JULY 2019 ISSUE 16.14
Behind the numbers Assessing investor returns in a challenged market /16
Commercial’s big break With $85bn in opportunities, brokers are set for a bumper H2 /20
STEVE KANE NAB’s GM of broker distribution reveals how the major’s digital focus will transform lending /14
Full throttle Adelaide Since the auto industry collapse, positive vibes abound in SA /26
ALSO IN THIS ISSUE… News The latest activity from across the market /4 Caught on camera The Pepper Money Insights Roadshow tours Australia /24 In the hot seat Career insights from Athena Home Loans CEO Nathan Walsh /30
NEWS
IN THIS SECTION
Lenders Specialist lender launches 100% home loan /04
Aggregators Aggregator reports influx of female brokers /06
Technology CEO: Broker input shaping digitisation /10
Associations MFAA pairs up with ABA to launch broker training /12
Market Uptick of overseas interest in Aussie property /08
www.brokernews.com.au JULY 2O19 EDITORIAL Editor Melanie Mingas News Editor Madison Utley Production Editor Roslyn Meredith
DATES TO WATCH
Upcoming can’t-miss events
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14 AUGUST
21 AUGUST
29 AUGUST
Commercial Lending Workshop
Doyenne Program: Women in Broking
MFAA’s Tasmania PD day
In collaboration with the MFAA, Simplicity Loans and Advisory will host a two-hour commercial lending workshop from 3.45pm at the Pullman Hotel, Sydney. This casual event is aimed at resi brokers looking for the tools required to identify, analyse and capitalise on the opportunities in commercial lending.
Pioneered by ANZ’s Simone Tilley, a series of events will take place between August and October to inspire and support female brokers in the industry. The first will see a new group of Doyenne women meet for a conversation lunch with Tilley and Katherine Bray before a hands-on afternoon working on profiles and thought leadership positions.
Taking place at Elizabeth Street Pier, this one-day event will arm delegates with the information on the latest developments in the industry that they need to get ahead, while also introducing them to a range of industry service providers and lenders through the adjoining supporter showcase.
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CAFBA’s annual conference and awards will take place at the Grand Hyatt Melbourne. Conference attendance is complimentary, but registration is required. The awards ceremony starts at 6.30pm on the same day. Early-bird tickets for the event are on sale until 1 July.
Tackling how the industry has changed since the royal commission, this year’s credit conference will see financial services institutions, regulators, professional service organisations and industry associations collaborate to discuss the future of credit law at the Sheraton Mirage, Gold Coast.
12 SEPTEMBER R U OK? Day It’s a question that is often asked without waiting for an answer, but this September people across Australia will once again be encouraged to check in with their friends and peers. The aim is to inspire meaningful connections, and events will be held across Australia.
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Connective Conference 2019
Australian Mortgage Awards
COBA 2019: Stronger Together
With a two-day agenda, Connective’s Unite and Transform conference kicks off in SA on 26 September, before heading to Victoria (10–11 October), Queensland (17–18 October), WA (24–25 October) and NSW (31 October–1 November). Each edition of the conference will be followed by a state awards ceremony.
Starting at 7.30pm, this year’s AMAs will see hundreds of mortgage and finance professionals return to The Star in Sydney to celebrate the industry’s best and brightest players, with awards in more than 30 categories. The 2019 event will feature Urzila Carlson, Duke Music and Linden Furnell.
The Customer Owned Banking Association’s 2019 convention will take place over three days on the Gold Coast. Sessions will cover the future of the banking sector and the opportunities for customer-owned institutions. The speaking line-up includes an address by APRA chairman Wayne Byres.
Fast money. Short term. $100k - $10million. Real Estate backed lending.
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NEWS
LENDERS LA TROBE FINANCIAL ADDS TO INVESTOR SUITE has launched its 90 Day Notice Account offering an initial rate of 3.10% per annum with monthly payments. For term and yield, the account complements the non-bank’s existing 48 Hour (2.6%) and 12 Month Term (5.20%) products. “We believe that this current low interest rate environment will persist for years to come, and it is critical that investors take steps to identify alternative income sources,” said chief investment officer Chris Andrews.
SLIGHT RISE IN LOANS FOR NEW HOMES Source: HIA
Lending for construction and purchase of new dwellings – Australia 10,000
LA TROBE FINANCIAL
9,500
Number of loans
9,000 Seasonally adjusted 8,500
8,000
7,500
HOMESTART FINANCE TACKLES CRUNCH state government-owned SA’S HomeStart Finance has introduced an interest-free deposit gap loan of up to $10,000 for five years, provided both directly and through its broker channel. According to Andrew Mills, head of customers and origination, 90% of HomeStart’s customers would have been unable to secure a loan from a major lender. Over the past 30 years, HomeStart has helped secure mortgages for more than 70,000 households.
“If you’re not having broad conversations and locating leads from within to create opportunities for your business, you’re really diminishing the value of what you’re building” Malcolm Withers Head of commercial, Pepper Money
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7,000 Aug 2016
Dec 2016
Apr 2017
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SPECIALIST LENDER LAUNCHES 100% HOME LOAN Loan for owner-occupiers frees up eligible borrowers from needing to save for a deposit or purchase lenders mortgage insurance lender Granite Home Loans has introduced a 100% mortgage specifically for those who work in the legal, medical, finance, IT and engineering sectors. Designed for the purchase of owner-occupied homes, the offer frees up eligible borrowers from needing to save for a deposit or purchase lenders mortgage insurance. Eligible applicants must have a tertiary qualification, three years or more of industry experience and meet the minimum income threshold, which starts at $100,000 per year but varies across the states. “There are many high-quality potential homeowners out there SPECIALIST
with a fantastic education behind them and a great career ahead of them who are able to afford to repay a home loan but who probably haven’t seen homeownership as something that is realistically attainable for them in the immediate future,” said Craig Mackenzie, co-founder and director of Granite Home Loans. “Our vision is to help those high credit quality professionals that current mortgage solutions may not be fully catering for by giving them an alternative to enter the market sooner, if that is the path they wish to take.” Granite intends that the product should not only meet the needs of young professionals looking to enter the market for the first time
Aug 2018
Dec 2018
Apr 2019
but also those starting over with minimal savings, whether after a relationship breakdown, illness, or other extenuating circumstances. Granite’s 100% home loan solution has an interest rate of 5.99%. After the $3,500 establishment fee, there is no LMI or risk fee payable. The lender also provides a 97% home loan solution at an interest rate of 5.60%, with the same general terms as the 100% product. A spokesperson from Genworth Insurance said, “These loans are considered higher risk and therefore typically attract a higher interest rate. There are also greater capital requirements for lenders of these types of loans to adhere to, which in turn has cost implications for the borrower.” “So, while a borrower without LMI may not incur an LMI premium, they often incur a higher interest rate, making this option more expensive over the life of the loan.”
