MAY 2019 ISSUE 16.08
What customers want Steve Weston talks about launching Australia’s first digital bank /16
Banking on business La Trobe Financial debates commercial lending with its top brokers /18
BILL BAKER The co-founder and CEO of Lend explains how a new matchmaking tool will help brokers and their SME clients /14
Big deal LH Financial helps a property investor and entrepreneur to diversify /22
ALSO IN THIS ISSUE‌ Caught on camera YBR Group holds its fifth annual Commercial Conference /24 Housing market data The latest figures and insights from WA /26 In the hot seat Will Unkles on tackling the email avalanche /30
NEWS
IN THIS SECTION
Lenders P2P lending space shows 45% growth /04
Aggregators Loan Market rolls out new client retention tool /06
Technology Prospa reaches first New Zealand milestone /10
Associations NRL players look to brokers for financial support /12
Market AFG Index a “wake-up call” for policymakers /08
www.brokernews.com.au MAY 2O19 EDITORIAL Editor Melanie Mingas News Editor Madison Utley Production Editor Roslyn Meredith
DATES TO WATCH
Upcoming can’t-miss events
ART & PRODUCTION Designer Martin Cosme
9 M AY
1 5 M AY
2 2 M AY
AFG Broker Grow Series
Build your property portfolio
China Angle
Executives from AFG will join a line-up of external speakers in sharing expertise and experience to help brokers identify future business growth opportunities. Sessions will cover social media marketing, the evolution of the sales conversation, credit and time management, among other topics.
In one of a series of events taking place over the month, Bluewealth is educating investors and their brokers on how, where and when to build wealth through property. This event at Sydney’s Olympic Park will focus on portfolio diversification, leveraging assets, and securing future wealth.
Organised by business intelligence and networking brand Basis Point, this event will see David KO Chin and Tim Cheung, co-founder of hedge fund LSL Partners, discuss the investment potential of Australian property. Taking place on 22 May in Perth, the event is sponsored by Deloitte.
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CORPORATE Chief Executive Officer Mike Shipley Chief Operating Officer George Walmsley Managing Director Justin Kennedy Publisher Simon Kerslake Chief Information Officer Colin Chan Human Resources Manager Julia Bookallil
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Melanie Mingas +61 2 8437 4720 Melanie.Mingas@keymedia.com
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2 8 M AY Australian Banking Innovation Summit Taking a global view, this inaugural event looks at trends both at home and overseas over two days of interviews and panel sessions. The summit will be held at Doltone House, Sydney, and will tackle regulation, AI and consumer behaviour, among other topics. It will feature speakers from Xinja, SocietyOne and NAB.
2 8 M AY
tel: +61 2 8311 5831 fax: +61 2 9439 4599 subscriptions@keymedia.com.au
2 9 M AY
AMA nominations open
Fireside chat with 86 400
The Australian Mortgage Awards recognise brokers, BDMs, lenders and aggregators across more than 30 categories. Nominations for the 2019 awards are open from 28 May to 29 June, and the ceremony will take place on 19 October at The Star, Sydney. For further information, visit www.australianmortgageawards.com.au.
Part of RFi Group’s Randstad Leaders Lecture Series, this live interview will see Andrew Stabback, CEO of AB+F, chat to 86 400 CEO Robert Bell and chairman and co-founder Anthony Thomson. Taking place at the Four Seasons Sydney, the event will kick off at 7.30am and is scheduled to conclude by 9am.
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5 JUNE
6 J U N E
18 JUNE
Broker Business Exchange
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 attending the day-long education and networking event. BBX will comprise conference and workshop sessions and an exhibition of leading industry names.
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.
The Broker Commercial Masterclass Vow has teamed up with the FBAA to devise a commercial masterclass series for brokers looking to break into the non-resi and equipment finance space. Kicking off on 18 June in Adelaide, the five-hour workshop will be delivered in Perth (19 June), Brisbane (25 June), Melbourne (26 June) and Sydney (27 June).
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 MAJOR DENIES JOB CUT RUMOURS widespread news of dramatic downsizing of Commonwealth Bank’s workforce and branch system, CBA has deemed the reports “unnecessarily alarming”. A spokesperson told Australian Broker that specific claims about 300 network branch closures were “misleading”, but said the figure could refer to a reduction in CBA’s ATM system. The rumoured closures were reported to be threatening 10,000 jobs, and the Finance Sector Union has filed a complaint with the industrial umpire. FOLLOWING
LENDING SLOWS Source: ABS, CommSec
Lending to households and businesses, trend $80bn
$75bn
$70bn
$65bn
4-year low $60bn
$55bn
RAMS REMOVES AWARD-WINNING LOAN has withdrawn its low-doc RAMS home loan option for self-employed borrowers and SME owners who don’t have the documentation needed to secure a traditional mortgage. Less than two months ago, RAMS was named best self-employed lender for the third consecutive year. A spokesperson for the lender said, “RAMS will maintain focus on our core strength, mortgages, with our key objective still being to help our customers into the home of their dreams.”
“[Recent cuts] should set off another round of interest rate moves, of course centred on fixed rate loans. The itch is becoming irresistible” Steve Mickenbecker Group executive of financial services, Canstar
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$50bn Jan 2013
Jan 2014
Jan 2015
Jan 2016
Jan 2017
P2P LENDING SPACE SHOWS 45% GROWTH The latest research by ASIC concludes that loan volumes reached $433m in the 2017/18 financial year
research conducted by ASIC has confirmed the growing popularity of the peer-to-peer (P2P) lending marketplace, driven by demand for new and alternative sources of funding. During the 2017/18 financial year, new P2P borrowing increased by 45% to reach $433m in value, and outstanding loans were up 59% to $518m. While these numbers have “increased significantly” from the 2016/17 figures, the data did indicate a slight slowing in the rate of investor and borrower growth, according to ASIC. Respondents reported a total of 13,446 investors and 31,421 borrowers in the P2P space as of RECENT
June 2018. Over the same period a total of $352m was invested in the platforms surveyed. The data collected also revealed that rates of default had increased to 2.9% of total loan value, up from 2.3% last year. According to ASIC commissioner Danielle Press, “The surveys help ASIC better understand the make-up of these developing sectors and how to facilitate their growth, while at the same time manage any regulatory risks they pose compared with more traditional lending and fundraising approaches.” Providing a timely example of the growth that can be achieved by P2P lenders, SocietyOne has tripled its volumes over the last
Jan 2018
Jan 2019
12 months and is currently eyeing a further 50% growth by the end of 2019, equating to a fivefold increase in the volumes recorded a year ago. One of the fastest-growing P2P lenders, SocietyOne recorded $64.9m in originations in the three months to March, up from $39.5m over the same three-month period in 2018. “What we’re finding is, post-royal commission people are looking for alternatives, and then, when they find an alternative and they see it’s fast and easy and a good rate, they’re actually going through with it. So we’re finding more customers enquiring, and when they do enquire, more customers are going through the process,” said the lender’s CEO, Mark Jones. Jones reports that the majority of SocietyOne customers are looking to either reduce their credit card limits – usually during the mortgage application process – or refinance and therefore reduce the cost of existing personal loans.
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NEWS
A G G R E G AT O R S KEYSTART JOINS AUSSIE’S PANEL OF LENDERS panel has expanded to 24 lenders with the addition of Keystart, a WA lender specialising in low-deposit home loans. Aussie CEO James Symond said, “Keystart has a unique offering, requiring a deposit from as low as 2% from customers, depending on location. Our WA team of 80 mortgage brokers, including 18 retail stores, is excited to be able to offer Keystart to first home buyers to help them purchase a home sooner.” AUSSIE’S
VOW SIGNS UP NEO-BANK
LOAN MARKET ROLLS OUT NEW CLIENT RETENTION TOOL Brokers can schedule pre-approved communications with clients for everything from an annual check-in to a birthday message aggregator has unveiled a new marketing tool to combat the “longstanding industry challenge” of investing in relationships with existing customers while simultaneously pursuing new leads. Loan Market has launched an automated post-settlement email tool called Stay-in-Touch, intended to sync with the behavioural trends of customers and bring them closer to their broker at key points in their financial journey. The idea is to automate communications to ensure existing customers receive quality ongoing service while the broker grows their businesses with new clients. “Now more than ever, brokers need to stay in touch with their AN
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clients. With the increasing regulatory demands creating time pressures, efficiency is key,” chief marketing officer Lisa Phillips said. “Servicing existing clients while prospecting for new ones is an industry challenge and a major reason why 20% to 22% of the typical broker’s book turns over every year. If a broker settles 50 loans a year and has a loan book of 175 active clients, they could have close to 40 clients walk off their books every year – a staggering number that can be avoided.” Stay-in-Touch can address everything from pre-approval and term expiry reminders to birthday messages and annual check-ins. Brokers are able to select the communication touchpoints they
would like to have distributed and opt out of others, as well as schedule when they are sent out. Stay-in-Touch covers nine potential client touchpoints: pre-approval, settlement, check-in, protection, car loan, happy birthday, annual review, fixed rate review and interest-only expiry. The tool works through Loan Market’s MyCRM, with the broker receiving communications at the same time as their client, thus enabling them to follow up the digital engagement. More than 35,000 automated emails have already been sent to customers through Stay-In-Touch since its launch last month, with average open rates of between 60% and 80%, triple the industry standard. “Automated Stay-In-Touch doesn’t replace the all-important face-to-face and phone communication; rather it has been designed to complement it by offering brokers a prompt to check in with their clients,” Phillips said.
