Australian Broker 16.16 by Key Media

AUGUST 2019 ISSUE 16.16

Counting the cost The impact of Westpac’s responsible lending court case /16

High hopes for the Golden State Andrew Bromley shares his outlook for lending in WA /20

SCOTT MCWILLIAM The CEO of Resimac explains how the non-bank achieved double-digit year-on-year mortgage book growth /14

Inspiring change FAST’s Brendan Wright on leveraging diversity for a stronger business /22

ALSO IN THIS ISSUE… Caught on camera Hitting the road for the FBAA commercial lending masterclass /24 Housing market The latest insight on Western Australia’s turbulent market /26 In the hot seat Xinja CEO Eric Wilson talks about bringing service back to customers /30

NEWS

IN THIS SECTION

Lenders Judge delivers responsible lending ruling /04

Aggregators Merger to create Australia’s largest broker network /06

Technology Game-changing CRM launched by aggregation group /10

Regulators APRA chair addresses self-regulation concerns /12

Market Property values impact homeowner finances /08

www.brokernews.com.au AUGUST 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

4 - 6 SEPTEMBER

12 SEPTEMBER

12 – 26 SEPTEMBER

Annual Credit Law Conference

R U OK? Day

CLYP Cocktail Launch Event

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.

CAFBA’s Commercial Lending Young Professionals (CLYP) program officially launches next month with events scheduled for NSW and WA on 12 September, Queensland on 19 September and Victoria on 26 September. The program is designed for those aged 40 or under who are looking to break into commercial loan writing.

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 Grand Mirage, Gold Coast.

Production Manager Alicia Chin Traffic Coordinator Freya Demegilio

SALES & MARKETING Sales Manager Simon Kerslake Global Head of Communications Lisa Narroway

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

EDITORIAL ENQUIRIES

Melanie Mingas +61 2 8437 4720 melanie.mingas@keymedia.com

SUBSCRIPTION ENQUIRIES

17 SEPTEMBER

18 SEPTEMBER

18 OCTOBER

Valiant – Introduction to Commercial Finance

Financing New Equipment webinar

Australian Mortgage Awards

Get ahead on your SME client’s tax concerns with this 30-minute webinar. The session will explain the tax implications of buying new equipment and the funding solutions that can be leveraged to reduce the bill. The course is provided by Queensland-based chartered accountants Adrians.

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.

tel: +61 2 8311 5831 fax: +61 2 9439 4599 subscriptions@keymedia.com.au

ADVERTISING ENQUIRIES

Simon Kerslake +61 2 8437 4786 simon.kerslake@keymedia.com.au Key Media Pty Ltd Regional head office, Level 1O, 1–9 Chandos St, St Leonards, NSW 2065, Australia tel: +61 2 8437 4700 fax: +61 2 9439 4599 www.keymedia.com Offices in Sydney, Auckland, Denver, London, Toronto, Manila, Singapore, Seoul

8 NOVEMBER

10 – 12 NOVEMBER

22 NOVEMBER

FBAA Gold Coast conference

COBA 2019: Stronger Together

MFAA PD Day and River Cruise

Returning slightly earlier in 2019, the FBAA’s annual Gold Coast conference will once again take over the Sea World resort. This year’s theme is ‘Challenge the Future’ and the association is due to reveal details of speakers and special guests over the coming weeks.

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, with the speaker line-up featuring APRA chairman Wayne Byres.

The annual Tasmania PD day and river cruise returns on 22 November for MFAA members wishing to learn and network in the Apple Isle. The event will provide delegates with an opportunity to get ahead on the latest industry developments, while meeting other members from the state.

Fast money. Short term. $100k - $10million. Real Estate backed lending.

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 EXPAT INTEREST RATE CUT BY 70BPS has cut interest rates on its Gold Expat range. From 19 August, Expat applicants under 70% LVR will receive a 35bps reduction on principal and interest investment loans, now at 3.79%. Interest-only investment loans have been reduced by 70bps to 3.99%. For applicants under 80% LVR, the P&I investment loan package stands at 3.94% and interest-only at 4.09%. Owner-occupied loans have also been reduced by 20bps to 3.79%. BETTER CHOICE

PERFORMANCE DIVIDE BETWEEN MAJORS the second consecutive month, APRA’s banking statistics have demonstrated a clear divide between the major banks in terms of household lending performance. CBA continued to show the strongest growth of the four banks, adding $2bn to its owner-occupier loan book, while ANZ posted the slowest growth. The June data confirmed that total household lending by the majors stood at $436bn for Commonwealth Bank, $419.5bn for Westpac, $261bn for NAB and $254bn for ANZ. FOR

“We have a solid base for growing our mortgage lending books. We’ve seen an improvement in momentum through the latter part of the financial year” Steve Johnston Acting CEO, Suncorp

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BUSINESS BORROWING AT 11-YEAR HIGH Source: CommSec

Business fixed loans and revolving credit – trend monthly $45bn

$40bn 11-year high $35bn

$30bn

$25bn

$20bn Jan 2007

Jan 2009

Jan 2011

Jan 2013

Jan 2015

JUDGE DELIVERS RESPONSIBLE LENDING RULING Decision delivered on 13 August assessed suitability of nearly 262,000 home loans written between December 2011 and March 2015 responsible lending case against Westpac was dismissed during a court hearing in Sydney last month, with the presiding judge saying that discussion around the household expenditure measure (HEM) benchmark was “of marginal relevance” to the outcome. ASIC accused the bank of breaching the NCCP Act 2009 when it assessed loans through its automated system, relying solely on the HEM benchmark rather than customers’ declared living expenses. Nearly 262,000 home loans written between December 2011 and March 2015 were assessed. However, Justice Nye Perram dismissed ASIC’s case against the major bank “on facts”. ASIC’S

The case went to trial in May, after Justice Perram rejected the $35m fine agreed between ASIC and Westpac, saying more information was needed to generate an appropriate penalty. In the ruling, Justice Perram said the Act required a credit provider to ask itself only whether “the consumer will be unable to comply with [their] financial obligations under the contract” or, alternatively, whether the consumer “could only comply with substantial hardship”. The judge clarified that “the Act is silent on how a credit provider is to answer” those questions and found that Westpac had suitably regarded its customers’ declared living expenses.

Jan 2017

Jan 2019

“Indeed, ASIC accepted that it was lawful for Westpac to use the HEM benchmark to answer those questions. What it could not do was to answer them without taking into account any of the consumer’s declared living expenses,” he said. The reliance on HEM came under scrutiny during the royal commission, and the major banks are now slowly transitioning to alternative processes that provide more holistic suitability assessments. Westpac has since updated its group credit policies “to enhance the way [it] captures customer living expenses, commitments, and verify documentation”. A Westpac spokesperson said, “We recognise sometimes it can be difficult for customers to provide a complete picture of their expenses, and the enhancement of our expense categories means our staff and brokers have the opportunity to prompt customers to remind them about particular expenses they may have forgotten.”