NEWS
A G G R E G AT O R S SUBAGGREGATOR RATE CUTS INEFFECTIVE TEAMS UP IN WITH TAX GROUP ‘RESTRICTIVE’ LANDSCAPE managing director John Kolenda has said the Reserve Bank’s rate cuts are doing nothing for consumers seeking finance, adding that lending remains “highly restrictive, complicated, and confusing”. “We have seen a dramatic reduction in borrowing capacity for consumers, with many being disheartened by the scrutiny of the major banks in analysing their expenses and activities,” Kolenda said. FINSURE
AGGREGATOR REPORTS INFLUX OF FEMALE BROKERS IN FY19 For the first time in its 27 years in business, Aussie Home Loans has recruited more female brokers into its retail channel than male the last year, 51% of new franchisees and retail loan writers at Aussie Home Loans were female. It marked the first time that women outnumbered men in the firm’s 27-year history, following active work towards achieving gender balance. “Recruiting more women into the Aussie team is a trend we’re determined to continue,” said general manager of people and culture Lynda Harris. “We’re proud to be bucking the trend in the industry, but we’re also well aware more needs to be done so we can not only continue to attract the right women to mortgage broking but keep, support and enable them so they start, grow and lead successful businesses.” IN
The MFAA’s most recent survey of more than 400 brokers shed light on the damaging disconnect between the male and female perspective of the inclusivity of the mortgage broking industry. While 60% of the male respondents said there were no barriers to female participation, just 35% of the women surveyed agreed. Further, 65% of women cited unconscious or conscious beliefs about gender roles as inhibiting their professional success in the space. Of those surveyed, 30% of women said they felt the industry was not inclusive of females, while less than 10% of the male respondents indicated the same. These results echo those
published in the previous report, when almost 700 brokers and finance professionals shared their views. Then, 57.27% of women believed they were underrepresented in the industry, while only 22.15% of males agreed. According to Harris, some of Aussie’s most successful members in both its mobile broker and franchisee channels are women. Belinda Woodley, co-franchisee of a successful multistore Aussie franchise, said mortgage broking was a fantastic business path for women looking for flexibility and a rewarding career. “I really enjoy running a business, helping my customers and investing in building an exceptional team around me,” she explained. “I started with Aussie as a mobile broker over a decade ago, and I now co-own two Aussie stores. It’s incredible where this journey has taken me and what you can achieve with the backing of a great business partner.”
NON-MAJORS REACH NEW HIGH the fourth quarter of FY2019, non-majors posted a recordhigh 42% of all lodgements and accounted for more than a third of first home buyer mortgages for the first time, the AFG Index shows. Lodgements increased 12% from the last quarter, but they remained 11% lower year-on-year. “There are tentative signs of increased activity, with lodgement numbers and volumes up significantly,” said AFG CEO David Bailey. IN
“Today’s customers are looking to build longer-term relationships with their brokers, and they expect that relationship to encompass a broad spectrum of services” Brendan Wright CEO, FAST
Alt Doc up to $500,000 for business purposes Resimac Prime Alt Doc For more, visit broker.resimac.com.au Terms, conditions and credit criteria apply.
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NEWS
MARKET SALES OF NEW HOMES HIGHEST IN A YEAR to the HIA New Home Sales report, new sales in May were at their highest monthly level in more than a year (see graph). Home sales increased by 54.2% in NSW, 34% in Western Australia, 26% in Queensland, 25.3% in Victoria and 0.9% in South Australia. However, while the uptick suggests that confidence is returning, concern remains that the supply of new homes has far outstripped demand, according to fresh doubts raised by CoreLogic analysis. ACCORDING
STILL CONFUSION AROUND CREDIT REPORTING many as 97% of 1,000 consumers surveyed by Experian were unaware of the impact that missed credit card payments had on their credit score. The data also found that 22% did not realise credit card repayments could impact future credit applications, while 42% believed that one missed payment would only decrease their credit score by 1–5%. Executive GM Poli Konstantinidis said the results would have far-reaching impact as CCR continued to be rolled out. AS
“Stamp duty is an unreliable source of revenue, and the increased dependence makes states heavily susceptible to housing market downturns” Tim Reardon Chief economist, HIA
Carrie Law, CEO and director, Juwai
UPTICK IN INTEREST FROM CHINESE INVESTORS IN AUSSIE PROPERTY New data has revealed what could be the beginning of a turnaround in Chinese residential investment in Australian property the first time since 2016, there have been two consecutive quarters of year-onyear growth in Chinese buyers of Australian residential property, according to the Chinese Australian Dwelling Investment Tracker 2019 published by Juwai.com. The new data, which comes as investor activity across the market continues to struggle under the weight of difficult credit and buying conditions, could signal a change in the market outlook. While plummeting property prices have kept foreign investors at bay, Juwai expects Chinese buying to pick up again in 2020 as the property market begins to recover. And there is an additional factor at play: the offset of hefty foreign FOR
buyer taxes against a weakening Australian dollar. “Australia appeals to Chinese buyers as one of the wealthiest peoples in the world, with a median individual net worth of US$191,453. Three Australian cities rank in the top 10 of the world’s most liveable cities,” said Juwai CEO and director Carrie Law. “A buyer holding Yuan today needs the equivalent of $88,800 less in funds compared to 2017 to purchase an $800,000 dwelling. Thus, Australian state foreign buyer taxes have been counterbalanced by the plummeting Australian dollar, which has lost 11.1% of its value against the Chinese Yuan since July 2018. That compares to the 8% rate of the highest foreign buyer taxes,
which are in New South Wales and Victoria.” Currently, Melbourne is the Australian city receiving the bulk of enquiries from Chinese buyers, at 43.8%, compared to Sydney’s 23.9%. The report also looked at the contribution of Chinese students. According to its findings, they comprise 38% of foreign students in Australia and contributed $11.7bn in export income from international education activity in 2017. Law said, “Young adults from China have helped turn education into Australia’s third largest export industry and the largest single services export. Chinese students generate more export education income than students from the next seven highest-ranking countries combined. “Anti-student policies in the UK and USA are likely to push Australian enrolments even higher.” Currently, Victoria and NSW combined are home to around two thirds of all foreign students residing in Australia.
PRIVATE NEW HOUSE SALES - AUSTRALIA Source: ABS, HIA
HIA new home sales
ABS seasonally adjusted approvals – private sector
12,000 11,000 10,000 9,000 8,000 7,000 6,000
28.8%
5,000 4,000 3,000 2,000
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NEWS
TECHNOLOGY
RATESETTER JOINS ANOTHER LENDING PANEL P2P lender RateSetter has joined Choice Aggregation Services’ lending panel, pushing its loans to more than 1,600 brokers. In 12 months, RateSetter has joined more than 10 panels, with plans to raise that number yet further, and there are more than 8,000 brokers currently accredited with the lender. Its CEO, Daniel Foggo, said “Versatile and affordable finance should be core to a broker’s growth outlook and their clients’ financial wellbeing.” ONLINE
CEO: BROKER INPUT SHAPING DIGITISATION Digital enhancements top building society CEO’s list of priorities, with the aim of “removing friction” and reducing turnaround times new CEO of Newcastle Permanent Building Society, Bernadette Inglis, has revealed how the institution is aiming to take the friction out of the lending process, improve turnaround times and refine communication. “Whenever we work with our broker partners or directly with our customers, we endeavour to make the complex simple for them,” the former Westpac executive explained. “Customers can now do more of their home lending needs online. This is an area that we will continue to drive and develop. “Part of that is listening to our broker partners to understand what is important to them as they help customers; how digitisation THE
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enhances their business; and how we can cooperate with them in providing those capabilities from us to make their businesses more efficient and more effective.” According to Inglis, working with brokers is a natural extension of the building society’s driving goal. “Our focus – and my focus – has always been and always will remain firmly on customers and the people in our community. Because brokers also have that aspiration, there’s a very good partnership there,” she said. Noting that the bank’s physical presence was contained to the Newcastle region, Inglis voiced appreciation for the wider reach provided through
mortgage brokers. “Those partnerships are critical in our being able to help the people in our community. Homeownership is an incredibly important part of our business because it is so core for our customers,” she said. Inglis also praised the quality of the clients brought to Newcastle Permanent through the broker channel. “We’re all about putting people in a position where they can afford their home, and they can – with comfort – own their own home, so that quality aspect is really important to us,” she explained. Newcastle Permanent also confirmed that it would pass on July’s 25 basis points cash rate cut in full to all its home loan products. “Customers may choose to maintain the amount they pay off their home loans, effectively paying off their loan balance sooner, or enjoy the benefit of some extra space in their monthly budget,” said the new CEO.