86 400 has joined Vow Financial’s panel of lenders, bringing the digital bank a step closer to rolling out its mortgages once APRA has granted its banking licence. Clive Kirkpatrick, general manager of Vow’s parent company, YBR Group, said 86 400 was “completely transforming” home loans. “We look forward to continuing to work with 86 400 to provide Aussies with better value when it comes to buying a home.” NEOBANK
“A significant number of our brokers have indicated that commercial lending is an area that they really need to increase their knowledge in” Glenn Mitchell Head of commercial and leasing, Vow/Yellow Brick Road Group
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NEWS
MARKET FEDERAL ELECTION KEY TO HOUSING ISSUES taxes and regulations, skills shortages, uncertainty in policymaking and rising costs, the HIA has urged politicians to seize a “golden opportunity” to address housing issues in the upcoming federal election. “Added to these problems is the fact that the Australian housing market is softening. Almost four years on, the housing market today is very different to the one that prevailed during the 2016 federal election,” said HIA managing director Graham Wolfe. CITING
SMES MOVE AWAY FROM PRIMARY BANKS number of SMEs that use THE their primary bank to fund growth has dropped below 20% for the first time in five years. As a result, the latest SME Growth Index by Scottish Pacific concluded that non-banks were set to top SME funding choices by 2020. CEO Peter Langham said, “Nine out of 10 SMEs would be willing to accept a higher interest rate if they didn’t have to provide property security.”
“We’ll continue ... to ensure we design products and services that meet [brokers’] needs and customer and community expectations” Ian Rakhit Head of third party banking, Bankwest
David Bailey, CEO, AFG
AFG INDEX A ‘WAKE-UP CALL’ FOR POLICYMAKERS Group CEO says policymakers should tread carefully when formulating regulatory responses to the royal commission
newly released AFG Mortgage Index provides “stark evidence” that the lending environment has “significantly deteriorated”, says the group’s CEO, who went so far as to say the data should be “a wake-up call for policymakers”. The index showed that lending volumes in the first three months of 2019 dropped 10% from the previous quarter, with volumes in the March quarter 15% lower year-on-year. Both the number and volume of loans lodged during the quarter were the lowest in more than five years. “We have reached a critical time in the housing market cycle and we would urge policymakers to tread carefully in any regulatory THE
responses flowing from the royal commission. This is a time for policy formulation that considers the full potential impact on the lending market,” said AFG CEO David Bailey. “It is clear the broader implications for the Australian economy are huge if we get it wrong.” The tight lending market and falling housing prices have contributed to a decline in NSW volumes of almost 20% quarteron-quarter. All other states, with the exception of the Northern Territory, are also significantly lower than the same time last year. While many of the figures are grim, the index did highlight the crucial contribution of the broking industry.
“The value mortgage brokers deliver by facilitating a competitive lending environment is most starkly shown by the ongoing decline in the market share of the major banks, which peaked in Q3 of 2013 at 78.2%,” Bailey explained. That figure now rests at 58.6%. “Outside of the mortgage broking channel, the majors have control and dominate the market. The distribution capability provided by mortgage brokers enables the country’s non-major lenders to compete,” Bailey said. “With the sole exception of first home buyers, who remain the last bastion of major bank lending, the growth in non-major lending has been broadly uniform across all other customer types.” The index revealed that the “big losers” of the past six months have been ANZ and NAB, with the latter’s share halving and now sitting at 5%. Among the “winners” are Westpac and its affiliated brands, as well as WA-based Bankwest.
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NEWS
TECHNOLOGY
Noah Breslow, global CEO, OnDeck
FINTECH EXPANDS INTO EQUIPMENT FINANCE has officially launched its equipment finance loan. Global CEO Noah Breslow was joined by CAFBA during broker launch events in Melbourne and Sydney last month. “OnDeck specialises in taking the risks that banks don’t know how to take in an intelligent way. We want to do it responsibly of course, but we see a real opportunity in equipment finance,” Breslow said. ONDECK
Beau Bertoli, co-founder and joint CEO, Prospa
PROSPA REACHES FIRST NEW ZEALAND MILESTONE New operations see loan book reach $10m, with the New Zealand market estimated to be worth $4bn–$5bn per annum business lender Prospa has confirmed it has reached its first loan book milestone since launching operations in New Zealand. While the lender officially opened for business in late March, the preceding six months were spent preparing to expand operations and tailoring products to the new market. Now Prospa has officially passed the $10m mark in funding in New Zealand. “We were able to build our product, integrate it into the New Zealand network, and start the scale-up process over a relatively short period of time. In total, we think the New Zealand market is worth somewhere ONLINE
between $4bn and $5bn dollars per annum,” said Beau Bertoli, Prospa’s co-founder and joint CEO. Despite the half-million small business owners throughout New Zealand, Bertoli saw very few options made available for accessing capital in that market. “We think there is so much opportunity, so much untapped growth for small business owners supporting the New Zealand economy,” he said. “We expect that our products and services in New Zealand will have a similar type of benefit for the economy that they do in Australia, where they are driving GDP growth and creating jobs.” The CEO told Australian Broker that a network of thousands of
advisers in New Zealand is a key part of the lender’s distribution strategy. Prospa recently joined the New Zealand Financial Services Group panel, one of the largest mortgage and insurance distribution groups in the country. The New Zealand launch has in no way slowed the momentum of operations in Australia. Just last week, Prospa announced a new business line of credit as well as an improved small business loan. For now, these products are available only in the Australian market, while the core loan product continues to establish itself and grow in New Zealand heading into the second half of 2019. Looking ahead, Bertoli said, “It was really exciting to grow through the $1bn milestone in Australia recently, but we still think there’s huge opportunity out there. “When we launched in Australia, we wanted to change the system and change the way it worked. That’s our approach in New Zealand too.”
FINTECH BUSINESS OBJECTIVES 2017 Source: World FinTech Report Survey, Capgemini, LinkedIn, Efma, and MaRS, 2017
5.5% Merge with or get acquired by a fintech firm
18.1% Compete on our own without collaborating with traditional firms
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0.9%
What is the primary business objective of your firm?