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NEWS

A G G R E G AT O R S ‘AUSSIE ELEVATE’ HOME LOAN LAUNCHED new partnership with Adelaide Bank has enabled Aussie Home Loans to launch a new loan product, Aussie Elevate. The loan includes a 100% offset account with variable and fixed rate loan options; bridging finance to help those looking for a new home; construction and land only loans; a branded Visa credit card with a low interest rate; and the ability to redraw funds. It has been designed to meet the needs of all homebuyers. A

Mark Haron, director, Connective

MERGER TO CREATE AUSTRALIA’S LARGEST BROKER NETWORK If approved, the $120m deal between AFG and Connective will create a network of more than 6,500 brokers

groups AFG and Connective have announced plans to merge in a $120m deal that will see the creation of the country’s largest broker network. Speaking to Australian Broker, Connective director Mark Haron clarified that, should the merger be approved next year, the two businesses will leverage each other’s strengths, while remaining completely separate businesses. This includes the lending panel, business models and pricing. Regarding head count, there will be “no cross pollination or changes to roles” at Connective, while AFG “reshaped” its executive team back in June. Software systems will also remain separate, but Haron revealed that a “better version” of Mercury would AGGREGATION

be rolled out “very soon” for Connective brokers. However, the deal will pave the way for Connective to expand its white label portfolio by leveraging AFG’s securitisation program. Currently, white label loans contribute 4% of Connective’s total business. Many brokers were shocked by the announcement, which was confirmed by the ASX just ahead of official communications being sent to brokers on 12 August. “While some people are surprised by the news, it’s one of those situations where you are dealing with a listed entity, it’s marketsensitive information and you can’t be front-running in telling people that a certain transaction is occurring. That’s simply against the law,” Haron said.

Under the transaction, Connective Group Pty Ltd will receive $60m in cash and 30,886,441 AFG shares, valuing the acquisition at $120m. AFG will fund the cash component primarily through a new corporate debt facility. The transaction is expected to be EPS-accretive (presynergies) in the first full financial year post-integration and AFG is currently expected to maintain a dividend payout ratio of between 60% and 80%. The deal still has to be approved by both Connective and AFG shareholders, as well as the ACCC. However, if successful, the combined group will create a significant national mortgage distribution network, with combined mortgage settlements of $76bn in FY19. “What this means for brokers is that nothing changes from a Connective point of view,” Haron said. “Glenn and I will still be there, still driving the business and driving the team to provide excellent support.”

INDUSTRY DIVERSITY ENCOURAGED CEO Brendan Wright urged the industry to boost diversity at the Women in Business luncheon in Sydney last month (see page 22). Keynote speaker Rabia Siddique, an author and humanitarian, also encouraged brokers to reshape the industry, saying, “Stand when others remain seated. Speak up when others remain silent. Challenge behaviours, conduct, policies, practices, language that is keeping the underrepresented and voiceless where they are.” FAST

“The combination of good people, a growing distribution capability and no institutional ownership are vital ingredients to build a successful aggregation business” Frank Paratore COO, Purple Circle

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NEWS

MARKET PROPERTY LISTINGS REACH NEW LOW number of properties listed for sale in Australia is tracking at the lowest level in nearly a decade, according to CoreLogic. Over July, newly advertised stock was 22% lower than a year ago, and “significantly” down relative to recent years on a broader scale. Total stock for sale was also at the lowest level in years, and down 3.5% as compared to the previous year. CoreLogic said the numbers were “reflective of weak vendor sentiment”. THE

LENDING DECLINE STARTS TO SLOW decline in new lending commitments for dwellings has slowed, according to June data from the ABS. Seasonally adjusted new lending to households increased 1.3% over the month, following a 1.6% fall in May. “In June we saw rises in new lending commitments for both owner-occupier and investor dwellings for the first time in over a year,” said ABS director of financial statistics Ben Dorber. However, investor lending remains down. THE

“A third rate cut so soon would not have given policymakers enough time to see if [previous] cuts had any marked effect on the economy” Susan Mitchell CEO, Mortgage Choice

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PROPERTY VALUES IMPACT HOMEOWNER FINANCES The majority of 11 categories assessed showed a decrease in financial comfort over the six months to June data has confirmed that in the last six months there has been a notable deterioration in the financial comfort of homeowners with a mortgage. ME’s latest Household Financial Comfort Report attributed the decline to the tightening in the availability of credit, continued affordability concerns and high housing debt. The majority of the 11 categories assessed in the report charted a decrease in comfort over the six months to June 2019. “Despite lower mortgage loan rates, expected cuts in personal income tax and higher local and global equity prices, this is largely a consequence of continued decreases in the value of residential property in many parts of Australia,” said NEW

Jeff Oughton, consulting economist for ME. “It’s evident that despite the latest monetary policy changes, there remain high levels of housing debt worry and actual payment stress among Australians,” he said. The cost of necessities was named by 44% of those surveyed as their most significant financial concern. Following with a 10 percentage point spread were the 34% of households that recorded anxiety over their level of cash savings as their leading worry. Of the households with mortgages, 43% indicated that they contributed around a third of their income or more towards paying their loans. However, more than 41% of

households feel optimistic about their dwelling prices rising over the coming year, while 11% are prepared for values to fall further. Interestingly, investors are more optimistic than owner-occupiers, with 46% expecting the value of their investments to rise during the next 12 months and only 9% anticipating a decrease. Despite the rental yields that can still be achieved, their sentiment is particularly surprising given the low uptake of investor loans and rate of purchases. The highest levels of financial comfort among homeowners were identified in NSW/ACT, closely followed by Victoria. Conversely, overall comfort fell in Queensland, Tasmania, SA and the NT, with the levels recorded by Brisbane, Perth and Adelaide residents plummeting to match the low levels reported in regional Australia. It is largely believed that property value declines have now “bottomed out” and that the market will start to pick up over the coming months.

TECHNOLOGY UPDATE

BANK OF CHINA ADOPTS APPLYONLINE IN AUSTRALIA FOR BROKER-FOCUSED GROWTH 2014 Bank of China (Australia) Limited (BoCAL), which has operated in the mortgage lending business, via its branches, for over 20 years, vowed to expand its mortgage lending portfolio by offering a variety of product features and a competitive rate. In accordance with this stated aim, BoCAL expanded distribution beyond its own channels and joined the AFG panel, enabling AFG brokers to distribute their home loans. Having achieved its goal and extended its footprint in the third-party channel, early this year BoCAL launched ApplyOnline standardised electronic lodgement for home loan applications, demonstrating an enduring commitment to the broker channel. “ApplyOnline has helped us to remove any barriers between us the lender, and our brokers,” says BoCAL Head of Retail Banking Ying Li. “As a customer-oriented quality financial service bank, our core values, our efficiencies and what our organisation stands for, being an internationally recognised world-class bank, and offering a superior service level to our clients and brokers are our priorities in the broker market in Australia,” Ms Li continues. “ApplyOnline has enhanced our digital capability and provided us with an all-in-one solution, which allows us to receive validated electronic applications and accurate supporting documentation efficiently and accurately.” NextGen.Net Customer Account Executive Adam Turriff says NextGen.Net was “proud” that ApplyOnline was considered an essential part of the BoCAL strategy to achieve its goals and aspirations. “Our engagement with BoCAL identified a desire to grow its mortgage origination IN

network, simplify its mortgage process and embrace innovation and technology,” Turriff says. “They consulted with us about which levers they could pull to embrace the third-party market and provide efficient acquisition of home loans. They chose to adopt ApplyOnline with metrics, along with the ‘Combined Industry Compliance’ tool (Compliance tab) and the Supporting Documents service with online document verification. “We will also be helping them to create additional efficiencies by entrenching ApplyOnline loan processing workflow manager to further streamline their internal operation,” Turriff says. Ms Li says she believes the implementation of ApplyOnline will translate into increased efficiencies and faster turnaround times. “For instance, using the ApplyOnline Supporting Documents service, we have gained a new level of control,” she says. “We’re now able to determine not just what supporting documents are required, but also when we require them. We can choose to request documents at different stages in the loan process by creating document checklists for brokers when they submit loan applications. To a certain extent it reduces the need for rework and boosts efficiency for our brokers and ourselves in processing loan applications.” Turriff talks of the “remarkable work ethic” he has witnessed within the bank and how open and available they were to NextGen.Net expertise. “Part of having a competitive proposition is of course about lodgement, applying the ApplyOnline standard and enabling brokers to submit a well-packaged application,” he says. By taking advantage of the

Adam Turriff, Customer Account Executive, NextGen.Net

state-of-the-art ApplyOnline tools, BoCAL has set in place ultimate processing efficiencies for all electronically lodged home loan applications and in turn ensured optimal acceptance by brokers. “ApplyOnline allows us to eliminate much of the manual processing in application lodgement. Otherwise our credit assessor would need to go to multiple systems to obtain information in order to make a credit decision,” Ms Li says. “Now our credit assessors can see the full applications. It mirrors exactly what a broker submits in an application into the system, including all brokers’ notes, supporting documentation and our lending requirements.