MAJOR ENHANCES BROKERS’ DIGITAL REACH received a preview of NAB’s planned digital enhancements during its second Digital PD Day last month when 2,000 unique users logged in. NAB also held its ‘Bank Behind the Broker’ education series across the country in May and June, which 1,700 brokers attended. “We will be looking to create more innovative training and education initiatives to reach as many brokers as possible,” said GM of broker Steve Kane. For more on this story, turn to page 14. BROKERS
NEWS
A S S O C I AT I O N S
FBAA LAUNCHES NEW WEB-BASED APP and aggregators will benefit from a new web-based app from the FBAA, which uses AI and character recognition technology to address time-consuming administrative tasks. The app can also be used to monitor industry requirements, including tracking protection and indemnity insurance issues and compulsory professional development needs – a useful feature given the rapid pace of regulatory change seen within the industry recently. The second version of the app is already in development. BROKERS
MFAA TEAMS UP WITH ABA TO PROVIDE BROKER TRAINING Mike Felton reports that “strong headway” has been made in the collaboration to support brokers facing further regulatory changes MFAA has issued an update on its work with the Australian Banking Association to address the risks posed to mortgage brokers as a result of the updated banking code, which came into effect across Australia on 1 July. The specific work being done concerns the role of brokers in identifying and supporting vulnerable customers, and related insurance considerations, among other areas. The MFAA advised caution upon first learning that lenders were requiring mortgage brokers to assist them in meeting their new obligations, and said it would seek clarity on the new declarations being introduced and their legal ramifications for THE
CAFBA 2019 AWARDS NOMINATIONS OPEN and associate members of the Commercial and Asset Finance Brokers Association can now submit nominations for CAFBA’s 2019 awards, taking place on 30 August. Across six categories brokers can nominate themselves and their peers. This year there will also be an additional award for the Women in Leadership Achiever, intended for one of the recipients of the prestigious CAFBA Women in Leadership scholarships. Finalists will be announced on Friday 16 August. FULL
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those in the industry. Last month, CEO Mike Felton updated MFAA members on the “strong headway” the two associations had made in addressing the concerns of the broking industry. Felton explained, “The MFAA and ABA are working closely on the development of a training module as a matter of emergency – in order to ensure that [brokers] are equipped to meet customer needs in this area, but also that [they] are comfortable in doing so. “Obviously, lenders will differ in the exact way they implement their obligations under the code, but the idea is to get the same core training to avoid [brokers] having to duplicate that
over multiple lenders.” Felton also addressed concerns that brokers’ professional indemnity (PI) insurance would not cover the new financial abuse declarations banks were asking brokers to sign. “The initial PI concerns are steadily being addressed,” said Felton. “A number of insurers have assured that broker requirements under the banking code of practice are not to be excluded from policies.” For now, Felton is encouraging brokers who are unsure of how to proceed to follow guidance issued by their respective aggregators. “Whilst we have not fully resolved the situation, I am delighted to say that we are making strong headway, with excellent progress in a number of areas,” he said. “The MFAA and the ABA have been in active discussion over the past week, and we are close to finalising the wording of a broker statement around co-borrowers and financial abuse.”
TECHNOLOGY UPDATE
QCCU’S TECHNOLOGY-DRIVEN EXPANSION
Sharon Evans, Mortgage Direct Manager, QCCU
Country Credit Union’s aim is to be the preferred lender for all Queenslanders. The independent, customerowned mutual, which began in 1971 as the Isa Mine Employees' Credit Union Limited in Mount Isa, is focused on growth, with investment in technology underpinning its core strategy and ApplyOnline its platform of choice. “We’re looking to spend on technology to value-add to the business,” says Queensland Country Mortgage Direct Manager Sharon Evans. “We have been using ApplyOnline for around four years and we’ve just upgraded, acquiring the ‘Supporting Documents’ tool. “We’re anticipating this will save at least 30 minutes per application due to increased efficiencies and processing,” Evans says. “In a small team such as ours, this time saving is huge QUEENSLAND
and will allow us to better resource our time with brokers to generate more business and positive conversations.” On 1 April 2018 Queensland Country merged with Queenslanders Credit Union to form the second largest credit union in Queensland (and the 12th largest customerowned banking organisation in Australia). They have approximately 450 staff, with 30 branches and service centres. Queensland Country's head office in Townsville is operating in a diverse community that's still in the throes of recovering from recent flash flooding, with many homes and businesses devastated in January 2019. Over the last three years Queensland Country Credit Union has increased its footprint in the south east of the State and is now pushing for additional growth in this region with the appointment of a Brisbane based Broker Relationship Manager.
Steven Hudson, Customer Account Executive, NextGen.Net
“Glenn Kazich will service our existing broker connections at a local level as well as further investing in expanding our footprint in South East Queensland particularly in Brisbane and Ipswich,” Evans says. NextGen.Net Customer Account Executive Steven Hudson refers to Queensland Country as “our most northern client” and talks of the pleasure he derived from flying to Townsville recently and visiting Evans. “With Queensland Country leveraging new ApplyOnline tools and experiencing a significant increase in volume through the broker channel, it was great to meet up to discuss future strategy,” Hudson says. “Supporting Documents is now an industry standard with a wide acceptance in the channel, and as Queensland Country experience increased growth, leveraging the tool internally brings efficiencies to loan processing and further
improves service.” Evans speaks of the Queensland Country marketing team “enhancing the look and feel of our broker website; the aim being to provide a modern look with broker-specific content to make it easier to do business with us”. She says, “by upgrading ApplyOnline to incorporate the Supporting Documents service for easier assessment and processing, we’ve established a scalable and efficient solution for applications originating in the third-party market”. “Supporting Docs has really streamlined the process and made ApplyOnline our onestop-shop. When brokers submit a loan it’s all in one system now, which captures everything,” she says. “While we’re not the biggest lender in Queensland, we aim to be the preferred lender for all Queenslanders and one of only a few lenders that will continue to remain ‘member owned’.