Get acquired by a traditional firm
75.5% Collaborate with traditional firms
(See the next issue of Australian Broker for more on this story)
HASHCHING TO REPEAT FUNDING ROUND COO of digital mortgage marketplace HashChing, Siobhan Hayden, has confirmed the firm failed to achieve its $5m crowdsourced funding target last year and is currently considering its next move. However, while it missed out on $5m, HashChing did receive a $700,000 loan from Jobs for NSW last May, to help fund 46 new hires over five years. “We believe [the funding] was a demographic issue and we have a lot planned for 2019,” Hayden said. THE
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With our broad product range, finance brokers have the opportunity to cater for their clients’ financial needs at every life stage. To partner with a team that is looking out for you, and help you grow your business call us today 13 80 10 or visit www.latrobefinancial.com La Trobe Financial Services Pty Ltd ACN 006 479 527 Australian Credit Licence 392385. La Trobe Financial Asset Management Limited ACN 007 332 363 Australian Financial Services Licence 222213 Australian Credit Licence 222213. Terms, conditions, fees, charges and La Trobe Financial lending criteria apply. To view our ratings and awards please visit our Awards and Ratings page on our website. This publication is for accredited broker use only and is not for distribution to consumers. www.brokernews.com.au
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NEWS
A S S O C I AT I O N S
Peter White, chairman, IMBF
IMBF APPOINTS NEW CHAIRMAN managing director Peter White has been named chairman of the International Mortgage Brokers Federation (IMBF). White played a significant role in creating the IMBF, which was launched in Canada late last year. He said, “I am honoured to be elected to this position, which uniquely leads the broking industry in global cooperation and collaboration. At no time in our industry’s history has this been done.” FBAA
NRL PLAYERS TO GET FINANCIAL GUIDANCE FROM BROKERS The School Entrepreneurs Program could be tailored for NRL players, with brokers delivering lessons in financial literacy
industry association behind the School Entrepreneurs Program is looking to extend the scheme to benefit young players in the National Rugby League. The MFAA and Mhairi MacLeod, founder and principal of Astute Ability Finance Group, have been working with the NRL to develop a program tailored for players, with Richmond AFL star Alex Rance already on board as an ambassador. David Fairleigh, former professional rugby league footballer and current assistant coach for the North Queensland Cowboys, has expressed hope that younger NRL players may be able to improve their financial skills and knowledge through a similar program. “So many players leave everything THE
RECOMMENDATIONS BY HAMMOND ADDRESSED proposed by the Hammond Review are closer to becoming reality after three key reforms were passed by parliament. The CEO of the Customer Owned Banking Association, Michael Lawrence, said bipartisan support for a bill amending the Corporations Act has helped create a more competitive banking sector. “Passing this bill during the busy budget sitting week and with a full parliamentary schedule is testament to just how important these reforms are for competition in the banking sector.” RECOMMENDATIONS
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regarding their financial affairs to their management, particularly the young guys coming through the ranks who find themselves being paid much more than other people in their age group,” he said. “There is an opportunity for the NRL to offer some guidance through a financial education program.” Drawing on the experience of teaching the existing program to school students across Australia, MacLeod said, “Thousands of young Australians have benefited from taking part in the program and acquiring knowledge and skills which will make them more self-sufficient and better prepared for adulthood. “I am confident a similar program would be of tremendous assistance
to NRL players, to help them manage their affairs and also provide a pathway for life after football.” The proposed program would only require a one-hour commitment per week from each participating broker, over a six- to 10-week period. Remembering finding himself out of a job when the North Sydney club folded in 1999, Fairleigh concluded, “The game has been good to me for more than 30 years, but it’s not always smooth sailing. It can be a fickle industry, but if you have good financial plans in place, that can be a big help.” Developed by Astute Ability Finance Group and the MFAA, the existing School Entrepreneurs Program is available to high school students and local youth groups. It covers topics such as setting up a business, developing business plans, marketing strategies, human resources, product development, and strategies for profit, loss and future business direction.
30/06/2003
MARKET SHARE OF FIRST HOME BUYERS RISING Source: ABS, CommSec
First home buyer share of market (ex-refinancing), seasonally adjusted 32% 30%
6-year high
28% 26% 24% 22% 20% 18% Jan 2012
Jan 2013
Jan 2014
Jan 2015
Jan 2016
Jan 2017
Jan 2018
Jan 2019
We’re with you every step of the way. Does your aggregator give you the support you deserve? Let’s be honest for a moment... every single one of us offer various commission models, CRM software access and marketing support services. We all provide professional development days, regular newsletters and annual conferences. Make no mistake - these are important. But it’s not enough. A truly supportive aggregator knows you, and knows your business. It offers continuous guidance from your BDM, not just when you’re first onboarded, but at all stages of your career. It openly and honestly communicates with you, arming you with the knowledge to enhance your business. It helps you expand your horizons and gives you access to the strongest product offerings available in the market. It provides ongoing training, to keep you ahead of the competition, and proactive compliance support, so that you don’t overstep regulatory boundaries. A truly supportive aggregator is defined by how much it cares for its brokers, and how much its brokers care for it. Join the aggregator that’s with you every step of the way. Contact Finsure today.
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FE AT URES
SPECIAL REPORT
FINDING THE PERFECT MATCH
Promoting efficiency, competition and better customer outcomes, Lend co-founder and CEO Bill Baker explains how a new matchmaking service can reduce a broker’s workload by up to 35 hours per SME client
KEY BUSINESS METRICS
2016
Lend established
100%
annual minimum growth
12 LENDERS
on the platform at launch, with more ready to join
9 STAFF
currently on the team
6-MONTH
team expansion underway, during which head count will double
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average, it can take a broker anywhere from 20 to 35 hours to place an SME client with a suitable unsecured lender. As all brokers know, that time is filled with phone calls, scenario workshopping, credit policy research and a lot of waiting – all with the aim of securing the best possible deal for the client. Recognising the time burden of this essentially unpaid process – not to mention the multiple applications a broker could expect to submit – entrepreneur Bill Baker co-founded Lend. Identifying that there were as many as 12,000 brokers working around the inefficiencies that currently exist in SME finance, the Lend team developed an online platform that would matchmake borrowers with a suitable lender. It does so without blemishing the applicant’s credit score and saves a broker up to three working days per application. The Lend platform automates the manual process of matching a lender to an SME, using a sophisticated combination of AI and analytics. This means the system can analyse bank statements in the same way a credit manager assesses cash flow; it’s intelligent enough to determine whether a customer can service the loan they want, and it then applies each lender’s credit policy matrix to the scenario to generate a ranking of the most appropriate lenders for the task. Crucially, AI means the platform can learn from the outcomes it generates, to keep ahead of any possible changes to lender ON
policies. The icing on the cake is a centralised dashboard, single log-in and standardised, single application for all lenders on the system. Baker says the platform, which is due to launch this month, is unrivalled in its space. “For us it’s about finding the most suitable lender first time every time. We have developed our own lender logic based on a number of data points to generate a unique profile. In addition to this, all lenders have volunteered information on their product matrix, giving us leadingedge accuracy,” he explains.