“We hope that the use of ApplyOnline will enable us to implement a straight-through process, improving turnaround times, and increasing conversion rates.” Asked what BoCAL’s growth aspirations are in the broker channel, Ms Li replies: “We have made a significant investment in establishing our Mortgage Centre, and have recruited highly experienced relationship managers to specifically work with aggregators to provide a superior service.” “We will continue to build relationships through the broker channel, with a number of projects also underway which will further underpin our growth into the future.”

NEWS

TECHNOLOGY E-SIGN SERVICE ROLLED OUT BY BANKWEST has rolled out a new digital signing service across all home loans that it says will reduce by nine days the time it takes for a new loan to be made ready for settlement. Further, the service will eliminate 2.3 million pieces of paper per year from the bank’s loan processing. To date, the service has been rolled out to Bankwest’s proprietary lenders and the wider broker channel. BANKWEST

John Kolenda, co-founder and managing director, Finsure

‘GAME CHANGING’ CRM LAUNCHED BY AGGREGATION GROUP Finsure system uses big data to predict customer behaviour and inform brokers of credit requirements

aggregation group has launched a new CRM platform that it promises will be “game changing” for its 1,700 brokers. Infynity, developed by the Finsure Group, streamlines workflow and automates timeconsuming tasks. It creates a centralised platform for thirdparty application integration, allowing brokers to connect with their own partners as well as a range of other service providers that have chosen to partner with the Finsure Group. Earlier this year, the group’s co-founder and managing director, John Kolenda, told Australian Broker that the new CRM would be key to the AN

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group’s plans for 2019. “This new system is built on the basis of predicting customer behaviour before it happens,” he said. “The other thing we are doing is integrating it with social media so the system will create a centralised area for all customer interactions,” he said. “It’s a really insightful system that we can’t wait to roll out to our network.” Kolenda added: “Although we have exciting plans to expand our service offering in 2019, at the end of the day our focus will always remain on continuing to deliver on our value proposition to our members.” According to Finsure general manager for aggregation Simon

Bednar, Infynity is “the most up-to-date” CRM on the market and features groundbreaking technology. Not only is the system designed to help brokers generate deeper understanding of their customers’ credit needs but it also supports new industry compliance requirements, he explained. “Infynity is built with an understanding that compliance is a business enabler, not an inhibitor. In this time of increased compliance oversight, Infynity allows brokers to monitor their behaviour and identify potential issues within the business before they become concerns. Needless to say, this is a game changer for brokers,” Bednar said. “In [this] highly challenging lending landscape, the aggregator that can maintain the strongest offering to brokers across all services will be the one that succeeds in this market.”

Brett Halliwell, general manager, Advantedge

ADVANTEDGE UNVEILS NEW TECH DEVELOPMENT “dynamic loan application tool” has been launched by Advantedge after it entered into a “strategic partnership” with software developers Simpology. Loanapp offers live-chat support and real-time feedback, data autofill, responsive lender updates and an intuitive user interface built for ease of use. “The decision to integrate Loanapp into our offering further strengthens our ability to offer more streamlined and efficient services to brokers,” said Advantedge general manager Brett Halliwell. A

NEWS

R E G U L AT O R S

AFCA FAIRNESS PROGRAM UNDERWAY Fairness Project will be headed by June Smith, following her promotion from lead ombudsman of superannuation, advice, investments and life insurance to deputy chief ombudsman. Smith said, “Work has already commenced on a new Fairness Project to investigate how we can ensure AFCA decisions are made fairly and to identify a framework for confirming that complaints are consistently resolved in a way that is fair, efficient, timely and independent.” AFCA’S

APRA CHAIR ADDRESSES SELF-REGULATION CONCERNS Regulator chair delivers speech to the Banking and Finance Oath conference titled ‘Is self-regulation dead?’

chair Wayne Byers attempted to answer one of the industry’s most pressing questions when he delivered a speech at the Banking and Finance Oath conference in Sydney earlier this month. Highlighting the role of individuals in upholding ethical standards, Byres’ address, titled ‘Is self-regulation dead?’, reiterated that legal compliance was the minimum requirement to restore public trust in the financial services sector, and that the onus was on the individual as well as the firm they worked for to ensure compliance. “While after-the-event punishment will act as a general deterrent against illegal behaviour, APRA

FINTECH CALLS ON REGULATORS FOR SUPPORT fintech Fair Go PERTH-BASED Finance has called on regulators to better support Australians. CEO Paul Walshe said, “I would encourage governments, particularly the WA state government, to do more to invest in economic growth drivers, beyond what interest rate reductions can deliver, to attract and support companies and people in places like Mandurah.” The fintech recently expanded into Mandurah, creating eight new roles for local workers.

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more than just compliance with the law is needed to restore the financial sector’s reputation. Individuals, companies and industries must better regulate their own behaviour: to do not only what is legal, but also have regard to what is right,” he said. Ensuring there were no grey areas in his message, Byers further highlighted that boards and executives were “ultimately responsible” for the activities and performance of their companies. A series of new industry codes have been introduced over the last year, while existing codes have been updated. This has drastically changed the regulatory landscape and increased the responsibility of regulators such as APRA for

upholding new and amended standards. On this point, Byers said the new frameworks had been designed to create “opportunity for more genuine self-regulation to play a role in helping win back lost trust”. Further, they had been given “real teeth” so the financial services sector can more effectively police itself. “The question is whether the industry is ready to embrace that challenge,” he added. “The buck may stop with boards in a legal sense, and it’s essential they set the right tone, policies and incentives, but as individuals we are faced with a myriad of decisions every day in which we are able to exercise our discretion,” Byers said. “The fact that misconduct or unethical behaviour may be possible, or even inadvertently incentivised, is not a licence to take advantage of it. Nor even to turn a blind eye to it.”

