horizon.
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27
DATA
QUEENSLAND
H
$430,000
-1.1%
-2.2%
Brisbane
U
$380,000
0.0%
-2.5%
Qld country
U
$372,000
-0.7%
0.0%
MEDIAN HOUSE AND UNIT PRICES
Adelaide’s low prices are making it a hit with buyers
$1,000,000
Area
Type Median value
Quarterly
12-month
growth
growth
Adelaide
H
$466,000
0.0%
1.1%
SA country
H
$280,000
2.1%
1.1%
Adelaide
U
$335,000
0.0%
0.0%
SA country
U
$220,000
8.8%
12.4%
28
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PERTH Total auctions
18
Cleared
7
Uncleared
6
Clearance rate
SOUTH AUSTRALIA
53.8%
Houses
$600,000 $500,000 $400,000 $300,000 $200,000 $100,000 $0
$522,000
$700,000
$668,800
$800,000
$640,000
$900,000
$815,000
CoreLogic’s Hedonic Home Value Index report for March 2019 showed that, alongside Hobart, Canberra and Brisbane, Adelaide had the best housing market conditions among the capital cities. In the face of tight lending criteria, it’s the affordable markets that are starting to hold court. Indeed, while Adelaide’s house prices increased by an annual rate of 0.9%, the majority of properties sold in the city in 2018 were in the $200,000 to $400,000 price range, while 5.3% of sold properties were priced under $200,000. Outside the city, a whopping 32.2% of sales were of properties costing less than $200,000. Nonetheless, Adelaide is still a divided market in which some areas perform better than others. “South Australia is similar to Brisbane in its diversity of market conditions at the moment. There are some very positive signs in some areas and dismal signs in others,” says Jeremy Sheppard, head of research at Select Residential Property.
51.9%
Sydney Melbourne Brisbane Adelaide
Perth
Hobart
Units
Darwin
$400,000
Qld country
Clearance rate
$677,000
2.1%
26
$292,500
0.2%
Uncleared
$441,000
$530,000
28
$350,000
growth
H
Cleared
$455,000
growth
Brisbane
84
$352,500
12-month
Total auctions
$480,000
Quarterly
ADELAIDE
$318,250
Type Median value
There were 1,210 homes taken to auction across the combined capital cities during the week ending 12 May, which returned a preliminary auction clearance rate of 58.1%. Last week the volume was higher, at 1,479 auctions held, and the final clearance rate increased to 52.5%, the second highest clearance rate seen over the year to date. Compared to last year, volumes continue to trend lower each week – almost double the volume of homes were taken to auction over the same week in 2018 (2,279), when 58.2% sold. Although the clearance rate will adjust lower in the full set of results, the trend over the past two months has seen final auction clearance rates holding around the low- to mid-50% range, and we expect a similar finalised result this week. While the trend in auction clearance rates certainly isn’t suggesting strong market conditions, with the success rate holding at around 10 percentage points higher than late last year, it reflects a better fit between buyer and seller expectations of prices.
$440,000
Area
WEEK ENDING 12 MAY 2019
$384,000
In Queensland, rising interstate migration is feeding population growth, while infrastructure efforts are broadening the area’s appeal. Regional districts that are expected to see growth in the near future include Logan and Ipswich. However, Queensland has also become the place to be for investors looking to make profit from rent – it’s considered a landlord’s market. “In Brisbane, where the construction boom hit its peak a couple of years earlier, we have witnessed the rental vacancy rate drop from 4% to 2.6% in February 2019,” says OpenCorp director Matthew Lewison. “It took just 13 months for this incredible shift in vacancy rates, and our property managers are already telling us that rents are starting to creep up at a faster pace.” The strengthening of the rental market comes on the heels of reports of population growth in Queensland, suggesting that a lot of this demand comes from new interstate migrants. This is likely to spur investment activity further.