want to send all their deals there, they can do that. Control and transparency are important,” Baker says. As a tech rather than finance company, Lend is about more than just lead generation. If the firstchoice lender doesn’t want to take the deal, the system sends it to the second most appropriate lender – a great outcome for the borrower and more settlements for the broker. “Initially we would get a lead through Google and feed that through the system; it was just distribution. Since introducing our new platform, with our own leads, the conversion-to-settlement has increased by 70%, which is a big number, so the platform works,” Baker says. Collaborative outcomes The premise sounds simple, but the idea has been developing since Lend was officially launched in 2016. Over almost three years, the team has been heavily engaged in
“We built an independent system that gives the broker full control to choose the best solution for their customer” Bill Baker, co-founder and CEO, Lend According to Baker, the only barrier to a lender being part of the platform is if their technological infrastructure isn’t up to scratch. Throughout the process, the broker retains full control, with the added ability to specify or exclude lenders based on how they and their customers like to work and the relationships they have with certain brands. Commission payments to brokers are also automated through the platform to ensure that remuneration is timely. “We built an independent system that gives the broker full control to choose the best solution for their customer. Or, if they have a preference for a certain lender and
an extended R&D process, during which they discovered that the greatest pain points for brokers and their SME customers were speedy credit decisions, pricing and realtime application updates. Tackling these hurdles has been key to the Lend proposition. “We didn’t go into this industry lightly. As with all the markets we go into, we did a lot of research, and we realised that if we are going to succeed purely on business loans we must start by focusing on one type of product and doing it well,” says Baker. While speed is a natural benefit of the platform, other broker pain points required more deliberate
In partnership with
Bill Baker, co-founder and CEO, Lend
solutions. For example, to assist brokers with the pricing component, Lend created a tool to compare and calculate the cost of each available loan, which is a similar philosophy to that of the SMART Box, implemented in Australia last year as part of the Code of Lending Practice. To keep brokers in the loop on an application’s progress, the platform sends email and SMS alerts, accessible via their mail inboxes, web browsers or mobile dashboards while in the office or on the road. A broker support team is also available by phone for additional support. By forging a closer alliance between brokers, borrowers and
lenders, Lend also provides a means of distribution for new brands to offer loans in an efficient and effective way. At the time of
is growing by the week. “This year is going to be the year of collaboration,” says Baker. “Firstly, speed and technology
“Lend allows businesses to have access to the smaller lenders ... and gives them the opportunity to compete” Bill Baker, co-founder and CEO , Lend going to press, more than 12 lenders had been confirmed to feature on the Lend panel – including all six of the Code of Lending Practice signatories – and the list
will pave the way for that to happen, and secondly the broker will be empowered to access multiple lenders, providing a better customer experience and meaning their client
gets an answer more quickly. “That is crucial when running a business – it allows the SME to secure funding and move on with their day-to-day activities. Also, Lend allows businesses to have access to the smaller lenders that have slightly different lending criteria and gives them the opportunity to compete.” There’s a further element of perfect timing in Lend’s scheduled debut. The platform will be launched in a post royal commission lending environment in which bank policy has tightened but brokers are rushing to diversify their suite of services ahead of potential remuneration changes. However, Baker maintains a positive outlook, saying that unsecured lenders – whether alternative, online or nonbank – now promote so many benefits to those who use them that they are actually becoming first-choice sources of finance for business owners. “The unsecured lenders are the first choice for SMEs now because of the speed and simplicity of getting funded, so the outlook is bright,” Baker adds. “As well as the benefits for broker and lender, the SME gets a better deal, a better experience and access to funding. All those wonderful things you would expect of a technology company, and ultimately the customer wins and the broker wins because there are more deals happening, so they continue to use the system.” Ahead of Lend’s official launch, the team is already working on ways to expand the platform with equipment financing, invoice factoring and “all the other business funding solutions” on the drawing board. “We intend to be the go-to platform for every finance broker. A one-stop shop offering multiple finance solutions. For now, it’s business loans with a number of exciting product offerings nearing completion,” Baker says. AB www.brokernews.com.au
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IN THE NE WS
WHAT CUSTOMERS WANT Last month, Australia’s first digital start-up bank, Volt, asked consumers what they wanted from their lending institutions. Revealing the answers to Australian Broker, the neobank’s co-founder and CEO, Steve Weston, says the future is all about aspiration
year, three neobanks were granted restricted ADI licences by APRA: Xinja, 86 400 and Volt. Of the three, one has now received its full banking licence, becoming the first digital start-up bank and changing how Australia saves, pays and borrows. As a first step, Volt Bank has gone direct to its target customer base to ask them what they want from a finance brand. The answers were simple: personalised functions, timely service, respect for loyalty, LAST
Don’t give me a savings account; understand what it is I’m saving for and help me achieve it. Help me with budgeting; show me where I can get better deals. “Banks haven’t done that, and that’s what customers are asking for.” Armed with these answers, Weston, his co-founder Luke Bunbury and the Volt team are positioning the bank to lead the huge changes they believe lie ahead for banking in Australia. “If we’re talking about an iceberg,
“People want help that they don’t get from banks today. So, don’t just give me a home loan; help me buy the home” Steve Weston, co-founder and CEO, Volt Bank and reduced fees, to name a few. But the overall theme was aspiration – the idea that people don’t just want a bank account so they can receive and pay money; they want an account that can support their lifestyle and goals. Volt co-founder and CEO Steve Weston says, “People want help that they don’t get from banks today. So, don’t just give me a home loan; help me buy the home. When I’m in the home, help me pay the loan off. 16
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the royal commission was just the tip. It was the big scandal, but in terms of the volume of issues, those will be lifted out of the water in the next few years,” Weston told delegates at the 2019 AltFi Summit in Sydney last month. Speaking exclusively to Australian Broker, he explains that while the royal commission highlighted shortcomings in the financial system, it’s far from the end of the story.
Steve Weston, co-founder and CEO, Volt Bank
“Some of the things [banks] have been doing are actually not what the regulators or society expected, so we’ve got to go and fix those up. We’ve got to go and remediate the sins of the past; put processes in place to stop them from happening again. That’s when I refer to the iceberg coming out of the water. The big issues probably are out, but in volume they still have to surface,” he says. New-age banking Now on a path to becoming a bank that makes people better off, Volt is looking to reinvent the humble current account by adding new spending controls, real-time digital functionality and other mechanisms. When it comes to loans, Volt is on track to launch mortgage lending by late 2019, again promising to make the process faster, easier and “more rewarding” through technology. Volt will have its own mortgage team; however, that doesn’t mean brokers will be written out of the equation. “People are looking for someone to trust, and that should be their mortgage broker,” Weston says. Weston has regularly praised the role of the third party channel, last year telling Australian Broker that a digital bank did not signal the end of face-to-face banking or
guidance. However, for Volt, digital banking does signal the end of the ‘loan for life’ philosophy. “Brokers need to show that they’re doing more than just giving a loan; they have to really understand what customers need and help them achieve that goal and pay off the loan,” Weston says. “If we’re going to respect customer choice, the broker proposition is outstanding, so we’ll be broker-sourced. It doesn’t matter what I think; customers are going to need brokers – getting that impartial advice, being able to access a choice of providers. It’s incredibly attractive.” Those who want to be a part of what Volt is creating can download Volt Labs, an app-based co-creation community that allows customers, brokers, in fact anybody with an interest in Volt, to have their say on how products and services are developed. Community members can also submit ideas and test new features and products. For now, Weston’s focus is on making Volt the change Australia wants to see. “The world is changing,” he says. “With the growing popularity of smartphones, that’s the branch. Suddenly your previous competitive advantage has become a commodity, and your advantage now is your product.” AB
Wednesday 5 June • The Westin Sydney
FUTURE-PROOF YOUR BUSINESS Hear from award-winning brokers:
Karen Bashford General Manager South Coast Business and Financial Solutions MPA Top 100 Brokers 2018
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Navjeet Singh Matta CEO Gain Home Loans MPA Top 100 Brokers 2018
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We don’t want you to miss this unique event focused on futureproofing your business in a postRoyal Commission world and featuring tips and advice from award-winning brokers and brokerage directors recognised in MPA’s annual industry rankings.
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ROUNDTABLE
BANKING ON BUSINESS With the non-banks now in the driving seat and more brokers exploring the space, commercial lending is evolving rapidly. However, an influx of inexperienced advisers could soon reverse the positive outlook. La Trobe Financial explores the trends with three leading brokers What are the primary trends that have driven commercial broking over the last 12 months? David Scardoni: The primary trend I see is the tightening of the credit markets, namely the banks. That has really driven demand for a business like ours and the services we provide. Banks are not doing presales at a lower leverage, and so developers are struggling to secure bank funding and they are partnering with experienced brokers to be able to give them that optionality, both in construction and investment debt.
Q
Jean-Pierre Gortan: I personally think there is a much wider acceptance of non-banks now than there was 12 to 18 months ago. Clients aren’t predominantly driven by price – they are more solutionsfocused now; they need an outcome. The other development is that there are simply more players in this space, so that builds reputation and acceptance of the non-bank sector and drives demand. Cory Bannister: Diversification is no longer an option. The industry bodies are really starting to promote that. We know CAFBA has a clear focus on commercial, and we now see the MFAA promoting commercial brokers directly to business owners on social media. The FBAA is running commercial forums, and this is all in addition to the aggregators pushing commercial diversification. For many aggregators this has been a focus for some time, and now pleasingly others are following. George Karam: We are starting to see an improvement in the quality 18
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of the client seeking our services initially, rather than clients simply coming to a broker as a last resort, so to speak.
borrower’s requirements in a timely manner, giving them confidence that as a non-bank we can meet their needs.
Stephen Lawrence: Personally, I am seeing much more acceptance of the non-banks, especially where
George Karam: There is a diminishing role of the banks being able to articulate their value
“My personal view is that you should be educated rather than regulated, and we need to lead that change. It’s a craft” George Karam, director, BF Money a borrower, who has been a bank customer for many years, is now finding it much more difficult to obtain finance from the banks. We have therefore been assisting the broker market as to what we can do as a non-bank to meet the
proposition to their commercial clients, and an improvement in the way commercial brokerages have been able to communicate theirs. It’s about the banks losing their way by not putting the needs of their clients front and centre, whereas the
brokers are, and that’s starting to play itself out in the marketplace. Cory Bannister: There are certainly tailwinds and a combination of factors that mean brokers with no or limited experience in commercial lending are now finding themselves having more conversations with their clients to find commercial solutions. Consumers are finding they need a broker to source a loan for them because they can no longer self-serve at their local bank. With broker market share pushing towards 60% and likely to go to 70% in the near future, it means the opportunity set is wider now for brokers too. There are more people in your CRMs and more people who are comfortable dealing with brokers. Everywhere you look the tailwinds for the broker proposition are strong, and more customers will use brokers now for commercial solutions.