REGULATION PUSHES CREDIT CARD LENDING TO NEW LOW Source: APRA, CommSec

Credit cards out of favour 15%

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SPECIAL REPORT

THE NEXT CHAPTER

Recording double-digit year-on-year growth in its mortgage book, a streamlined Resimac is being positioned to capitalise on the next wave of market trends. CEO Scott McWilliam reveals the details to Australian Broker

RESIMAC: FAST FACTS

years of experience in home finance

50,000+

customers served across Australia and New Zealand

11-YEAR HIGH

reached in non-bank lending in 2018

$12BN

combined loan portfolio following Resimac and Homeloans merger

12,000+

brokers accredited to write Resimac loans

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Reserve Bank of Australia estimates that non-bank residential mortgage lending has grown by around 15% per annum over recent years, putting the sector well ahead of its mainstream bank competitors. But in 2018 things started to accelerate, with loans and advances by non-bank intermediaries up 11.4% over the year to September. It was the strongest annual growth in 11 years and put the non-banks firmly on the map for borrowers from all walks of life. However, for the non-banks the trend is far from a simple pendulum swing from the royal commission. By offering service, systems and approval procedures that are superior to those of their traditional bank competitors, the nonbanks have been able to meet the demands of discerning borrowers. Not only does this signal that the current environment is the new normal, but it raises the bar in terms of customer experience. “We see this as a long-term tectonic shift,” says Resimac CEO Scott McWilliam. “As a mature, leading non-bank lender, Resimac has benefited from the consumer movement away from traditional lenders. Consumers today are better informed than they’ve ever been and are therefore more aware of and favourable towards the alternatives in the market. This is encouraging brokers to educate themselves about well-established non-bank lenders such as Resimac.” While Resimac has certainly been in the right place at the right THE

time, a series of behind-the-scenes developments have also contributed, helping the lender to achieve double-digit year-on-year mortgage book growth in Australia. These started with the consolidation of the Resimac and Homeloans brands in December 2018 following a 2016 merger that created one of Australia’s largest

more functionality for accessing loan account funds. “There have been several highlights which have flowed from our successful move to a single brand,” says McWilliam. “Our service position is a key performance driver of this business. In order to get all of that operating as effectively as possible, we had to remove some of the unnecessary complexity that sat in our business as a result of operating two brands.” Digital solutions Digitisation has been a key enabler of the new business strategy. According to McWilliam, the goal is to leverage data and tech solutions to provide superior borrower and broker experiences

“Consumers today are better informed than they’ve ever been and are therefore more aware of and favourable towards the alternatives in the market” Scott McWilliam, CEO, Resimac non-bank lenders with a combined loan portfolio of more than $12bn. The new Resimac then streamlined its offerings to compete on product, rate and service, as well as customer experience, across prime, near prime and non-conforming loans. A team restructure followed, which saw the creation of a Relationship Management Team for broker partners and the appointment of four new BDMs, with two based in Melbourne, one in Sydney, and one in Adelaide. Next came a “significant investment” in technology, designed to “transform our business and customer experience”. For example, Resimac now offers Visa Loan Access Cards for customers with Resimac-funded loans, providing greater flexibility and

and then entrench this philosophy throughout the organisation. “It’s about building scale and productivity and delivering quality for all our stakeholders,” he says. “We are also very happy to deliver against these objectives via acquisition or partnership with other parties that we believe are highly successful in their areas of speciality, and who offer something we know our customers want.” On that note there have been several developments in recent months. The first is a partnership with Athena Home Loans, the fintech determined to help borrowers pay off their debt, rather than take on more. In a mutually beneficial arrangement, Resimac is providing funding support to Athena and in return will enjoy access to the

In partnership with

Scott McWilliam, CEO, Resimac

fintech’s state-of-the-art digital customer experience. According to McWilliam, the deal will “fast-track some of our priorities”. Then in July of this year Resimac acquired a 15% stake in the Adelaide-based fintech, Positive Group. Specialising in asset finance solutions, this deal will likely support Resimac’s diversification from mortgage lending, as well as the enhancement of its technology in asset finance and, as a result, the customer experience. “We are excited about what we can achieve together,” McWilliam says. “The Athena Home Loans and Positive Group deals are great

examples of how we are willing to partner with external parties in order to realise our strategic objectives.” Optimistic outlook A number of factors have converged to create the goldilocks environment in which Resimac currently thrives. However, McWilliam’s focus is now on positioning the business to build on its winning streak, regardless of external factors. Central to this is responsible lending. While banks have moved away from their reliance on indexing and profiling – which was previously depended on to form a

view on individual living expenses – Resimac assesses loan applications based on the applicant’s own circumstances, enquiring about actual spending habits and living expenses. “Yes, the landscape has changed, but it has changed more for others than for us because we believe we have been consistently adhering to our responsible lending obligations,” McWilliam says. “As a result, we have not had to materially change our policy because it is consistent with our responsibilities. It really has been a case of the market getting closer to us than us getting closer to the market on this,” he explains.

Resimac is just one of a number of non-banks to be in the right place at the right time, but the lender is far from resting on its laurels. McWilliam expects that demand for non-bank home finance will continue to grow in 2019, adding to existing demand for mortgage solutions. Operationally, the rest of the year will see continued investment in the service proposition for brokers, as well as broker education that will focus on improving the customer experience pre- and post-settlement. “Resimac will continue to provide a competitive value proposition down the broker channel, and we are confident that we will continue to grow our market share. As for the broader mortgage market for the rest of 2019, there have been some positive signs recently in relation to borrower activity, and we have an optimistic view about the future of the sector,” McWilliam says. The focus on customer experience will continue well into 2020, along with investments in technology, process efficiencies and talent. Further, McWilliam reveals that there is also talk of expanding the product range beyond home loans. “Our goal is to not only become a more diversified, leading non-bank lender but to broaden our proposition over time to become a leading financial services company,” he says. While the details are under wraps for now, an educated guess can be made as to what that expansion could entail. Given the recent partnerships and heightened market demand for personal finance solutions, commercial, equipment and even personal loans could be on the cards. What is clear is that the strong focus on digital distribution – whether direct to market or via the third party channel – will remain, and McWilliam and the growing Resimac team will certainly have their work cut out for them. AB www.brokernews.com.au

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NE WS ANALYSIS

COUNTING THE COST

Following the shock ruling that saw ASIC’s responsible lending case dismissed by a judge, Australian Broker examines what the decision could mean for the future of expense verification and the ability of lenders to accurately predict serviceability

1 March 2017, ASIC commenced Federal Court proceedings against big four institution Westpac to test the responsible lending provisions of the National Consumer Credit Protection (NCCP) Act. In nearly 10 years of NCCP application it was the first legal test of the Act, and, despite it taking 30 months for ASIC to get to the courthouse, things didn’t go how the regulator had hoped. Specifically, proceedings focused on Westpac’s use of the housing expenditure measure (HEM) benchmark and assessment of interest-only home loans between December 2011 and March 2015. The bank’s reliance on HEM and failure to calculate individual serviceability on higher principal ON

and interest repayments were central to the case. Hearings started in May of this year and, on 13 August, Justice Nye

“It’s a pretty big deal,” says Jesse Vermiglio, partner at the law firm Holley Nethercote. “It’s a fundamental shift from the

“It’s a fundamental shift from ... how ASIC thought a key component of responsible lending laws worked” Jesse Vermiglio, partner, Holley Nethercote Perram concluded that Westpac didn’t breach the law; ASIC misinterpreted it. The case was dismissed. Not only did a regulator lose, but it did so on both its application of law and the facts of the case.

thinking as to how ASIC thought a key component of responsible lending laws worked – a shift from what they thought to what a judge has actually now decided.” In a statement released the same day as the ruling, David Lindberg,

the chief executive of Westpac’s consumer division, said, “This is an important test case for the industry, and we welcome the clarity that today’s decision provides for the interpretation of responsible lending obligations.” Not only has the interpretation of the law been clarified, but the case also means that the slow creep to prescriptive legislation – and a resulting nanny-state approach to how the general population manage their finances – has been halted. “From my point of view,” says credit and risk consultant Andrew Tierney, “it’s about looking at the loans that didn’t have the checks done and asking, is the default rate less or worse? Then there would be a case.”