FE AT URES
SPECIAL REPORT
TIMES OF CHANGE
Steve Kane, National Australia Bank’s general manager of broker distribution, reveals how the major’s digital focus will transform lending and give brokers an upper hand with residential, commercial and SME clients
NATIONAL AUSTRALIA BANK AND THE BROKER CHANNEL
46%
of NAB mortgages are originated through the broker channel
2,000
unique users logged in for the latest Digital PD Day
1,700
brokers attended face-to-face training sessions
+11
NAB’s net promoter score (NPS) among residential brokers
38%
of residential brokers are likely to recommend NAB
+27
Average NPS for commercial and small business loans among brokers’ customers
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the context of business and management, organisational change is an area that attracts much study and commentary. However, when an industry starts to change around the professionals who define and drive its success, the pressure intensifies. Noting the turbulence that has faced the broker channel of late, in February National Australia Bank launched the ‘Bank Behind the Broker’ campaign to help brokers tackle change, while providing a suite of new tools to navigate a working environment that has been reshaped by multiple factors over recent months. “We fully support the broker channel,” says the bank’s GM of broker distribution, Steve Kane. “NAB’s ‘Bank Behind the Broker’ message is saying we recognise how brokers contribute to good customer outcomes, and we will continue to support that.” There is sincerity in the slogan: not only has NAB rolled out a whole series of tools and service enhancements, but the third party channel even got a mention in the bank’s latest financial results, which credited brokers with driving growth across housing loans and consumer banking, in both year-on-year and half-year figures. “It’s fair to say the growth in our portfolio is very strongly supported by the broker channel,” Kane says. When it comes to brokeroriginated loans, the third party channel delivered around 46% of all mortgages in the first half of FY19 and 14.3% of all of NAB’s business loans – a figure supported by the 2018 launch of QuickBiz for Broker IN
and the extension of ApplyOnline for SME loans. Future focused While its performance is strong, Kane reveals that the bank is far from resting on its laurels, and that to 2020 there will be product and related education developments across small business
clients by leveraging NextGen.Net’s ApplyOnline. Additionally, DocuSign capability will be expanded, giving NAB the means to fully digitise applications from step one through to settlement, including documentation. The bank has also moved into the mandatory documentation space, creating efficiencies across the board. “That is driving better customer turnaround, quicker response for brokers to go back to their customers, less rework in relation to applications, less requests for information – it’s a win-win for everyone,” says Kane. To help brokers keep up, Bank Behind the Broker is supported by an education series combining webinars, digital
“NAB’s ‘Bank Behind the Broker’ message is saying we recognise how brokers contribute to good customer outcomes, and we will continue to support that” Steve Kane, GM of broker distribution, NAB lending, commercial lending and residential mortgages. These are intended to drive efficiency while providing quicker working processes for brokers and better outcomes for their customers, as proven during internal modelling. “The only thing that has been consistent for brokers is change, and that puts a stress on everyone. At NAB, we make sure we are always focused on delivering the education around change in a consistent way. Every decision we make internally we consider how it will impact the broker and the broker’s customer,” Kane says. Technology will be a central focus, not only in cutting down application and turnaround times but in identifying crossover opportunities between residential and business
PD days and face-to-face learning to safeguard and drive standards, with curriculums devised in collaboration with brokers, aggregators and industry players. For example, in actively prepping brokers for upcoming changes to ApplyOnline, NAB invited NextGen.Net to deliver education sessions, during which brokers heard about the latest service, policy and product updates from eSign and ApplyOnline, including the new Compliance tab and supporting document requirements. “A continuous focus on education and training improves professionalism and drives increased customer satisfaction and market share, so our focus will continue in this area,” says Kane. This year has also seen an extension of the Digital PD Day
In partnership with
Steve Kane, GM of broker distribution, NAB
that debuted in 2018. Held in May, the latest session saw more than 2,000 unique users log in and, building on 2018 as well as new and emerging developments, the agenda covered business lending opportunities, economic and property market trends, and navigating regulatory change. “The digitisation of processes improves efficiency for the broker and their customer. They have the capability now to ensure that everything is provided upfront, and we are seeing a significant lift already in application quality, which is fantastic,” says Kane, who reports that accurate, high-quality applications can
receive an unconditional answer “well inside” 48 hours. In the consumer space NAB has introduced a series of offers to maintain its competitive edge, including cashback on purchases and refinances. Combined, these measures had a positive impact on NAB’s April 2019 NPS scores and broker surveys (see box), during which it emerged that 56% of commercial and small business brokers and 38% of residential brokers are likely to recommend an NAB loan to their customers. Essential services Deloitte Access Economics calculates that the mortgage
broking industry contributed $2.9bn to the Australian economy in 2016–17, supporting the employment of more than 27,100 full-time workers, as well as the lending needs of thousands of home and business owners. As a testament to this, broker market share reached a new high of 59.7% in June of this year. Recognising that the impact of this reach extends well beyond metro areas, NAB is also helping brokers extend their services to the wider community, while diversifying their own business models. For example, the bank provides its brokers with access to specialists across a broad range of industries,
including health, aged care and agriculture, in order to handle different types of customers with specific needs through dedicated resources. “We are genuine in our belief that the services provided by brokers to the Australian community are absolutely essential, particularly in a market that has seen significant changes. That is why we are the bank behind the broker, because we feel brokers are an absolutely vital contribution to the financial services industry,” says Kane. “It is our role to be supportive of that, and to supply information and data to keep everyone abreast of all the changes that they are going through.” This means brokers, too, will become teachers, educating their clients on the customer-facing changes that banking and finance must navigate over the coming months. Among these are open banking, CCR, the replacement of the HEM benchmark, changes from the Combined Industry Forum, and the new Banking Code of Practice. “Brokers play a primary role in the relationship with the customer. It is important that brokers in their discussions with customers have the right support and information to keep the customer fully informed,” says Kane. Tying these various threads together, Kane says the focus for brokers over the coming year boils down to one point: relationships over transactions. It’s an approach that will generate sustainable business streams while continuing to meet the best interest of each and every customer – something that itself will become a focal point in the development of new regulatory frameworks over the coming months. “We see a very positive outlook for mortgage and finance brokers. We think their value proposition and the value they have shown to the customer is integral to future longevity of the industry,” Kane says. AB www.brokernews.com.au
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NE WS ANALYSIS
REALITY BEHIND THE NUMBERS
Investor activity in the residential property market has taken multiple hits over recent years, the latest being a 3.4% decline in returns in FY18/19, compared with a rally of 11.4% on ASX investments. Australian Broker examines the situation and where the opportunities lie for brokers accountant, a financial planner and a mortgage broker walk into a bar. The bartender has a residential investment property and takes the chance to talk finance, specifically the level of return that can be achieved from property when compared to other asset classes, such as stock market shares. The bartender is concerned. According to data published by CommSec at the end of the last financial year, stock market investors saw a rally of 11.4% on their average ROI in the 2018/19 financial year. Meanwhile, property investors saw a decline of 3.6% on their ROI. It’s a notable development in a country where the tax office counts two million property investors. Further, June data from CoreLogic shows that while both owneroccupier and investor lending has slowed, investor credit is now limping along at a historically low growth rate of 0.7%. It’s the latest in a string of blows for property investment, and the bartender is unsure how to act, or who to turn to for guidance. “There are exceptions, but generally speaking an accountant tends to be reporting on what has happened in the past, so they aren’t necessarily looking to the future and what could happen. If they did look ahead, they would tend to be risk averse,” says Jai Martinkovits, MD of Finance Ferret. “If you look at the financial planner, they’re certainly forward looking but are debt averse and will look at ways to reduce existing debt. However, mortgage brokers are in the debt and risk game, so it’s a very relevant conversation AN
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for brokers to be having.” The investor property market has been rocked several times in recent years. From property prices and credit policy to APRA’s lending caps, CoreLogic has found property
investors continues to be subdued, and credit conditions … remain tight. Mortgage rates are at record lows and there is strong competition for borrowers of high credit quality.” The million-dollar question is
“What brokers should be doing is having conversations to educate their clients, particularly around the power of leverage” Jai Martinkovits, MD, Finance Ferret investors are under such pressure that activity has plunged from a high of 43% of all purchases to just 28%. When announcing that the RBA would cut rates for the second consecutive month in July, Philip Lowe said, “Demand for credit by
whether the latest hit to ROI is an anomaly, or the start of a new trend. There is evidence to support both sides. Last year Aussie Home Loans published its 25 Years of Housing Trends report, which concluded that
since 1993 property values had increased 412%, while the ASX All Ordinaries index had gained a mere 261%. However, these figures were sourced before the lynchpin property markets of Sydney and Melbourne faced their worst value slide in recent
AUSTRALIAN SHARE MARKET PERFORMANCE (JULY 2018–MAY 2019) Source: CommSec
Australian share market 6,800
ASX 200 index, since July 2018
6,600 6,400 6,200 6,000 5,800 5,600 5,400
July 2018
Sept 2018
Nov 2018
Jan 2019
Mar 2019
May 2019
history – a development that reframes everything. This year’s federal election has yet to spark the trickle-down effect predicted by so many, but there are high hopes following two cash rate cuts and APRA’s relaxation of servicing rules. “To really stimulate the property market, you have to get gun-shy investors to feel more confident again,” says Helen Collier-Kogtevs, MD of Real Wealth Australia. “The way that is going to happen is a stable economy, low interest rates and banks lending freely again. Then people will feel they can borrow, they can afford the property and they will want to invest for their future.”