NON-BANK LENDING TREND Source: RBA, CommSec
Loans and advances, annual change 30% Banks
25%
Other lenders
20%
11-year high
15% 10% 5% 0% -5% -10% -15% Feb 2008
Feb 2011
Feb 2014
Feb 2017
In partnership with
ROUNDTABLE PARTICIPANTS
Cory Bannister In terms of educating the brokers who want to diversify into commercial, who should develop and provide the resources? George Karam: The issue I have with diversification at the moment is that it’s for income’s sake, and it’s not diversification for the customer’s sake. I think we as an industry run the risk of rushing more people into diversified business models without providing them with the tools to do it well. That needs a real measured approach.
Q
Stephen Lawrence: If we talk about the La Trobe Financial construction product, for example, we do webinars, PD days, presentations, and we have hosted webinars and presentations for brokers on how to assess a construction deal, from start to finish, step by step. We can do the same for commercial, and our BDMs are specialists in that area too. Those brokers who are looking to make the move, we are absolutely out there to help them. Cory Bannister: The question of who polices and sets the standard is a bit of a chicken-and-egg situation because industry bodies may say lenders should impose a minimum standard, but many lenders look to the industry associations to hold the standard as part of their accreditation process. If we look at it from the top down, if brokers are represented by their industry bodies and they say generally lenders want you to be with one of those bodies before they will consider you for accreditation, then that’s where it might be most
appropriate. I think the national broker ID has the potential to become a good platform for this; similar to how on your driver’s licence it’s marked for cars, bikes and trucks, a similar regime could apply for brokers. Jean-Pierre Gortan: One of the majors, as part of their industry accreditation, gives commercial accreditation with residential straight up, regardless of whether you asked for it. It’s a package deal.
and increase education, for example through standards, courses, etc? Jean-Pierre Gortan: A broker saying “I can do commercial lending” when they have no experience is bad for everyone – the customer, the industry, the reputation of the industry. Then in turn for the lenders you have people with no experience calling you for transactions; and, last but not least, if a particular transaction is overpitched to the lenders it gets
“Why commercial lending fits so well with our business model is that our diversified funding allows us to do it broadly” Cory Bannister, VP and chief lending officer, La Trobe Financial To maintain the industry standard, it definitely needs a different set of rules, agreements and accreditation. A new-to-industry resi broker has to be mentored, and only two years later can they take the training wheels off. George Karam: We recently employed an equipment finance (EF) specialist, and we wanted him to get EF accreditation, but the only way to get it was to get the home loan accreditation first. If you look at the agreements, it reads exactly the same, but the work, practical application and skill set – they’re not exactly the same. We need a fundamental rethink of what a commercial broker is.
Q
Do the aggregators need to shepherd the flow
VP and chief lending officer, La Trobe Financial
Steve Lawrence VP, head of major clients, La Trobe Financial
David Scardoni Director, Stamford Capital Australia
tainted. At the end of the day the customer is the one who loses. Cory Bannister: There is a need for brokers to be generalists to a certain level, but then we need specialist brokers. It’s like going to the supermarket. The days of going to a butcher, baker and so on are over, and instead supermarkets win because they provide a generally good array of produce and it serves your purpose for day-to-day needs. But when you have friends over for dinner, most people will have a particular butcher they like to go to, or an organic store, for example. I think broking could perhaps evolve into something similar, where you have generalists to a degree, but when you’re going to complex areas it may sit better with a specialist.
Jean-Pierre Gortan MD, Simplicity Loans and Advisory
George Karam Director, BF Money
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FE AT URES
what is the value proposition for your customer? David Scardoni: It’s certainty, speed – time is money – and ease. Typically, the credit process is a lot more streamlined, and the other benefit is terms. It might be higher gearing or presales, and it is offset by a slightly higher rate, but that’s the offset.
a perception with clients that nonbanks are the easiest, rather than best, option. We package all the options, and that might be a major, a secondtier, a non-bank, and we say here you will get the most gearing, this one has the cheapest price, and effectively if it’s the one most suited to the project it isn’t going to require you to discount your presales or find extra cash. You do sometimes get pushed back, but there is much more acceptance with non-banks now, and with
George Karam: Particularly with development finance, more than any other type, your obligation needs to
“It’s about getting involved and being passionate enough to get into commercial lending. Look at the qualifications out there and find a mentor” Steve Lawrence, VP, head of major clients, La Trobe Financial
As a broker, what is the most pressing reason for you to select a non-bank lender for commercial clients, and
Q
20
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Stephen Lawrence: What we try to do as a non-bank is meet those broker requirements by speaking to the market and the decision-makers. Because dealing with the banks you can speak to a relationship manager, but they can only do a certain amount because they have credit and property, etc. But at La Trobe Financial we give the brokers direct access to our decision-makers. We are all on the same floor and we make decisions more quickly and collaboratively. That helps brokers and their customers at the end of the day, with faster decisions and more flexible terms. That’s where we come from in a timely manner and
Jean-Pierre Gortan: Generally, for most transactions we offer our clients lenders from each part of the spectrum by way of comparison, and we talk through the pros and cons of each. Effectively, we are looking for client buy-in by identifying what suits them most, but I am reluctant to go straight to the non-bank as default – there is
Source PwC Banking Matters, August 2018
Major bank credit growth (annualised)
ADI credit growth excluding majors (annualised)
79.8%
25%
79.6%
20%
79.4%
15%
79.2%
10%
79.0%
5%
78.8%
June 2018
May 2018
April 2018
Mar 2018
Feb 2018
Jan 2018
Dec 2017
Nov 2017
Oct 2017
Sept 2017
Aug 2017
May 2017
-5%
April 2017
78.4%
Mar 2017
0% Feb 2017
78.6% Jan 2017
Cory Bannister: Dealing with commercial brokers can often lead to deeper relationships. As was mentioned, you are there to find solutions for customers in complex
La Trobe Financial there is credibility associated with the brand too.
ADI CREDIT GROWTH JAN 2017—JUNE 2018 Major banks’ market share of ADIs
George Karam: La Trobe Financial’s competitive advantage is that they are engaged with our businesses. They aren’t simply waiting, cap in hand, for the next transaction. You feel like you are an extension of their supply chain.
be to the project, not necessarily to the customer. If you’re looking for what the project needs and there is a solution out there that fits with the requirement, then more often than not you will be able to get the right fit for the development from a non-bank that is more flexible on the terms than by trying to make the project change to fit the bank.
July 2017
La Trobe Financial offers the broadest product range of any non-bank lender. How does the broker experience feed into the development of the portfolio? Stephen Lawrence: We talk to brokers to find out what they see in the market and if we need to tweak something here or adjust something there. We absolutely listen to brokers in the market, from a residential and commercial basis, and of course we are also looking at the wider lending market and the other lenders to see what they are doing.
Q
scenarios that perhaps aren’t always easy to find. It isn’t just a case of putting information into a matrix and then away you go. It’s about having detailed conversations along the way so we feel part of a broker’s business too. Why commercial lending fits so well with our business model is that our diversified funding model allows us to do it broadly. Our retail credit fund, which is something different in the market, means we can act in a relationship-banking style because we aren’t limited by single warehouse covenants.
June 2017
George Karam: In the accounting profession you don’t see the industry telling bookkeepers that they should now diversify into complex advisory, but that seems to be the discussion among aggregators and, to some extent, lenders.
In partnership with
in a manner that hopefully suits the customer at the end of the day. Jean-Pierre Gortan: I’ve actually put Stephen in front of a few customers. When clients don’t know the brand it helps to put someone senior, knowledgeable, articulate and well-spoken into the decision-making process. It’s helped me close a few deals. Stephen is invaluable to the process wherever you can use him. What are your three tips for brokers looking to try commercial lending? George Karam: You need to spend time to investigate and learn. You need to be a curious individual who wants to learn for the sake of learning things. If you want to do it well and over the long term, it’s one of those things where every transaction has its own learnings, and they should be applied to the next deal and the one after that. It is a continuous education. I would encourage people to invest in themselves rather than trying to find the next income stream.