RESPONSIBLE LENDING: A TIMELINE

2009

2018

2019

The National Consumer Credit Protection Act comes into effect

Westpac’s expense categories for mortgage applications increase from six to 13

Royal commission’s final report rules that the household expenditure measure can still be used

Westpac further increases its expense categories from 13 to 18

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2017

2018

2019

ASIC commences Federal Court proceedings against Westpac

Federal Court refuses to approve $35m penalty for Westpac imposed by ASIC

Justice Perram dismisses ASIC’s allegations against Westpac on two counts

Jesse Vermiglio, partner, Holley Nethercote

Illustrating his point, Tierney highlights that the case was based on 262,000 Westpac loans, 10,500 of which didn’t have full checks conducted. Further, 5,400 of these loans are still with the bank, representing 0.4% of Westpac’s total portfolio – and they are performing similarly to or better than the other 99.6%. “None of these loans went into hardship. So, when we look at it, what are we doing? Are we making it even more of a nanny state where we have to protect an individual from themselves and they are absolved of all blame?” Tierney goes on to highlight that typically around 97% of all loans with all lenders are paid on time, and that most people are fully aware of how much they can afford to borrow. What people don’t know is what lies ahead – whether that’s pregnancy, divorce, bereavement or any other life event that can impact on their financial circumstances. Importantly, no lender can ever know either, and that’s nothing to do with expenditure benchmarks.

Ken Sayer, CEO, Mortgage House

“Responsible lending has always been a case of, you need to make sure you do the right thing by the customer. If you are doing something we can see isn’t the right thing, such as lending $30,000 to somebody with no job, that’s where it should be coming in,” Tierney says. “But to absolve consumers of

Andrew Tierney, credit and risk consultant

is whether or not a lender can ever truly know the full extent of a borrower’s living expenses. “A lot of people have to get loans, whether it be a mortgage, a car loan, a credit card,” says Vermiglio. “Whether it’s through a mortgage broker, direct through a bank, peer-to-peer, whatever, it doesn’t

“Are we making it even more of a nanny state where we have to protect an individual from themselves and they are absolved of all blame?” Andrew Tierney, credit and risk consultant all responsibility opens the door to a lot of interpretation and a lot of legal action that may not be necessary.” Questions remain The case raises a number of important questions, one of which

matter. This decision has an implication on all of those channels of responsible lending… and it’s not just on mortgages. “My view is that it’s quite a significant decision.” As Justice Perram said in his ruling, “I may eat wagyu beef every

day washed down with the finest Shiraz but, if I really want my new home, I can make do on much more modest fare.” In its submission to ASIC, the FBAA made a similar point. It said, “Administration of responsible lending laws [needs] to recognise that consumers change their spending behaviour in response to taking on a new loan, therefore a backwards-looking assessment of a consumer’s financial position was only partly helpful.” Opposed to the prescriptive approach seen of late, FBAA managing director Peter White says, “Proper regulation of responsible lending must recognise that licensees and consumers each have equal responsibility when it comes to seeking credit and honouring repayment commitments. “We are hopeful this judgment may be the start of things moving back towards balance where 100% of the compliance burden and 100% of the consequences aren’t shouldered by licensees.” www.brokernews.com.au

FE AT URES

WHAT IS HEM?

The household expenditure measure (HEM) is a measure of what families spend on different types of household items, calculated quarterly by the Melbourne Institute of Applied Economic and Social Research.

HAYNE ON HEM

“In the Interim Report, I said that using a statistical measure of ‘the median spend on absolute basics’ plus the twenty-fifth percentile spend on discretionary basics as a default measure of household expenditure does not constitute verification of a borrower’s expenditure. I remain of that view.”

So how can the banks get – and remain – ahead on living expenses, and what does this mean for serviceability moving forward? Although this case dates back to 2017, the assessment of living expenses was a key focus of the royal commission. Hayne didn’t call for an outright ban on the use of the HEM, but banks are reducing their reliance on it. “ASIC is saying your past expenditure is what you need to rely on to assess if you’re able to make your repayments or not, whereas [Justice Perram] said that’s not necessarily the right way to assess if someone is going to be able to make their repayments. It doesn’t really tell us what changes in behaviour they’re going to make in terms of their expenses,” Vermiglio says. “That’s the crucial part of the judgment that I think lenders will want to think about.” The question is what happens next. One of the available options is to change the regulatory framework outlined in the NCCP to align more closely with ASIC’s interpretation of it. This would require a change in the law, something that ASIC is unable to initiate alone. However, there are other options. 18

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Building a crystal ball A new generation of agile and tech-savvy lenders are developing their own systems to analyse expenses and, ultimately, predict risk and serviceability. One of these is Mortgage House, which utilises Yodlee to download bank statements and other documents to its own origination platform so AI can

because we have built that from inception, based on actual data, and there is no human reconciliation, for want of a better word.” While the approach works for individual lenders, cascading such a level of sophistication across the IT systems of a major bank – or the entire banking system itself – would be a whole different ball game.

“If ASIC wants to take control, it has to create a system from scratch and tell everybody to work within it” Ken Sayer, CEO, Mortgage House analyse the transactions. So advanced is the system that after almost 30 years in the industry Mortgage House now considers itself more a technology company than a lender. “That [system] predicts the likelihood of meeting the next month’s repayments as well as the borrower’s discretionary and mandatory expenses,” says CEO Ken Sayer. “We are light years ahead of everybody else, and it’s only

“There is only one way: ASIC builds the system and everybody plugs in. The master regulator APRA will then actually have a clean, digestible document,” Sayer suggests. Referencing the Reserve Bank's work to create a centralised platform for real-time payments, he adds, “If ASIC wants to take control, it has to create a system from scratch and tell everybody to work within it. That would remove 100% of the variables.”

The final option is to do nothing and instead wait for the full rollout of open banking and comprehensive credit reporting (CCR), which by their nature will collate vast volumes of data on borrower behaviour. “We just had some proper regulation on open banking, so if you are able to access bank accounts and you get a bureau report with CCR, you know what debts are outstanding and you can actually start to form a picture of the person straight away,” says Tierney. While the initial applications of such a system won’t paint the full picture immediately, Tierney says CCR 2.0 is likely to be the solution, allowing consumer behaviour to be modelled in order to create new risk calculations and, essentially, a window into a person’s financial future. “If I get the transaction history on a person in an automated fashion, I’m looking at that person in isolation. If we model 1,000 or 100,000 people to look at their incoming and outgoing transactions, how they affect the risk of that person, and so on, we get a very clear picture,” he explains. To achieve what currently seems impossible, CCR and open banking must reach an unprecedented level of sophistication incredibly quickly. In the meantime, individual players will no doubt continue to pioneer piecemeal solutions based on their own business objectives. Consumers also deserve a look-in at this point. Without their buy-in to share their private financial information in the first place, all options are off the table. What can be considered a certainty is that, by default, fintech is about to take on a huge regtech component, and the lenders who don’t stay ahead of the developments could find themselves with outdated systems no broker wants to subject their clients to. AB

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FE AT URES

OPINION

HIGH HOPES FOR THE GOLDEN STATE

WA’s economic woes could be coming to an end, setting the scene for a recovery in property prices. Andrew Bromley, mortgage adviser at Smartline, writes about the projects likely to drive the next wave of mortgage lending

past 12 to 24 months have been challenging to say the least in Australia’s west. A flat property market, stagnant wage growth and tight lender policies have contributed to the situation WA brokers find themselves in. However, green shoots are appearing and, as they say, the worm is finally turning. A significant factor in the (albeit slow) turnaround is the optimism surrounding a resurgent mining sector. During the mining boom of the early 2000s, West Australians thought the good times would never end. Property prices were up, jobs growth was high, and the party was ongoing. Of course, with boom comes bust, and since its heady times the WA economy has been stuck in the mire of a budget deficit and a generally weakened outlook. In the last year, however, there have been a number of promising announcements regarding new and revised mining operations. Job vacancies have increased, and suddenly there is more talk of opportunities both in the north of the state and areas closer to Perth. The famous ‘superpit’ in Kalgoorlie is

seeing its first expansion in operations in almost 10 years. This is significant after last year’s setbacks when there