this specific area of the property market as expected. “While we have not seen a material lift in demand in the investor space since the removal of the benchmark, APRA’s subsequent change to the serviceability floor could bolster borrower sentiment, in turn stimulating investor appetite
return of the sentiment that drives positive economic growth and therefore stronger conditions for lending and property purchase. CEO and founder of Blue Wealth Property Tony Hayek says, “The upside of the share market performing well is that it gives everybody confidence. It reflects a
“To really stimulate the property market, you have to get gun-shy investors to feel more confident again” Helen Collier-Kogtevs, MD, Real Wealth Australia
The wider view That added economic strength could be just around the corner. Regulators and lenders have made a series of moves that have had the effect of stimulating or dampening the market at various points over recent years. However, the removal of the investor lending benchmark in April of last year didn’t reinvigorate
for property,” says Mortgage Choice CEO Susan Mitchell. “Furthermore, APRAs serviceability floor [changes] may help to improve access to credit and enable some borrowers to obtain a larger loan, which may benefit property investors.” Ironically, the strength of the ASX over the last 12 months could see a
strong economy, it drives positive sentiment, it means people will be positive about investment. All of that reflects on positive economic numbers, and that gives people confidence to invest.” For Hayek, like others, the real issue is the availability of credit. “Even though there has been much talk about giving some relief to the
finance market and industry, that hasn’t yet translated into reality. What we have seen at Blue Wealth is that sentiment has significantly improved, but that hasn’t led to improved activity yet,” he says. What is certain is that there has been a clear change in the economic returns that underpin not only the ‘Australian dream’ but the retirement aspirations of millions, as well as the stability of the wider economy. If these trends continue in the new financial year, it could signal a sea change in how Australians generate wealth, as well as the focus of thousands of broker businesses. Mint Equity director Zac Peteh believes there are numerous reasons to be positive. “We may see the property purchase price bracket drop [and that will] allow investors to have both shares and property. With property prices falling, now is the time to buy and benefit from future years’ capital growth. For most, property investment is a long-term strategy, so capital growth over a 10- to 20-year period, combined with good yields, is still likely to outdo share returns for the same time frame,” Peteh says. Safe as houses As Martinkovits highlights, brokers have a unique role to play as they work in both risk and debt. From this vantage point they can even leverage the uncertainty that exists in the property market currently to support their investor clients – as well as their own business diversification strategy. “What brokers should be doing is having conversations to educate their clients, particularly around the power of leverage. Any broker who isn’t www.brokernews.com.au
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Zac Peteh, director, Mint Equity
Susan Mitchell, CEO, Mortgage Choice
Helen Collier-Kogtevs, MD, Real Wealth Australia
Jai Martinkovits, MD, Finance Ferret
combine the two for a long-term strategy if their situation allows. For those who still can’t decide, it could be that compromise provides the key. The share market is volatile and exposed to shocks from across the globe; however, shares in property and development firms saw a 12% total return last financial year. Either way, from the broker’s view,
“The upside of the share market performing well is that it gives everybody confidence. It reflects a strong economy, it drives positive sentiment” Tony Hayek, founder and CEO, Blue Wealth Property investor can go on and obtain another property,” Collier-Kogtevs advises. “I think it’s important that investors who think they can’t borrow keep trying. Don’t take a no now as a no forever.” In the current environment, the bottom line is that investors prefer the tangible asset over the intangible and for that reason will often favour property over stock, or 18
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the new figures are further evidence that diversifying from owner-occupier residential lending is a priority. “I don’t necessarily think that property will perform as strongly as it has in the past, but you don’t need that same level of performance for it to be a very solid asset class. Property should be a core part of every Australian’s investment strategy,” Martinkovits says. AB
MONTHLY VALUE OF NEW HOUSING FINANCE COMMITMENTS (APRIL 2009–APRIL 2019) Source: CoreLogic
New housing finance commitments – Australia $16
$15.3
$14 $12.6
$12
$10
$bn
doing that is missing a huge opportunity and, beyond the opportunity itself, they are doing their client a huge disservice.” For Martinkovits there is a simple formula – and it all comes back to capital growth. Imagine a client has $100,000 to invest. One option is to buy shares, either for $100,000 or for up to $200,000 by obtaining a margin loan to boost their capital dollar for dollar. Another option is to use the $100,000 for a deposit and buy an investment property for $500,000. Apply a conservative return to both options and, over time, property leads while attracting less risk – even if that performance is at a slightly lower rate than that seen over the last decade. “Brokers really need to be able to help clients, without getting into the financial planning area – there is a fine line there. The opportunity is to have a broad conversation around the shape of retirement and how property can support people in achieving their objectives,” Martinkovits says. The possibilities don’t end there. In addition to guiding new investor clients through the opportunities in the market, brokers can assist many existing investors who also require loan restructuring. “There are two streams of opportunity for brokers who are savvy enough: one is to switch the investor from their interest-only loan to a P&I repayment structure that is affordable and manageable. The second is to structure the finance so that the
$9.4
$8
$6
$4
$4.4
$2
April 2009
April 2011
April 2013 April 2015
Owner-occupier (ex refi)
April 2017
Investor (ex refi)
April 2019
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BUSINESS TALK
COMMERCIAL’S BIG BREAK
From non-residential property to asset and construction finance, by some estimates untapped commercial lending opportunities are currently worth $85bn. But when it comes to finding solutions for clients, Australian Broker finds that there is more to the sector than meets the eye with other areas of the lending environment, recent months have seen a contraction in the availability of commercial credit. Yet demand for commercial lending solutions remains strong – so strong in fact that, according to La Trobe Financial, unmet lending needs could be worth as much as $85bn. As has happened elsewhere, a contraction in mainstream banking has heightened demand for the non-banks to meet the credit shortfall, which sounds simple enough. However, Steve Lawrence, vice president and head of major clients at La Trobe Financial, says the current situation has actually brought about a steady rise in market complexity. “Whilst the financial landscape is as challenging and complex as it has ever been, we have always held the opinion that where there is complexity, there is opportunity. We believe that, with strong conviction, right now it is a golden opportunity for brokers to increase commercial market share and grow their businesses,” Lawrence says. Observing several growth areas in the market at this time, Lawrence says there are hundreds of opportunities for brokers to unlock for their clients. The first growth area is selfmanaged super funds, where smaller SMEs place their owneroccupied commercial properties in their SMSFs for investment and tax purposes. Secondly, Lawrence says vacancy rates in the office market – which currently stand at a 10-year low – confirm there are four hotspots across the country at this time, each AS
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at different points in their own respective property cycles. These are Sydney and Melbourne, which are
Thirdly, the property development sector is seeing a shift too, with demand for rental premises driving
“Whilst the financial landscape is as challenging and as complex as it has ever been, we have always held the opinion that where there is complexity, there is opportunity” Steve Lawrence, vice president and head of major clients, La Trobe Financial currently both strong, and Perth and Brisbane, which are both showing strong gains and future potential.
growth in commercial construction. “The finance market has become highly complex for consumers who
do not know who to turn to, and these unknowns and complexities are the fuel that drives finance broker growth,” says Lawrence. “Today, consumers are experiencing a high level of uncertainty, low confidence and brand confusion in the finance world, therefore finance brokers are, and will continue to be, highly sought after.” Adapting to change Change has defined the finance industry over the last year, and Peter Vala, GM of partnerships and distribution at Thinktank Commercial Property Finance, says commercial lenders – as well as brokers – must pivot in order adapt and capitalise.