Q
David Scardoni: Upskilling and getting the time in market; understanding the ins and outs of commercial broking, including understanding basic commercial property fundamentals such as evaluations, cash flow, feasibility. You need to get your head into that stuff. You need to really understand what capital is available, otherwise you’re not really servicing the client to their full needs. That once again comes with time in market, experience and finding out how to deal with your database and networks. Jean-Pierre Gortan: They need a good mentor. You need a sounding board rather than making decisions on the fly because the customer will pay. I have lots of brokers who call up and ask me for advice. I’m more than happy to help, because when I was starting out nine years ago I used to do the same. If you don’t know what you’re doing, find someone who does, and learn as much as you can. It’s not as simple as putting up the flag and starting to write commercial. Cory Bannister: Partnerships are critical, but alignment of those partnerships is key. To start with, look to your aggregator – can they
help you on education? Same with lenders – make sure you have the support of a lender who can help you throughout the process. Next, I would say start with your existing client base rather than going out and telling the world you are a specialist in the commercial arena. Just try to solve a few less complex transactions and learn through those first, and keep in mind that you really do need to learn as much as you can about lenders, products and the market before you dive in. Stephen Lawrence: It’s about getting involved and being passionate enough to get into commercial lending. Look at the qualifications that are out there, and find a mentor. You can go through your aggregator instead, and they will put you in touch with specialists in that area and help mentor you as well. Again, we have a very experienced commercial lending team who can also help the broker to workshop a deal. I’ve been through 40 years of banking and finance and 26 of those in commercial lending – it’s just about passing that knowledge on and helping people who are up and coming. George Karam: Commercial has gone from being a career path that
is closed to anybody who isn’t a commercial banker to being open to anyone who has worked in mortgage broking. There will be a transition, and if it isn’t managed well it will end up being regulated. My personal view is that you should be educated rather than regulated, and we need to lead that change. It’s a craft, and like any other craft it needs to be taught. We have seen the lack of standards, qualifications and our inability to professionalise come under a lot of scrutiny recently. Either we step up or we step into line. How do you expect the commercial lending space to develop over the next year, and where could the challenges lie? Jean-Pierre Gortan: My expectation is that post royal commission and post-election, the banks will start to loosen up a little. I think the likes of La Trobe Financial will retain a big chunk of the market share they have started to win, but I also believe the banks will become more competitive, a little more flexible. The INGs and Suncorps and so on are saying they really want to write construction but can’t get 100% presales, so how do we get around that?
Q
There will be some defrosting of the commercial space. David Scardoni: The non-bank space is still maturing. A lot of new lenders have entered the market in the last 12 to 24 months, but they’re struggling to find deals. It’s overcrowded, and a lot of them will go out of business I think. George Karam: We are constantly looking at our lender panel to see where we want to strengthen relationships, and we are assessing them on what we call the three Ps: price, policy and process. Bank or non-bank, if you can only compete on one P, close shop; if you can compete on two, then you will win market share; if you can compete on all three, you will own that space in the market. Cory Bannister: I don’t think a lot will change in the next 12 months. Our focus is to continue to improve our value proposition, because we expect over time that lenders will return to this space, so we feel we have an opportunity to solidify our footprint and demonstrate our capability and user experience to the market so that we leave a lasting impression that continues to be sought after through all seasons. AB www.brokernews.com.au
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PEOPLE
Have an interesting deal? Had a particularly difficult or interesting deal? Why not share it with us? Email:
Melanie.Mingas@keymedia.com
A BIG DEAL
Nick Lowe and William Hamer, joint directors at LH Financial Group, recall how they negotiated an ambitious and complex deal that helped a property investor and entrepreneur explore a new business venture
Chris and the Moula team took time to develop a bespoke approach that accounted for the nuances of this specific transaction. Their solution included a $100,000 loan for the renovations and refit, a $50,000 overdraft, and an ongoing line of credit to cover OPEX. The workshopping took a couple of weeks, then from the time we submitted the application, things moved very quickly and the funds were on their way to the client in no time. THE TAKEAWAY
THE FACTS
Loan size and term $100,000; 12 months
Client Business owner and entrepreneur
Goal To obtain a term loan
Location South Australia
Working with the Moula team, we created the most effective solution possible for the circumstances, putting our client on track to hit his ROI target Nick Lowe Joint director, LH Financial Group
THE SOLUTION
We knew that, due to the complexity and nature of the deal, the major lenders would not touch this application – it was too complicated, there was no security, and the client just didn’t have the 22
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Aggregator Lowe Finance, LH Financial
industry track record needed to mitigate the risk of such a huge project. We needed a specialist business lender that was receptive to non-vanilla deals, supportive of small businesses, and understanding of those who wanted to
THE SCENARIO
We were approached in November of last year by a property developer and entrepreneur who was looking to diversify his business interests. He was a new client of LH Financial Group and he had a new business plan: instead of staying in propertyrelated fields, he wanted to branch out into hospitality and take over the freehold lease on as many as four existing businesses. All were well-known venues but needed some work to restore them to their full potential. A loan was required to cover the renovation and premises refit, as well as to fund overheads like marketing and payroll. We had a month to complete the deal. However, due to the complex structuring this was a challenging time frame. Not only did the deal fall outside of normal credit policy but there were five development companies being used as guarantors, and the client had a limited trading history in hospitality of only four months.
Lender Moula
Drawing on our day-to-day experience of working with business owners, we knew we needed a lender that was agile and responsive to the needs of an ambitious business. We also needed a lender that would be receptive to creating a bespoke deal capable of supporting long-term growth and achieving the client’s ROI target – that knowledge certainly paid off this time. Our relationship with Chris also helped. His ‘above and beyond’ attitude was certainly a game changer on this occasion; he is always ready to try to find the right solution for our clients, and as a BDM he has always been supportive of the deals our clients require. This wasn’t a simple deal, and making it work took a lot of effort; however, Chris and the Moula team were incredibly supportive and full of bright
Will Hamer Joint director, LH Financial Group
build a diversified portfolio of interests. Further, we needed a lender that could be flexible enough to design a custom solution that was suitable for meeting the client’s current needs as well as their future objectives. We had worked with online lender Moula many times before, although the client had not yet. We knew this sort of deal could be workshopped with a Moula BDM to reach a good outcome for all concerned. So we turned to Moula BDM Chris Evans. Although the lender was a relatively young brand in the marketplace, the client was happy with this course of action due to Moula’s growing reputation and its backing by Australia’s largest non-bank lender, Liberty Financial.
ideas as to how we could leverage what was needed against what was available. Working with the Moula team, we created the most effective solution possible, putting our client on track to hit his ROI target. To say the client was thrilled is an understatement. This deal wasn’t straightforward, but with our combined expertise and professionalism it was well handled and, as a result, all of the client’s businesses have been strengthened and their risk profile greatly improved. For any brokers who are stuck on a complicated deal, I would fully recommend talking to Moula – or another similarly agile, tech-driven and receptive lender – and work closely with your BDM. AB
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23
PEOPLE
CAUGHT ON CAMERA More than 160 brokers arrived in Launceston, Tasmania, for YBR Group’s fifth annual Commercial Conference. Held in February, the two-day conference was the biggest yet, with more than 30 exhibitors showcasing their commercial products to delegates. Education was top of the agenda, along with networking. Glenn Mitchell, YBR’s head of commercial and leasing, said, “On the back of the royal commission recommendations, never before in the industry has there been a more critical time for brokers to fully understand commercial and equipment finance products available in the market to sell to their clients.”