CAPITAL CITY AUCTION CLEARANCE RATES
$531,500
Population growth and infrastructure boost rental returns
Canberra
CAPITAL CITY HOME VALUE CHANGES Capital city
Weekly change
Monthly change
Year-to-date change
12-month change
Sydney
-0.4%
-0.9%
-4.3%
-11.2%
Melbourne
-0.1%
-0.4%
-4.1%
-10.0%
Brisbane
-0.2%
-0.4%
-1.7%
-2.2%
Adelaide
0.0%
-0.1%
-0.6%
0.3%
-0.2%
-0.4%
-3.5%
-8.4%
-0.2%
-0.6%
-3.7%
-8.9%
Perth Combined 5 capitals
*The monthly change is the change over the past 28 days
BRISBANE CANBERRA Total auctions
35
Cleared
12
Uncleared
17
Clearance rate
Total auctions
83
Cleared
20
Uncleared
31
Clearance rate
39.2%
41.4%
SYDNEY Total auctions
441
Cleared
189
Uncleared
99
Clearance rate
65.6%
TASMANIA
MELBOURNE Total auctions
545
Total auctions
4
Cleared
249
Cleared
2
Uncleared
189
Uncleared
0
Clearance rate
Clearance rate
56.8%
TASMANIA
Area
Low supply sends buyers flocking to regional Tasmania Hobart’s property values are rising at a faster annual rate than rents, but rental rates are becoming less affordable for tenants as a result of tight supply. As Hobart’s property market becomes more difficult to get into, many buyers are looking to the regional pockets of the Apple Isle. CoreLogic data indicate that these are among the top-performing regional areas in Australia, in part because the housing market is more affordable in Tasmania. Over 70% of sales in 2018 were of properties priced under $400,000; however, sales of properties worth over $600,000 now comprise 5.1% of transactions, when this percentage was just 2.2% in 2013. If prices maintain this growth trend, we could certainly see Tasmania slowing down and stabilising in terms of price hikes. Meanwhile, rents in Hobart have increased by more than 10% over the last 24 months, according to OpenCorp director Matthew Lewison.
N/A
Type
Median value
Quarterly growth
12-month growth
Hobart
H
$460,100
2.6%
14.3%
TAS country
H
$310,000
1.7%
8.3%
Hobart
U
$360,000
1.0%
10.6%
TAS country
U
$240,000
-0.2%
-0.4%
All data sourced from CoreLogic.com.au
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PEOPLE
IN THE HOT SEAT Citibank’s head of mortgage distribution, Matthew Wood, reveals details of the institution’s revamped mortgage plans and explains why a part-time job at McDonald’s provided his first lesson in customer service
What’s the greatest challenge for brokers at this time? The greatest challenge for brokers right now is remaining focused A on delivering great client outcomes in such a difficult environment. This year has been a big one for the broker space, with the response to the royal commission in February, and continued discussions about credit accessibility creating some question marks since then. To manage these changes, I would advise that brokers remain unified, ensure their regulatory obligations are met, and ensure the quality of their loan application submissions remains high. Last but not least, they must also do their best to stay across any and all market changes.
Q
What was your first job? As a Sydneysider, my first job was at McDonald’s Miranda at the A age of 15, and it was a great way for me to cut my teeth in the working world. I developed a strong work ethic and learned to be a team player. It might look easy to the untrained eye, but balancing the job of flipping burgers, serving fries and pouring drinks while ensuring great customer service definitely taught me a lot in terms of organisational and time management skills.
Q
What are your top survival tips for working in finance? At Citi we have a very strong emphasis on putting our clients at A the centre of everything we do. In my case, this means both brokers and the end customer. I think this focus is incredibly important for anyone working in finance, as it keeps you reminded of what really matters. My other top tips would be to be organised, surround yourself with talented people, and, if you are a leader, make sure you invest in your team members and support them when needed.
Q
What’s one thing you hope to achieve in 2019? Professionally, this is a really exciting year for Citi’s mortgage A business. After a quiet couple of years when we focused on improving our back-end processes, we have come back into the market with a very competitive offer – we have a wide range of products and great rates. I’m looking forward to growing our business and becoming a bigger player in this space. AB
Q
30
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