TREND IN COMMERCIAL AUCTION CLEARANCE RATES - YEAR TO JUNE 2019 Source: CoreLogic
Commercial property auction clearance rate Clearance rate
4-week trend
100% 90% 80% 70% 60% 50% 40% 30% 20% 10%
Historical clearance rates have date breaks where there are less than 12 observations in the fortnight
0% June 2018
August 2018
October 2018
December 2018
February 2019
April 2019
June 2019
Steve Lawrence, vice president and head of major clients, La Trobe Financial
“As with residential finance, commercial lending has also felt the effects of change and in many instances has become more difficult to obtain, and mostly from traditional sources,” Vala says. “This pace of change is seemingly continuing to accelerate, whether in relation to lender policy, loan products, compliance or regulatory intervention, as well as new entrants, including fintechs and neo-banks. But with great change also comes great opportunity.” Among these areas of opportunity, Vala identifies a number of target areas that brokers should consider. For example, using lenders that are fully committed to brokers and with limited or no direct customer contact can serve to avoid the difficulties that can arise through channel conflict. “Brokers have access to a greater depth and breadth of lending choices than their client will ever have, particularly if that client is time-poor like so many people are these days. This great advantage is primarily
what raises the broker proposition – to provide informed choice and real alternatives not previously considered or easily accessed by a client on their own,” he says. Additionally, Vala recommends that brokers carefully assess the
Peter Vala, GM of partnerships and distribution, Thinktank Property Finance
client’s declared income, supported by either an accountant’s letter, recent BAS statements or bank statements. This documentation can be used to support a commercial or residential property loan, and post-settlement borrowers have the
“The subtle and stark differences in assessment criteria and supporting documentation for credit assessment are increasingly apparent amongst lenders” Peter Vala, GM partnerships and distribution, Thinktank criteria a borrower must meet under each lender’s policy. This goes all the way from providing traditional full financial statements and tax returns, through to staggered alternative income verification options. Thinktank’s alternative income verification solutions work on the
option to convert to a lower-rate full-doc loan, once their financial statements are updated and serviceability confirmed, for a minimal administration fee. “The subtle and stark differences in assessment criteria and supporting documentation for credit assessment
are increasingly apparent amongst lenders. For example, how would your self-employed or SME-owning borrower secure residential finance if their current financial statements and tax returns are not up to date, especially if the most recent year’s trading and profitability performance has changed, possibly improved? “Some mainstream lenders have actually pulled out of this space, while others, mostly non-banks, continue to support it strongly,” he says. In the midst of the political and regulatory challenges that have contributed to the current environment, non-banks are the fastest-growing and “most innovative” funding providers, says Vala. “Change in and of itself serves to drive innovation to create and find solutions to meet ever-changing customer needs. “Brokers happen to be the constant in delivering a critical service in the midst of a market that now offers a broader range of products and services than ever before. Non-banks www.brokernews.com.au
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could be rejected by their bank, and the time it takes to get a decision on a bank loan application, along with the lack of human contact during the customer experience, are just two of the additional reasons Koutsoumidis believes commercial borrowers are choosing not to deal with mainstream banks. “Without sounding like a broken record, we continue to see commercial borrowers looking for alternative commercial lending solutions to ensure their business doesn’t get bogged down in red tape and can continue to grow and flourish,” he says. “Every client is unique, and what may be a perfect fit for one client won’t be for another, so a broker’s knowledge of products is imperative, and knowing what their client’s short- and long-term goals are will go a long way to having a client for life.”
Dean Koutsoumidis, managing director, Equity-One
are proving to be the fastest-growing and most innovative and, being so closely aligned to the broking channel, it will be the brokers and their clients who embrace this trend who will benefit the most.” Flexible alternatives Equity-One has seen first-hand the fallout from recent changes in bank policy, noting an increase in enquiries from commercial borrowers who were, until recently, ‘bankable’. As MD Dean Koutsoumidis notes, these prospective borrowers have transacted on good assets and previously enjoyed good relationships with their banks, but all of a sudden they have found themselves in need of an alternative. “We continue to hear from brokers about a client that has provided everything required by the bank and for some inexplicable reason the bank doesn’t want to transact,” he says. However, the search for an alternative can only be fruitful if 22
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a true alternative exists in the marketplace. “We encourage brokers to engage with us, to work through their clients’ needs so we have a clear understanding of what the required
Walking the walk, Equity-One recently addressed the need for true alternatives by offering borrowers the opportunity to repay their fixed term loan early without any fees or costs, giving the
“We continue to hear from brokers about a client that has provided everything required by the bank and for some inexplicable reason the bank doesn’t want to transact” Dean Koutsoumidis, managing director, Equity-One outcome is. Equity-One prides itself on bringing the human element to working with brokers and their clients, rather than the algorithms, automated systems and red tape,” Koutsoumidis says.
borrower the flexibility to return to their bank should the opportunity – and associated change in their circumstances – arise. Under new lending criteria, there are many reasons why a borrower
Taking commercial online The internet provides solutions to many needs, and commercial lending is just one. As this trend has converged with the fallout from the royal commission, awareness of online commercial lending solutions has grown significantly over the last year. Research conducted by alternative SME lender OnDeck found that 42% of those who had previously had an application rejected by a bank had looked online for a new solution. Further, 22% of SME owners said they would consider an online lender in future, and, with 50% of businesses turning to a broker to help source the funds they require, knowledge of alternative commercial lenders is crucial. “As awareness grows with regard to the benefits that alternative financiers can offer compared to traditional lenders, and more SME customers look for optionality beyond banks, lenders like ourselves are become increasingly
present, has spurred SMEs to invest in new assets and equipment, supporting uptake of OnDeck’s new equipment finance loan. There are other factors at play, too. As new challenges emerge in the operating environment, many SME owners are recognising that the time taken to organise mainstream funding can come at a cost to their business. “As technology advances and Australian SMEs are increasingly competing in a global marketplace, this time-saving can give a small business a valuable competitive advantage,” Poolman says.
Cameron Poolman, CEO, OnDeck Australia
mainstream,” says Cameron Poolman, CEO of OnDeck Australia. “This growth is a win-win for brokers and their clients. It’s not just about brokers broadening their revenue streams, though of course that is a key benefit. Ultimately, this is about brokers being able to better service SME clients, both in terms of providing more timely access to capital and also offering choice and flexibility where they don’t want to be encumbered with security on their personal or business assets.” Leading by example when it comes to serving SME borrowers, last year OnDeck launched a dedicated equipment finance loan when it discovered that many of its loans were being used to cover the cost of equipment. With heightened activity has come a new focus on regulation of the online sector, and last year OnDeck was also one of seven signatories of the Lending Code of Practice. The guidelines were
designed to bring greater transparency to the SME finance sector and were backed by small business ombudsman Kate Carnell. As part of the work, OnDeck brought its SMARTBox™
Code and SMARTBox™, is fundamental to our industry’s development and, most importantly, to supporting the success of Australia’s small business economy.” Looking ahead, Poolman believes
“Ultimately, this is about brokers being able to better service SME clients, both in terms of providing more timely access to capital and also offering choice” Cameron Poolman, CEO, OnDeck Australia loan comparison tool to the Australian market. “We have seen a shift towards greater transparency over the last 12 months,” Poolman says. “Transparency, as offered by the
these factors will continue to drive growth in online SME lending, along with other developments. For example, the instant asset write-off, which increased from $20,000 at the beginning of 2019 to $30,000 at
The bottom line It’s unlikely the mainstream banks will continue to allow the non-banks to encroach on their market share, but stranger things have happened. As the market waits for their return, non-bank lenders will continue to put their money where their mouth is, focusing on highquality customer interactions and support of third party distribution. “There’s no doubt the coming years will continue to bring change,” says Koutsoumidis. “It seems unlikely that any sector or subsector within financial services will remain untouched by the royal commission, but our approach and principals around lending do not change to market conditions. We will always seek quality transactions in both bull and bear markets.” Credit conditions in the commercial sector are having an impact on commercial property sales and auctions, as well as the wider business environment and, ultimately, the economy. But if brokers play their cards right, they could still come out on top. “In the wake of the major banks’ credit tightening measures and product simplification strategies, finance brokers have a golden opportunity to increase market share,” Lawrence says. AB www.brokernews.com.au
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PEOPLE
CAUGHT ON CAMERA Touring Australia from 12 to 20 June, the Pepper Money Insights Roadshow focused on experience, urging the hundreds of broker delegates in attendance to see the lending application and settlement process through the lens of the regulatory experience (RX), digital experience (DE), customer experience (CX) and business experience (BX). Chaired by Pepper’s Aaron Milburn, the half-day event heard from Elise Ivory and Rachel Walker from Dentons, as well as Joanne Thrift, CX officer at Pepper Money. Each edition concluded with a panel discussion featuring Pepper Money’s Australia CEO Mario Rehayem and head of commercial Malcolm Withers, business coach Dorry Kordahi and performance coach Kate McKenna.