24
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DATA
NORTHERN TERRITORY
WA SPOTLIGHT
Growth rates down in Darwin market, but sales volumes up In the 12 months to January 2019, Darwin’s annual growth rate went from -9.7% to -3.5%, while regional pockets reported a rise in annual growth from -1% to 1.1%. In Greater Darwin, apartments are in a strong position: sales increased by 37% in the December 2018 quarter. Inner Darwin and north coast Darwin also recorded excellent figures as sales rose by 20% and 129%, respectively. Median prices are also rising in many areas, though others are still on a slippery slope. The median value in Greater Darwin dropped by 0.7% to $350,000, while in inner Darwin it tumbled by 6.6%. Alice Springs recorded an interesting result – while sales volumes were down by 11.6%, the median price increased by 2.3%. More first home buyers have been getting in on the market as well. The number of finance commitments in this segment grew by 2.5% in November–December 2018. With Darwin being an undersized market, however, this figure could still fluctuate. Area
Type Median value
Quarterly
12-month
growth
growth
Darwin
H
$490,000
0.0%
-2.0%
NT Country
H
$439,000
0.2%
0.0%
Darwin
U
$320,000
-2.2%
-11.7%
NT Country
U
$276,500
1.3%
8.5%
NEW SOUTH WALES
Correction continues, but investors positioned to benefit Sydney is still going through a correction period, but that doesn’t mean opportunities are not there for investors. “If you split the market into price points, the bottom 40% of the market – with median prices of up to $830,000 – is showing the strongest performance due to a larger number of buyers in this range and higher yields for investors,” says Propertybuyer CEO Rich Harvey. The top 10% of the Sydney market is also experiencing considerable growth, along with suburbs in desirable areas like those near the beach. “Areas with a continued lack of supply and continuous demand are also faring well, such as beachside areas like Bondi, Manly and Mona Vale,” Harvey says. Infrastructure upgrades play a role in the positive performance of these suburbs. Another factor is growth in the local job market. However, while many Sydney suburbs are in the black, some areas are struggling with too much supply. Area
Type Median value
Quarterly
12-month
growth
growth
THE DARK DAYS ARE OVER
Now that the lowest point in Western Australia’s property market has passed, buying opportunities across the state are set to increase
is far from reaching its previous heights, as prices continue to trend downwards. However, its prospects are looking rosier and rosier as time goes by. “While Perth recorded an annual and monthly fall in prices in November 2018, both falls are exactly half of what was recorded in NSW,” reports Charles Tarbey, chairman and owner of Century 21 Australasia. This suggests that the decline is easing up in WA and demand is creeping back in. “I believe that there are excellent buying opportunities in this market and would follow it closely if I were an investor that believed that Perth’s worst days are behind it,” Tarbey says. “After a horror few years, many believe that WA may be stabilising and the prospects for 2019 look brighter for the market.” Part of this resurgence can be attributed to the mining industry beginning a recovery, which is helping the economy regain its footing. “There seems to be a return in mining, but it’s not a mining boom – it’s just a slow return to recovery,” explains REA Group’s chief economist, Nerida Conisbee. “Employment growth is pretty good – we are seeing strong rental demand. But don’t expect that things will take off the way they did the last time Perth had a property boom.” The reinvigoration of the mining sector has injected new life into not just Perth but the regional pockets as well. “The local resurgence in mining projects has had a positive impact on sales in these regions, especially in Kalgoorlie-Boulder and Port Hedland, where renewed support in mining has created more local jobs and helped to boost population growth,” says Damian Collins, president of the Real Estate Institute of WA. AB PERTH
H
$925,000
-2.6%
-3.1%
Median price (houses)
NSW Country
H
$460,000
0.0%
2.6%
$351,375
Sydney
U
$707,000
-0.2%
-1.4%
NSW Country
U
$398,000
0.4%
0.8%
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Positive moves in the resources sector indicate long-term improvements for Perth The foundations of the Perth market are firm. However, sales of established homes remain fairly sluggish. Unfortunately, this sluggishness is playing havoc with valuations for refinances. In many cases, prices have softened, putting clients in a position where refinancing is not an option. Also, with the federal election looming, we have seen applicants being more cautious due to the potential impacts on rents and affordability. The good news is that there has been a substantial increase in vacant land and unit sales across the metropolitan region. The first quarter of 2019 has seen an increase in rents throughout WA, and the number of rental properties has fallen dramatically compared to 12 months ago. We have also seen a growing number of applicants with renewed employment in the mining sector, and property is still the preferred investment. Once the election is over, I think the market will stabilise and, as a wildcard, I predict an interest rate cut before Christmas, which will further assist market stabilisation. Harry C. Bozin Director/owner, Harken Financial
SUBURB TO WATCH: CLARKSON
Sydney
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BROKER PERSPECTIVE
Median price (units) $301,615
Source: CoreLogic
12-month growth
3-year growth
5-year growth
Indicative gross rental yield
-5.5%
-14.9%
-17.6%
4.9%
12-month growth
3-year growth
5-year growth
Indicative gross rental yield
0.3%
18.2%
-17.2%
5.1%
HIGHEST-YIELD SUBURBS IN WESTERN AUSTRALIA Suburb
OPPORTUNITIES AND KEY INFRASTRUCTURE
Type
Median price
Quarterly growth
12-month growth
Kalbarri
U
$125,000
3%
-2%
Cable Beach
U
$211,000
0%
9%
St James
U
$190,000
-17%
-44%
Road and rail
Leisure
In March, Scott Morrison announced funding for $1.6bn in road and rail projects
Metro shopping centres will enjoy upgrades valued at $4bn
Spalding
H
$121,250
-3%
-19%
Port Hedland
U
$215,000
-9%
-14%
Narrogin
H
$165,000
0%
-13%
Somerville
U
$205,000
0%
-14%
Katanning
H
$151,500
-1%
-4%
Boulder
H
$210,000
11%
-4%
Tourism
Renewables
Perth city is to benefit from 15 new, major-flagged hotels
Australia’s first waste-to-energy facility is located in Rockingham-Kwinana
Wagin
H
$172,500
5%
7%
Broome
U
$275,000
10%
10%
Kununurra
H
$290,000
-15%
-14%
AUSTRALIAN CAPITAL TERRITORY
Area
Type
Median value
Quarterly growth
12-month growth
Canberra
H
$680,000
1.5%
3.1%
Canberra
U
$425,000
0.0%
1.7%
Affordability will become crucial to sustaining demand The capital is buoyed by the strength of its local economy, which in turn is supported by a good job market. Nonetheless, this positive streak could slow down soon. The number of ACT suburbs with a minimum median house price of $1m came in at nine as of January 2019 – down from the 10 recorded over 2017 and 2018. Nonetheless, these premium suburbs continue to be beyond the capacity of many buyers. According to Domain data, these pockets are generally centred in Canberra’s inner ring, with the exception of O’Malley. For those who favour the location of the more expensive suburbs but don’t have the budget, there are other options, namely the neighbouring suburbs with much lower price tags. For instance, those wanting to buy into Forrest could consider Deakin instead, or Griffith rather than Narrabundah, or Ainslie instead of Reid.
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27
DATA
SOUTH AUSTRALIA
12-month
growth
growth
Adelaide
H
$463,000
0.7%
1.3%
SA Country
H
$270,000
1.0%
-1.0%
Adelaide
U
$340,000
0.0%
-0.1%
SA Country
U
$220,000
6.7%
5.7%
VICTORIA
MEDIAN HOUSE AND UNIT PRICES
Melbourne’s property prices regress to 2017 levels
$1,000,000
Type Median value
Quarterly
12-month
growth
growth
Melbourne
H
$710,000
-2.0%
1.4%
VIC Country
H
$365,000
0.7%
5.0%
Melbourne
U
$535,000
0.0%
1.9%
VIC Country
U
$270,000
-1.9%
-1.9%
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Total auctions
86
Sold
28
Not sold
21
Clearance rate
57.1%
PERTH Total auctions
46
Sold
8
Not sold
15
Clearance rate
34.8%
Houses
$0
Sydney Melbourne Brisbane Adelaide
Perth
Hobart
$470,000
$387,500
$460,000
$367,000
$100,000
$490,000
$200,000
$322,500
$300,000
$460,000
$500,000 $400,000
$522,500
$600,000
$682,250
$700,000
$665,000
$800,000
$838,000
$900,000
Tighter lending criteria is hitting Melbourne hard and the city is facing monthly drops in property prices as a result. CoreLogic’s Hedonic Home Value Index for February 2019 shows that values have fallen by a minimum of 1% every month since November 2018. Moreover, the rate of decline increased over the January 2019 quarter, with prices falling by 4% overall. In short, Melbourne's property prices have regressed to levels last seen two years ago, and the downturn is particularly evident at the upper end of the market. Properties in the top quartile saw values plummet by 12.4% in the year to January 2019. “The tightening of banks’ lending standards and stricter credit controls are making it more difficult for borrowers to access the same level of funding as was once possible,” says Geof Snell, principal property economist at BIS Oxford Economics. These factors are expected to cut down buying activity throughout 2019.