THE

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The Blackham Resources expansion and St Barbara Gwalia extension will bring a further increase of 490,000 ounces of gold per year. With gold prices remaining high, this is excellent news for the industry and WA’s economy in general. Iron ore has long been a driving force in the WA mining space, and there is plenty to be upbeat about. The BHP South Flank project has seen a $3.4bn investment in the expansion of the mining giant’s operations in the area. This will include an 80 million-tonnesper-year crushing and screening plant, with production anticipated to begin in 2021. A massive job program will result in one contractor, Monadelphous, filling 400 positions with construction works alone. Rio Tinto is also gearing up operations, with a focus on its Robe River projects. An investment of in excess of $1.5bn will see production sustained in both its Robe Valley and West Angeles mine sites, and the first ore is expected in 2021. FMG is ramping up works with an estimated $1.7bn investment in its Eliwana rail and mine project in the Pilbara. Mount Gibson Iron has also restarted the Koolan Island operation

With boom comes bust, and since its heady times the WA economy has been stuck in the mire of a budget deficit and a generally weakened outlook

Andrew Bromley Mortgage adviser, Smartline

were two wall slips within 12 hours in May. These slips resulted in reduced production and a number of redundancies for the Kalgoorlie Consolidated Gold Mine, which recently celebrated 30 years of production. Gold Road Resources in Gruyere is another vital gold-mining project in WA, which is expected to see a $621m investment. The first ore was mined in January of this year, and once underway the Gruyere mine will produce 300,000 ounces of gold per annum over the course of its life span.

after a seawall failure in 2014. After the main pit was flooded, an evaluation of the site took over two years to complete. The good news is that there are more than 21 million tonnes of high-grade iron reserves. With the upturn in mining, so comes the opportunity for finance brokers in the west to take advantage. Wage and employment growth, increased household cash flow and a more positive economic outlook will no doubt combine with higher house values to impact the broking sector. AB

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BUSINESS TALK

INSPIRING CHANGE

This year, the FAST Women in Business series welcomed more than 400 delegates across five events. Designed to empower, inspire and connect professionals from all walks of life, this is just one way the aggregation group is supporting more people to succeed in broking their day-to-day work, brokers deal with a diverse crosssection of clients and employees. In fact, the latest Opportunities for Women report, commissioned by the MFAA, discovered that 55% of brokers believe their customer base is becoming more culturally diverse. However, such diversity isn’t always reflected in the broker community. For example, in terms of gender diversity, the MFAA report highlighted a worrying trend: the share of female brokers joining the industry has declined to 30% from a peak of 34% in 2015. Further, the total proportion of female brokers in the MFAA network currently stands at 27.1%, compared to 50% female participation in the broader financial services industry. “The numbers show that women are still under-represented in the broking industry, and we will continue to contribute to the conversation on the benefits for women of becoming finance brokers,” says Brendan Wright, CEO of FAST. Recognising the opportunity to become part of the solution, in 2013 FAST launched its Women in Business program – at the time it was the first aggregator-led professional development program for women. Designed to unite females from the industry in an informal setting, as well as provide positive role models for those who might be considering building their businesses, today the event also promotes other facets of diversity and inclusion, such as culture, background, experience and thinking. “I believe the greatest opportunity IN

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Human rights lawyer Rabia Siddique with FAST CEO Brendan Wright

for any leader is diversity enablement – through gender, thinking, culture and background. We believe it is a game changer, in a sustainable way, and we will continue to champion for diversity,” says Wright. This year, more than 400 brokers, lenders and industry representatives from across the country attended

the seventh Women in Business series, which took place in Sydney, Melbourne, Adelaide, Perth and Brisbane between 24 July and 1 August. Inspiring delegates to lead change in the industry, Rabia Siddique – an Australian criminal and human rights lawyer, retired British army officer and author – told delegates

her harrowing story of surviving a hostage crisis in Iraq and suing the British government for gender and racial discrimination. During her keynote presentation she said, “A message I remember getting after is, ‘Rabia, if you as one person, a woman, a foreigner, could take on the might of the British government and impact change, you

From left: FAST’s Lorelle Green, head of aggregation operations and partnership support, and Rob Ryan, head of NSW/ACT and Qld, with Nicole Devine, GM for performance and operations at NAB, and FAST CEO Brendan Wright

have inspired us to take a stand in our lives and in our workplaces and in our communities.’ “That’s when it dawned on me: the power of the one. The power that we all have to create ripples of change. Waves come from ripples. And it takes one stone, one person to create that. Why should it not be you?” Creating a culture of diversity FAST’s culture of diversity and inclusion is no accident. Today, around 25% of FAST brokers and half of its employees are female, and it is expected that the numbers will continue to rise as diversity across culture, experience, background and thinking is heavily promoted throughout the business. If successful, the benefits will be tangible. Reports published last year by McKinsey & Company and the Peterson Institute for International Economics both concluded that companies with higher levels of gender diversity could expect to see up to 20%

higher profits. In 2015, the figure stood at 15%. “We’ve fostered a culture of diversity and inclusion to achieve greater productivity, innovation and employee engagement in the business in a sustainable way,” says Wright.

diversity is good for FAST; working in broking can be highly beneficial for women too. From commissionbased pay that eliminates the possibility of a gender pay gap to flexible working that fits around other life commitments, the industry offers many breaks for

“We’ve fostered a culture of diversity and inclusion to achieve greater productivity, innovation and employee engagement in the business in a sustainable way” Brendan Wright, CEO, FAST “At FAST there are many high-performing female brokers who are providing fantastic customer service and an understanding of delivering personal, home and business debt advice needs.” It isn’t simply that gender

business-minded women. “I believe it is important for the industry to continue to focus on growing diversity and inclusion through its employment practices. I encourage everyone to get women, and diversity more broadly, in and around the business they lead.

It’s a game changer in a sustainable way,” says Wright. “We also need to continue to provide opportunities for professional development and networking, such as Women in Business, so women can share their challenges and hear the success stories of their peers.” Although Wright says Women in Business is now part of FAST’s legacy, it is far from the only development supporting the cause. Not only will the series return in 2020 – and beyond – but FAST is also designing a program of work to provide opportunities for its female employees as well as the wider community of women brokers. “As the CEO of FAST, I see that I have a responsibility to create opportunities for others to develop and expand their capability in their chosen career or business. “We not only want to attract more women to the FAST network, but we want those women to really be able to make their mark,” says Wright. AB www.brokernews.com.au

PEOPLE

CAUGHT ON CAMERA The second annual commercial and equipment finance masterclass produced by the FBAA and Vow Financial toured Australia in June drawing record crowds in Adelaide, Perth, Brisbane, Melbourne and Sydney. There were speakers from the FBAA, Vow, La Trobe Financial, Pepper Money, Macquarie, Suncorp, ING and Thinktank, and delegates also enjoyed a Lender Speed Dating session. Glenn Mitchell, head of commercial and leasing at Vow/Yellow Brick Road Group, said, â&#x20AC;&#x153;Rather than reinvent the wheel, I went to lenders that already had good training content to deliver, an approach we found to be quite successful.â&#x20AC;?