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DATA
WESTERN AUSTRALIA
SA SPOTLIGHT
Politics will determine the future prospects of Perth Perth is still a long way from reclaiming the glory it experienced during the mining boom, but it is gradually climbing back up to a strong position. That said, Damian Collins, president of the Real Estate Institute of WA (REIWA), warns that investors should also pay attention to the country’s political situation and should not get too excited too soon. “Our local market is still fragile. We need our state and federal governments to do everything they can to support the recovery of the WA property market – not hinder it,” he points out. REIWA data show that the number of properties for sale fell by 3% from March to April 2019, but the number of rental listings increased by 7%. “Listings for sale have started to decline, despite sales remaining low, which could indicate that vendors are choosing to remove their property from the market and try their hand at renting it out instead,” Collins says.
Area
Type
Median value
Quarterly growth
12-month growth
Perth
H
$480,000
-0.8%
-2.0%
WA Country
H
$330,000
-1.5%
-3.3%
Perth
U
$368,500
-1.3%
-5.0%
WA Country
U
$295,000
6.8%
1.5%
QUEENSLAND
Queensland’s five-year promise looks to be fading Brisbane’s position has weakened as growth levels slipped into the negatives over the 12 months to April 2019, according to CoreLogic’s Home Value Index. “Queensland has promised to be the next boom city for the last five years – it hasn’t happened. It won’t this year either, and it’s unlikely to do so next year – not massively anyway,” says Results Mentoring director Brendan Kelly. “It is not in a position for growth, as it’s not a buoyant market. The unit market in Brisbane itself is still a little oversupplied. There’s still capacity there that needs to be filled before you get massive new developments coming up, so there’s still slack to be picked up by demand.” Brisbane “has growth and decline in equal proportions”, with the balance gradually tipping towards the red, Kelly says. “You’re going to get about 40% decline and about 25% in growth, to see a continued trend down in values,” he says.
Area
Type
Median value
Quarterly growth
12-month growth
Brisbane
H
$530,000
0.9%
2.9%
QLD Country
H
$432,500
-0.7%
-2.2%
Brisbane
U
$380,000
0.0%
1.8%
QLD Country
U
$362,000
-0.8%
0.3%
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FULL THROTTLE ADELAIDE After the collapse of its auto industry, Adelaide struggled. But positive vibes now abound in the City of Churches is finally on track after a number of years in the middle of the pack, when it struggled to recover from the economic blows it faced after the loss of the car manufacturing industry. According to CoreLogic’s Home Value Index, annual property values have fallen in all but three capital cities – Hobart, Canberra and Adelaide. This is an excellent sign of where Adelaide is heading in the near future, with its best-performing pockets being in the Central, Hills and North regions. Affordability is a big part of the city’s recent growth spurt as its prices move closer to those of Hobart. In fact, first home buyers in South Australia were the most active in the country in the first quarter of 2019, according to the NAB Residential Property Survey. Over 50% of new housing market sales were made to such ADELAIDE
buyers, and the low prices would likely have contributed to this activity. This doesn’t necessarily mean that Adelaide will skyrocket in the same way Hobart has done. But Adelaide has long been known for its consistency as a market. Based on survey findings showing that Adelaide’s price growth forecast was the strongest for a mainland capital city, acting NAB SA general manager Libby Greenwood says, “[This] reaffirms Adelaide’s reputation as a ‘no frills’ property market with buyers able to take confidence in its consistency.” However, despite high market confidence and the rosy growth forecast, SA’s suburbs are not expected to hit above-average growth levels in the next 12 months. Nonetheless, they show the type of growth that can be sustained over the long term. AB
HIGHEST-YIELD SUBURBS IN SOUTH AUSTRALIA Suburb
Type
Median price
Quarterly growth
12-month growth
Port Pirie West
H
$95,000
-5%
-25%
Peterborough
H
$79,000
10%
11%
Two Wells
H
$235,000
-14%
-45%
Port Augusta
H
$139,000
7%
3%
Virginia
H
$215,000
-22%
3%
Whyalla Stuart
H
$97,000
6%
15%
Salisbury
U
$150,000
-10%
-30%
Smithfield Plains
H
$181,000
3%
1%
Bordertown
H
$157,500
4%
18%
Elizabeth Downs
H
$179,000
-2%
-5%
Munno Para
H
$222,500
-4%
-11%
Whyalla Norrie
H
$130,000
6%
24%
AUSTRALIAN CAPITAL TERRITORY
Canberra remains strong as national market dwindles According to CoreLogic’s Home Value Index for April 2019, Canberra was the only capital city to record an increase in dwelling values over March–April, edging out even Hobart, which saw a price drop of 0.9%. The convergence of several factors is keeping Canberra in its favourable position. “It has a strong local economy that’s tied to government spending, employment growth, relative affordability and a short-term deficiency of housing stock,” says Geof Snell, principal property economist at BIS Oxford Economics. Australia’s quick and significant population growth is supported by positive levels of net overseas migration, but Snell expects this to slow. “A positive policy towards net overseas migration needs to be sustained. Should there be any potential cuts, this could have significant negative implications for the housing market, having regard to the record supply still working its way through the development pipeline,” he says.
OPPORTUNITIES AND KEY INFRASTRUCTURE
$1.115bn
9
$5bn
$19m
Invested in regional road and infrastructure
new intersection upgrades being built across metropolitan Adelaide
earmarked for final section of Adelaide's northsouth road corridor
public housing project underway
SUBURB TO WATCH: FULLARTON Median price (houses) $885,403
Median price (units) $405,247
12-month growth
3-year growth
5-year growth
Indicative gross rental yield
-7.9%
8.3%
14.7%
3.2%
12-month growth
3-year growth
5-year growth
Indicative gross rental yield
3.4%
7.4%
13.2%
4.6%
Quarterly
12-month
growth
growth
$654,250
0.6%
2.3%
$435,000
-0.4%
0.2%
Area
Type Median value
Canberra
H
Canberra
U
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DATA
NORTHERN TERRITORY
Darwin
H
$499,000
0.8%
-1.0%
NT Country
H
$405,000
0.0%
1.2%
Darwin
U
$300,000
-1.5%
-9.5%
NT Country
U
$315,000
-1.1%
7.3%
NEW SOUTH WALES
MEDIAN HOUSE AND UNIT PRICES
Investors still can’t resist the allure of Sydney
$1,000,000
Type
Median value
Quarterly growth
12-month growth
Sydney
H
$850,000
-2.1%
-6.1%
NSW Country
H
$460,000
-0.5%
1.6%
Sydney
U
$675,000
-1.4%
-2.7%
NSW Country
U
$399,000
0.0%
0.0%
28
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Total auctions
73
Cleared
31
Uncleared
14
Clearance rate
68.9%
PERTH Total auctions
27
Cleared
6
Uncleared
12
Clearance rate
33.3%
Houses
$0
Sydney Melbourne Brisbane Adelaide
Perth
Hobart
$497,500
$376,000
$100,000
$492,500
$200,000
$345,940
$300,000
$471,750
$500,000 $400,000
$525,000
$600,000
$686,000
$700,000
$661,000
$800,000
$830,000
$900,000
Even highly publicised negativity cannot keep investors away from Sydney; Real Estate Investar has recorded more than 100,000 investment outcomespecific searches for NSW. The more affordable suburbs are flourishing, with declines easing up in the April 2019 quarter, especially in the lower quartile of the market that's more accessible to buyers. “A number will not be able to afford detached dwellings in inner-middle-ring suburbs. Consequently, there will be rising demand for dwellings that offer a compromise between high amenity location, dwelling size and price,” says Geof Snell, principal property economist at BIS Oxford Economics. “We are forecasting the market will remain in a situation of undersupply. [Growth in migration and construction] will ease back and ... is expected to decelerate from the levels seen in 2018.” However, Sydney still has the weakest rental market among the capital cities as of April 2019, with rental rates slipping by 3.1% in the past 12 months.