Area
ADELAIDE
Darwin
Units
$430,000
Quarterly
$372,000
Type Median value
This week 1,978 auctions were held across the combined capital cities, returning a preliminary auction clearance rate of 57%. Over the previous week, a final clearance rate of 51% across 2,164 auctions was recorded, making it the third consecutive week when the clearance rate held above 50%. Over the same week last year, auction volumes were slightly lower (1,839); however, the clearance rate was stronger at 63%. Melbourne was host to 899 auctions this week, with preliminary results returning a 58% clearance rate. Over the previous week, 978 auctions were held across the city, with the final clearance rate coming in at 52%. This time last year, 723 homes were taken to auction and a final clearance rate of 68% was recorded. In Sydney, 740 homes were taken to auction this week, down from 801 last week. The final clearance rate in Sydney has held above 52% for the last five weeks, so it will be interesting to see if this continues once the remaining results are collected. Across the smaller auction markets, Canberra, Perth and Tasmania saw an increase in the number of homes taken to auction, while Adelaide and Brisbane saw lower volumes week-on-week.
$536,000
Area
WEEK ENDING 7 APRIL 2019
$650,000
Adelaide is one of the most affordable capital cities in the country, with properties at the lower price points predicted to perform well. “When you have people not wanting so much to purchase in Melbourne and Sydney, they will start to look at the smaller capitals like Hobart and Adelaide because the real estate’s still affordable,” says Real Estate Institute of Australia president Adrian Kelly. “If you’re buying for investment purposes, the rental returns are much higher than what you’ll get in the other big capital cities.” According to Herron Todd White’s Month in Review report for February 2019, middle-ring suburbs like Hope Valley, Ingle Farm and Dover Gardens are potential hotspots this year, offering properties within the $300,000 to $500,000 price range. These suburbs are ideal for first home buyers and investors who want to limit their reliance on lenders.
CAPITAL CITY AUCTION CLEARANCE RATES
$310,000
Adelaide reaps the rewards of a national dip in property values
Canberra
CAPITAL CITY HOME VALUE CHANGES Capital city
Weekly change
Monthly change
Year-to-date change
12-month change
Sydney
-0.2%
-0.8%
-3.4%
-11.0%
Melbourne
-0.3%
-0.8%
-3.6%
-10.0%
Brisbane
-0.1%
-0.7%
-1.2%
-1.6%
Adelaide
0.0%
-0.2%
-0.5%
0.7%
Perth
-0.1%
-0.4%
-3.0%
-7.9%
Combined 5 capitals
-0.2%
-0.7%
-3.0%
-8.7%
*The monthly change is the change over the past 28 days
BRISBANE CANBERRA Total auctions
74
Sold
35
Not sold
25
Clearance rate
Total auctions
127
Sold
22
Not sold
54
Clearance rate
28.9%
58.3%
SYDNEY Total auctions
740
Sold
327
Not sold
201
Clearance rate
61.9%
TASMANIA
MELBOURNE Total auctions
899
Total auctions
6
Sold
430
Sold
1
Not sold
310
Not sold
0
Clearance rate
Clearance rate
58.1%
TASMANIA
Area
Hobart’s rental rates outpace those of Perth and Brisbane Hobart remains arguably Australia’s most affordable capital, but the high growth levels recorded during its boom period may be starting to catch up with it. CoreLogic’s Quarterly Rental Report for January 2019 notes that the increase in rental rates over the last few years has begun to push rents in Hobart up above those in Adelaide and Perth. In fact, Hobart’s rents are now slightly higher than Brisbane’s. Over the same period, rental yields have not improved. The rising rents could be tied in part to the low supply in Hobart, which keeps the rental market very tight and gives landlords a little more leverage when it comes to rates. Short-term rentals are continuing to flourish as well, and this has had an impact on the long-term rental market. Nerida Conisbee, chief economist at REA Group, says buying property to list on Airbnb “make sense in a market like Hobart”.
N/A
Type
Median value
Quarterly growth
12-month growth
Hobart
H
$463,000
2.5%
13.3%
TAS Country
H
$305,000
2.6%
9.1%
Hobart
U
$360,500
1.4%
11.1%
TAS Country
U
$241,500
-1.6%
-0.4%
All data sourced from CoreLogic.com.au
www.brokernews.com.au
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PEOPLE
Aggregator Choice
IN THE HOT SEAT Will Unkles, the award-winning director of 40 Forty Finance, reflects on his early days as a broker and shares his tips for keeping on top of the email avalanche Who or what inspired you to become a broker? At age 24 I was working at a financial planning firm. I was A in charge of preparing and organising all annual client reviews. In the same year, I purchased my first home. During the process with the mortgage broker, I asked him what ongoing service I could expect given he would receive trail on my mortgage. Not only did he not have an answer but he told me I was the first person to ever ask. At that moment, I thought to myself, there is an opportunity for a high-touch model within the mortgage broking space, and then went on a five-year journey before starting my own business.
Q
What’s one of your recent career highlights? In October 2018 I was named Australia’s Independent A Broker of the Year at the 2018 AMA awards. This was a huge shock on the night, and I am still in some disbelief that it was possible only three years after starting my business. What it did represent is a changing of the mentality within the industry away from loan volumes towards a more holistic client focus.
Q
Q A
If you won $1m, what would you do with it? I’m too sensible for anything interesting here… Buy a family home within 10km of Melbourne’s CBD.
What do you wish you’d known when you started out as a broker? I came into broking with fantastic operational knowledge; A however, I didn’t know anything about lender policy. It took me more than 12 months to figure out that every lender has a policy document or portal where you can look up their different slants on various scenarios. I wish someone had pointed this out to me earlier as it would have saved a heap of phone calls to BDMs and lender hotlines.
Q
What are your top survival tips for working in finance? Strict email management. I use a ‘ball in your court’ method. A Any email in my inbox is for me to action. Once I reply or action what is required, the email gets quickly filed/deleted out of my inbox to ensure I can keep focused. Any email that comes in needs to be quickly returned to the lender/client to put the ball back in their court and await their response. AB
Q
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SYDNEY 2 MAY | ADELAIDE 9 MAY | PERTH 16 MAY | BRISBANE 30 MAY | MELBOURNE 6 JUNE
Our industry is in a new phase... whatever the outcome of the next few years, we will be faced with: – New governance and regulatory frameworks – New lending conditions – New customer expectations – Potential changes to remuneration structures At the same time, customers in record numbers will be seeking the services of value-adding finance brokers. In this new era, you will be required to think differently to continue to grow a sustainable business. The MFAA National Roadshow will arm you with the personal and professional skills and tactics to grow your business, push through and rise above the noise during this challenging time.
Sessions include:
Speakers include: Jess Gallagher
Summer and Winter Games Paralympian
Mike Felton CEO, MFAA
Amanda Stevens
Customer experience expert, marketing consultant and author
Are you ready?
Our industry is continually changing, and as brokers, when faced with this change, we may not see the opportunities that can come from it. At a young age our keynote speaker, Jess Gallagher, had to adapt to an incredible change. Jess will share how she develops, builds and sustains trust whilst adapting to the variables around her.
Chris Helder
Business communications expert and author
How to build a future-proof brand and win big in changing times
In times of change and uncertainty, the natural response is to retreat and cut back on marketing. In this session we’ll convince you to do anything but. You’ll discover why the new era provides a unique opportunity to grab market share. You’ll be inspired to get customer-obsessed and create an epic business.
Anthony Laye
Business and behaviour expert
Cutting the noise and the future of thinking
There is so much noise around our industry today. Is it distracting you from the main game? Is it affecting your productivity? This session will enable you to create a new mindset in order to take on the challenges that lie ahead and be more productive.
Are you connecting consciously?
In order to convert more prospects into customers, and customers and businesses into referrers, we need the ability to connect in a real way. In this session we demonstrate the skills needed to create more meaningful human-to-human connections that will increase your ability to win and retain new business.
PLUS! Professional headshot studio
GET YOUR TICKETS NOW! Roadshow Conference: $175 (MFAA member’s early bird) $275 (MFAA member’s full rate)
State Excellence Awards: $249 (MFAA member’s early bird) $329 (MFAA member’s full rate)
Non-member rates also available.
Visit roadshow.mfaa.com.au
Check your state’s National Roadshow website for early-bird expiry dates.
Major event sponsor and principal industry partner:
Earn 7 CPD | Exhibitor expo area Sponsor prize draws
Visit roadshow.mfaa.com.au for tickets or to find out more.
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