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DATA

SOUTH AUSTRALIA

WA SPOTLIGHT

Renters face higher costs, while first home buyers boost market After years spent in the middle of the pack, Adelaide is now in the spotlight. The March 2019 Housing Affordability Report published by the Real Estate Institute of Australia and Adelaide Bank found that the proportion of income needed to pay the average monthly rent increased by 0.4% over the previous year to 22.8%. However, the number of loans made to first home buyers increased 5.6% over the year to a total of 1,370, signifying a boost in activity in this sector. In fact, first home buyers in this state comprise 5.9% of this segment nationally. Adelaide’s consistency, generally one of its strong suits, was still on display as the average time on market saw no significant change over a 12-month period, according to CoreLogic data. In April 2018, properties in Adelaide took an average of 45 days to sell; a year later, they are spending 54 days on the market.

Area

Type

Median value

Quarterly growth

12-month growth

Adelaide

$461,000

0.7%

1.8%

SA Country

$275,000

0.7%

2.7%

Adelaide

$345,000

1.2%

1.5%

SA Country

$189,500

-1.4%

5.8%

NORTHERN TERRITORY

Suburbs see the lion’s share of action, but overall sales are still in decline In terms of value of sales, the suburb of Humpty Doo in Darwin stood out from the pack in the year to February 2019, with figures up 86.7%. Moulden’s total dollar value of sales trailed behind Humpty Doo’s, but its sales value was up by 88.6%. On the flip side, the sales value of regional suburb Desert Springs was half of what it was in the previous year. “Overall sales (volumes) were down 37% for the March 2019 quarter. The main differences were in Inner Darwin, which saw a drop of 28% or 24 sales, and Darwin North Coastal, which was down 62% or 30 sales. Alice Springs also saw a fall of 37% in unit sales volume, which equates to 14 fewer sales,” says Quentin Kilian, CEO of the Real Estate Institute of NT. Nonetheless, the rental market in the state leans on the side of units, with unit vacancies dropping by a considerable 3% over the quarter in Palmerston.

Area

Type

Median value

Quarterly growth

12-month growth

PERTH’S PROPERTY TIME WARP Despite boasting prices not seen since 2006, Perth remains on the verge of recovery, with hints of improvement in the land market is still one of the poorer performers in the national market, alongside Darwin, and property in this capital is thus the most affordable it’s been since 2006. While a few states are seeing more activity in their regional markets as their capital cities struggle, this is not the case in WA, as its outback is the among the weakest regional subregions in the country, according to CoreLogic’s Home Value Index for May 2019. Agricultural struggles have also likely impacted the property market in the wheatbelt. “The current downturn has certainly dragged out much longer than we would have anticipated a couple of years ago due to a range of factors, primarily the continuing sluggish economic conditions and slow population growth,” says Tanya Steinbeck, CEO of the Urban Development Institute of Australia WA. “We have also seen extremely tight lending criteria being applied by the banks, which has further dampened buyer demand. However, the federal election outcome, the introduction of the First Home Buyers Deposit Scheme and the latest rate cut, along with more reasonable retail lending criteria, should all help to support a market recovery.” Affordability of the land market represents a significant movement towards positivity, as there are good opportunities for buyers. “Perth land prices are currently representing excellent value for money, potentially $5,000 under market value at this point in time,” Steinbeck points out. The state government has also modified the Keystart loan scheme to accommodate new income limits – eligibility has now increased to $105,000 for singles and $130,000 for couples. Moreover, there is a 5% deposit initiative to spur first home buyer activity, improve affordability and eliminate the need for lenders mortgage insurance. AB PERTH

$480,000

-1.0%

Median price (houses)

NT Country

$400,000

-2.3%

-1.9%

$415,557

Darwin

$300,000

-2.4%

-10.6%

NT Country

$320,250

-1.3%

6.8%

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Things are looking up in WA as the mining industry revives and lending conditions make borrowing easier With the state government getting behind Keystart and increasing income eligibility limits, we are seeing more renters enquiring about homeownership. Additionally, Keystart has been a great success in assisting prospective WA borrowers to access low-deposit loans. APRA’s recent announcement on proposed changes to serviceability assessments should also boost borrower numbers. Mining projects are also coming back online, raising demand for workers. While the WA iron ore industry has traditionally been a driver of employment, lithium seems to be the new favourite, with some industry leaders claiming that a bidding war has commenced again as workers are sought to fuel the mining boom. Hopefully, this will stimulate population growth in Perth as there remains an oversupply of residential blocks in outer suburbs. However, the rollout of the Metronet rail system should increase demand in those areas. In the farming sector, record grain prices and strong demand for meat products has positioned WA as a target for overseas investors, as evidenced by a recent deal settled on a 76,000-hectare freehold grain and sheep property sold to Saudi investors. Harry C Bozin Director/owner, Harken Financial

SUBURB TO WATCH: QUEENS PARK

Darwin

BROKER PERSPECTIVE

Median price (units) $308,752

12-month growth

3-year growth

5-year growth

Indicative gross rental yield

-6.1%

-11.9%

-17.0%

4.6%

12-month growth

3-year growth

5-year growth

Indicative gross rental yield

-10.4%

-15.7%

-26.2%

7.4%

HIGHEST-YIELD SUBURBS IN WESTERN AUSTRALIA Suburb

OPPORTUNITIES AND KEY INFRASTRUCTURE

Type

Median price

Quarterly growth

12-month growth

SOUTH HEDLAND

$105,000

17%

PEGS CREEK

$165,000

-36%

NULSEN

$91,250

-27%

NEWMAN

$179,500

24%

RANGEWAY

$91,100

-1%

KAMBALDA WEST

$91,500

-12%

-14%

DERBY

$169,000

30%

-17%

BROADWATER

$178,000

SPALDING

$121,250

-7%

150,000

37,000

jobs to be created to 2024 according to latest political pledges

jobs created since 2017 state election

SOUTH BOULDER

$165,000

-12%

25%

PORT HEDLAND

$400,000

KALBARRI

$145,000

16%

AUSTRALIAN CAPITAL TERRITORY

$1.6bn

$12m

allocated to road and rail infrastructure in latest budget

to be spent on international destination marketing

Area

Type

Median value

Quarterly growth

12-month growth

Canberra struggles to maintain growth in the face of national value declines While population growth, economic strength and job availability helped keep Canberra steady throughout the national downturn, the city has not been entirely immune. CoreLogic’s Home Value Index for May 2019 indicated that over the month dwelling prices actually declined 0.2%, although the growth rate over the quarter clung to a positive 0.2%. Moreover, across the state, some suburbs recorded declines in year-on-year transactional sales values, with Isaacs in particular taking a considerable blow of 36.8%. On the flip side, the suburb of Higgins saw its total value of sales soar by a whopping 63.9% in February. Nonetheless, with the federal election over and political uncertainty clearing, CoreLogic head of research Tim Lawless expects greater confidence. “The federal election outcome has removed the uncertainty surrounding taxation reform, which should see an improved level of confidence amongst homeowners and prospective buyers, particularly investors,” he says.