Area
ADELAIDE
Units
Darwin
$432,500
12-month growth
$308,500
Quarterly growth
$435,000
Median value
$375,000
Type
There were 1,292 capital city homes taken to auction over the final week of June, returning a preliminary clearance rate of 66.5%, making this the third consecutive week to break the 60% threshold. Clearance rates consistently holding above 60% are a firm sign that buyer and seller price expectations are more balanced and housing prices are finding a new floor. Both Sydney and Melbourne returned a preliminary auction clearance rate above 70% this week; however, this will likely revise lower as final results are collected, to fall in the high-60% range. Melbourne returned a 70.6% preliminary auction clearance rate, increasing on the previous week’s 68.9%, although volumes were lower week-on-week, with 536 homes auctioned compared to 635 the week before. Volumes were also down week-on-week across Sydney (503 from 558). Sydney returned a preliminary auction clearance rate of 72% this week – a substantial increase on last week’s final clearance rate (60.9%), making it the best-performing auction market according to preliminary results.
$545,000
Area
WEEK ENDING 16 JUNE 2019
$671,000
Rental rates in Darwin continue to nosedive – it was the only capital city to record a fall in rents over the first quarter of 2019, according to CoreLogic’s Quarterly Rental Review for March 2019. However, it tops the list of capital cities in terms of gross rental yield, reporting an average of 5.95% over the March 2019 quarter. This puts Darwin at a healthy distance from second-placed Hobart’s 5.08% average. Even the property price declines have done Darwin good – the CoreLogic Home Value Index for April 2019 notes that, with the ratio of incomes to dwelling values being low in this capital, the top quartile of the property market is delivering an improved performance. In addition, the poor economic conditions in Darwin have not prevented researchers from discovering hotspots in the Greater Darwin area. The Housing Industry Association’s Population and Residential Building Hotspots 2019 report identified Palmerston, Lyons and Durack as suburbs to watch.
CAPITAL CITY AUCTION CLEARANCE RATES
$286,000
Darwin’s bright sparks signal strong outlook for the market
Canberra
CAPITAL CITY HOME VALUE CHANGES Capital city
Weekly change
Monthly change
Year-to-date change
12-month change
Sydney
0.0%
0.2%
-4.2%
-9.9%
Melbourne
0.2%
0.3%
-4.0%
-9.2%
Brisbane
-0.2%
-0.5%
-2.5%
-2.6%
Adelaide
0.0%
-0.5%
-1.0%
-0.3%
Perth
-0.1%
-0.7%
-4.9%
-9.1%
0.0%
0.0%
-3.8%
-8.3%
COMBINED FIVE CAPITALS
*The monthly change is the change over the past 28 days
BRISBANE CANBERRA Total auctions
28
Cleared
8
Uncleared
10
Clearance rate
Total auctions
213
Cleared
28
Uncleared
49
Clearance rate
36.4%
44.4%
SYDNEY Total auctions
503
Cleared
255
Uncleared
99
Clearance rate
72%
TASMANIA
MELBOURNE Total auctions
536
Total auctions
2
Cleared
312
Cleared
2
Uncleared
130
Uncleared
0
Clearance rate
Clearance rate
70.6%
TASMANIA
Hobart finds a happy place For Real Estate Institute of Australia president Adrian Kelly, there’s no cause for concern yet about where the Apple Isle stands. “Other centres such as Launceston, Burnie and Devonport will probably see a bit more growth in terms of values, because those markets are still improving, whereas Hobart is a bit more stable now,” he explains. “At the end of the day, Tasmanian property is still relatively affordable, particularly while interest rates remain low. I don’t think we’ll see prices come back too much this year, if at all.” With the popularity of short-term rentals like Airbnb, the issue of high rents due to supply shortage will persist, but Kelly points out that these rentals support the state’s blooming economy. “Our government’s not too keen to meddle in the short-term accommodation market while tourism remains very strong. It’s a good problem to have – I’ve never seen Tasmania in such a happy place!”
Area
N/A
Type
Median value
Quarterly growth
12-month growth
Hobart
H
$470,000
1.3%
10.5%
TAS Country
H
$310,000
0.3%
7.1%
Hobart
U
$385,000
2.9%
12.5%
TAS Country
U
$238,125
0.0%
-0.4%
All data sourced from CoreLogic.com.au
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29
PEOPLE
IN THE HOT SEAT
As a former bank exec turned fintech co-founder, Athena Home Loans CEO Nathan Walsh is no stranger to bold moves. Here he explains how his first job laid the foundations for a business model that aims to turn the mortgage industry on its head What’s one of your recent career highlights? The build and launch of Athena Home Loans has been an A amazing journey. Lots of magic milestones, from the assembly of a wickedly talented team to attracting investors like Macquarie, Square Peg and HostPlus and building Australia’s best home loan experience. But the absolute highlight is delivering huge savings for Aussie families as they switch from typical big bank rates. Just two weeks ago we had a family who moved their home and two investment properties to save $275,000 over the life of the loan. Incredible!
Q
What do you wish you’d known when you started out in finance? You can’t break what’s broken! Finance is critically important, A but so often it doesn’t deliver for customers. There is a crisis of trust, and Aussie homeowners deserve better. We need people to bring a more critical eye and be willing to reinvent the model. This is something I have only come to realise relatively late in my career. It is inspiring to see young fintech teams bringing such passion and smarts as they look to challenge the status quo and make life better for customers.
Q
What was your first job? While at university, I took a part-time job in the legal A department of one of the big banks. It was eye-opening. A really lovely team, working incredibly hard but drowning in oceans of paper files and manual processes. Too often the customer got lost in the complexity. Incredible that 30 years later too much of this legacy still remains. It was a real motivator to create the Athena model – it inspired us to ask, how do we use modern technology to make refinancing surprisingly simple? How do we deliver consistently great service? How do we build Australia’s most loved home lender?
Q
What’s one thing, personal or professional, that you hope to achieve before 2020? Help Australians pay down their home loans faster. The statistics A are sad. Aussie household debt is now among the highest in the world. Borrowers are 10 years slower in exiting mortgage debt than a generation ago. I am passionate about Athena’s mission to save Aussies a whole lot of money by helping them pay off their home loans faster, and it has been central to everything we do at Athena. And excitingly, we are already reaching our goal before 2020 because life is too short for a long home loan. AB
Q
30
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