Canberra

$660,000

0.8%

2.3%

Canberra

$430,000

0.1%

0.6%

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DATA

VICTORIA

VIC Country

$365,000

1.0%

4.3%

Melbourne

$535,000

0.0%

VIC Country

$279,500

0.0%

-1.9%

NEW SOUTH WALES

MEDIAN HOUSE AND UNIT PRICES

Regional areas now leading value declines as cities recover

$900,000

Area

Type

Median value

Quarterly growth

12-month growth

Sydney

$885,000

-3.2%

-6.1%

NSW Country

$465,000

-0.6%

1.2%

Sydney

$685,000

-1.4%

-2.5%

NSW Country

$400,000

0.0%

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$300,000 $200,000 $100,000 $0

$525,000

$500,000 $400,000

$660,000

$700,000 $600,000

$652,000

According to CoreLogic’s Home Value Index for May 2019, property prices across the nation dropped by 0.4% – the smallest month-on-month dip since 2018. “This improvement is primarily driven by a slower rate of decline in Sydney, where housing values were previously falling at the fastest rate of any capital city. Sydney values were 0.5% lower over the month – the smallest decline in values since March last year,” says CoreLogic head of research Tim Lawless. The recovery is evident in the auction market as well. “Although clearance rates remain low relative to several years ago when conditions were stronger, the improved performance at auction aligns with the easing rate of decline,” Lawless says. But the ripple effect has been seen across NSW, as outside Sydney some of the regional markets are feeling the negativity. CoreLogic’s Regional Market Update reported in March that Illawarra had the greatest annual decline in house values at 10.1%.

PERTH Total auctions

Cleared

Uncleared

Clearance rate

14.3%

Houses

$825,000

$800,000

56.7%

Sydney Melbourne Brisbane Adelaide

Perth

Hobart

Darwin

Units

$407,500

-2.7%

Clearance rate

$625,000

-2.1%

$330,000

$682,000

Uncleared

$470,000

$380,000

Melbourne

Cleared

$473,500

12-month growth

$373,750

Quarterly growth

Total auctions

$480,000

Median value

ADELAIDE

$332,500

Type

There were 1,115 homes taken to auction across the combined capital cities this week, up from 896 homes the previous week. The higher volumes saw the preliminary auction clearance rate rise to 71.2% after last week’s 65.4% final clearance rate. The weighted average clearance rate has improved over each of the last four weeks, coming in above the mid-60% range over the last two weeks and showing a vast improvement since the same time last year, when around 50–55% of homes taken to auction were reported as selling. However, volumes remain lower each week compared to last year; over the same week a year ago 1,536 homes were taken to auction. Looking at results across the individual property types, in the last four weeks the unit market has seen a higher final clearance rate each week relative to the number of houses sold. This week, however, preliminary results show that 71.9% of houses sold at auction, which was higher than the 69.4% of units sold. The two largest auction markets, Melbourne and Sydney, saw preliminary clearance rates rise this week, both coming in at the mid- to high-70% mark, with an increase in volumes over the week.

$441,500

Area

WEEK ENDING 28 JULY 2019

$372,250

Despite the market cooling, Real Estate Investar CEO Clint Greaves notes that Victoria remains one of the more popular areas in Australia and Melbourne’s price decline is easing up. According to CoreLogic, values went down by only 0.3% in the month to May 2019 – the lightest drop for a year. “Regional Victorian markets are a good example of where we are seeing strong interest and high levels of investment searches outside of the main Sydney and Melbourne markets,” Greaves says. Demand in the regional pockets is evident from the improved performance of areas like Geelong and Ballarat. CoreLogic’s Quarterly Regional Market report shows that house values increased by 0.4% in the year to March 2019, while unit prices jumped by 5.4%. “Metropolitan prices definitely seem to have reached a peak, but regional cities, particularly those within a reasonable drive of Melbourne, seem to be faring well,” says Rocket Property Group CEO Ian Hosking Richards.

CAPITAL CITY AUCTION CLEARANCE RATES

$535,000

Melbourne prices stabilise and regional areas show strength

Canberra

CAPITAL CITY PRIVATE TREATY MEDIAN PRICES Capital city

Number of house sales

Median house price

Number of unit sales

Median unit price

Sydney

2,004

$825,000

1,191

$652,000

Melbourne

2,266

$660,000

1,055

$525,000

Brisbane

1,251

$535,000

320

$372,250

Adelaide

634

$441,500

122

$322,500

1,003

$480,000

260

$373,750

Hobart

152

$473,500

$360,000

Darwin

$470,000

$330,000

259

$625,000

140

$407,500

7,605

$635,143

3,165

$528,062

Perth

Canberra COMBINED CAPITALS

BRISBANE CANBERRA Total auctions

Cleared

Uncleared

Clearance rate

Total auctions

Cleared

Uncleared

Clearance rate

41.7%

55.6%

SYDNEY Total auctions

391

Cleared

237

Uncleared

Clearance rate

78.5%

TASMANIA

MELBOURNE Total auctions

546

Total auctions

Cleared

339

Cleared

Uncleared

119

Uncleared

Clearance rate

74%

TASMANIA

Hobart’s time is up as negative growth returns CoreLogic’s Home Value Index for May 2019 indicated that Hobart’s dwelling values fell for two consecutive months, showing the first negative quarterly growth in three years. However, Tasmanians are now returning home because employment is strong, and this could turn things around. Wine and food have helped jump-start the tourism industry, and the influx of young, tech-based business has breathed much life into the city centre. Furthermore, agriculture is thriving and is the main driver of the local economy. “We’ve had a whole range of brand-new irrigation schemes put in around Tasmania. Being able to access all this extra water means farmers can really diversify,” says Real Estate Institute of Australia president Adrian Kelly. Meanwhile, rents are skyrocketing. CoreLogic data show that Hobart’s rents were up by 4.9% over the year to May, recording the fastest growth of all capital cities and dragging down nationwide affordability.

Area

N/A

Type

Median value

Quarterly growth

12-month growth

Hobart

$475,000

0.0%

9.5%

TAS Country

$314,500

1.7%

7.9%

Hobart

$380,000

4.6%

9.8%

TAS Country

$245,000

-1.4%

0.2%

All data sourced from CoreLogic.com.au

www.brokernews.com.au

PEOPLE

IN THE HOT SEAT

In his journey from junior lifeguard to founder and CEO of neobank Xinja, Eric Wilson has been no stranger to the deep end. Reflecting on why he moved into finance, he talks about the importance of putting customers and ethics first

Who or what inspired you to enter the world of finance? Banking, finance and money make a huge difference in people’s A lives. Fights over money are cited as one of the major reasons for divorce. Affording things like healthcare, education and housing makes a huge difference to the welfare and life span of Australians and people all over the world. My father-in-law used to be a good old-fashioned small town bank manager who cared about his customers and knew every one of them by name. He quit in disgust many years ago as he saw the bank he worked for move towards profit at all costs, and away from customers. I wanted to use technology to bring that service back to customers, and to help make life better for people.

Q A

What’s your favourite way to relax after a stressful time at work? After work? What’s that?

What do you wish you’d known when you started out in finance? That people really hate banks and, more often than not, they A have a really good reason to do so. I have always found it deeply mystifying that most people who work in banks are really decent human beings and yet the organisations they work for often behave appallingly. These people work hard, they care about people and customers, and they are deeply honest ... and yet we get all the issues we saw uncovered in the royal commission. I still wish I knew why.

What was your first job? After the obligatory paper round, I was a junior lifeguard at the A local council swimming pool in Slough, England. As if that doesn’t sound glamorous enough, I was too young to be a real lifeguard so usually just spent my time hosing down ‘presents’ the patrons had left in the pool and changing rooms!

What are your top survival tips for working in finance? Always tell the truth and never play in the grey areas. I believe A Warren Buffet once said that if you lose money, that’s forgivable, but if you lose your reputation you get fired. While none of us are perfect, our customers deserve the very best we can give them, both professionally and ethically. AB

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