APRIL 2018 ISSUE 15.07
Preparing to diversify How placing women at the top drives the bottom line /16
Back to school The story behind CAFBA’s new commercial broking certification /22
TONY HAYEK The Blue Wealth CEO reveals how value and service can be leveraged to accelerate business /14
Alternative lending The three leading trends in the alternative finance sector /18
ALSO IN THIS ISSUE … Opinion Scottish Pacific on generating results for SMEs /24 Caught on camera The annual Ladies Lunch hosted by Entourage Finance /25 Hot seat Nectar’s Justine McDonald shares her career highlights /30
NEWS
IN THIS SECTION
Lenders Major lender market share on the rise /04
Market Borrower limits set to fall
Brokers driving loan growth /06
Associations MFAA responds to broker scrutiny /12
/08
Technology Amazon of China makes property debut /10
www.brokernews.com.au APRIL 2O18 EDITORIAL
SALES & MARKETING
News Editor Rebecca Pike
Sales Manager Simon Kerslake
Journalist Nicola Middlemiss Production Editor Roslyn Meredith
DATES TO WATCH
Upcoming can’t-miss events
ART & PRODUCTION Designer Martin Cosme Production Manager Alicia Chin
26 APRIL
27 APRIL
30 APRIL
Sydney’s Changing Property Market: Acquisition and Financing Strategies 2018
Royal banking commission
Tax Essentials for Small Business
The second round of public hearings, this time focusing on financial advice, draws to a close on 27 April after two weeks. The hearings are open to the public and available to stream online. ANZ, ASIC, CBA, AMP and Westpac are all due to appear before the commission.
An essential for any business owner, this free ATO workshop covers the different tax rules for various business structures, in addition to tax rates and obligations. Registration is available via the ATO website. Workshops will be held in Qld and Vic (30 April), and NSW (3 May).
Examining the ever-changing market conditions in Sydney property, this evening seminar takes place at Club York and will hear from Rich Harvey, CEO and founder of Propertybuyer, and Simon Arraj, director of Modena Capital and Checkpoint Finance Group.
Traffic Coordinator Freya Demegilio
Marketing and Communications Manager Michelle Lam
CORPORATE Chief Executive Officer Mike Shipley Chief Operating Officer George Walmsley Managing Director Justin Kennedy Publisher Simon Kerslake Chief Information Officer Colin Chan Human Resources Manager Julia Bookallil
EDITORIAL ENQUIRIES
Rebecca Pike +61 2 8437 4784 Rebecca.Pike@keymedia.com
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tel: +61 2 8O11 4992 fax: +61 2 9439 4599 subscriptions@keymedia.com.au
1 M AY
1 M AY
2 M AY
The Constant Investor: Investing in Disruption
Finance and Coffee – On Tour
Australian Property Market Update
Simon Kerslake +61 2 8437 4786 simon.kerslake@keymedia.com.au
This is the second event of the year and follows the success of the Melbourne instalment. ‘Investing in Disruption’ will take place in Sydney, supported and hosted by not-for-profit fintech hub Stone and Chalk. The discussion will be moderated by ABC chief economics correspondent Emma Alberici.
This is the first of three networking events taking place in Sydney (1 May), Brisbane (2 May) and Perth (7 May). Promising laughter and learning, the series is hosted by F&C founder Dien Le and sponsored by Bluestone Mortgages. Monthly donators to F&C receive a 20% discount on the ticket price.
Blue Wealth Property provides expert insight on the latest property trends, with practical advice on how to leverage market data. The event will cover key market drivers and how to use research to identify opportunities. It will take place in East Maitland, NSW.
Key Media Pty Ltd Regional head office, Level 1O, 1–9 Chandos St, St Leonards, NSW 2065, Australia
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8 M AY
1 1 M AY
6 JUNE
2018 Federal Budget
MPA Roundtable
Broker Business Exchange
Treasurer Scott Morrison will deliver the budget in the House of Representatives from 7:30pm on 8 May. The cost of living, employment and poverty are expected to be key issues, with economic problems, housing affordability and lack of housing all expected to feature heavily.
The latest in the MPA Roundtable series, this discussion will gather the leading aggregators for an hour-long debate hosted by MPA editor Otiena Ellwand. The roundtable event takes place from 12 noon and is available for streaming via mpamagazine.com.au.
Taking place at the Westin Sydney, BBX is Australia’s leading independent national broker event, featuring an agenda of insightful conversation and debate, as well as observations from leading industry personalities.
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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.
NEWS
LENDERS TROPHY CABINET BOOST FOR LA TROBE specialist La Trobe Financial has received an international award for its Credit Fund for the sixth year running. The Blackstone Portfolio Company was given the Investment Company of the Year – Asia Pacific award at the International Alternative Investment Awards (IAIR) in Hong Kong. More than 800 industry professionals from 125 countries attended the event at Sheraton Towers. Winners were chosen by the IAIR Awards judging panel from a shortlist selected by more than 50,000 investors globally.
AUSTRALIA HOUSING PRICE FORECASTS Source: ANZ
Forecast
20
CREDIT
LENDERS LET DOWN SMES of Australia’s small MANY businesses would collapse were it not for mortgage brokers, according to Auswise Finance managing director Paul Boyd-Skinner. He says SMEs rely on mortgage brokers for assistance in tough times because of a lack of support from their banks, with some business owners selling their homes due to a lack of finance options. He maintains that SMEs need to focus on “day-to-day business activity without carrying the burden of finance-related stress”.
“In mortgage broking, increased transparency around broker commissions, fees and costs would help consumers to make more informed choices” Brian Hartzer Chief executive, Westpac
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year-to-year and % change
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5
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1997
1999
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2013
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2019
Australia house prices
MAJOR LENDER MARKET SHARE ON THE RISE The market share of major lenders has increased to 66.78%, up from 64.82% in November, driven by Westpac subsidiaries St. George, Bank of Melbourne and BankSA major lenders have seen their home loan market share rise once again, according to the latest AFG Competition Index. The index has also shown that the gap between the top four banks is closer than it has been for some time. Westpac is on top, with 14.21% of the market, and ANZ is in third place with 12.32%, after a drop from 14.93% in November 2017. While the major lenders now hold 66.78% of the market, up from 64.82% in November, the Westpac brands are the only banking group to have increased their share. Made up of Westpac, St. George, Bank of Melbourne and BankSA, the group’s share rose from 20.28% in November 2017 to 27.05%. AUSTRALIA’S
CBA and NAB’s share both fell, with CBA dropping from 14.99% to 13.63% and NAB from 8.57% to 7.67%. The non-majors’ market share is now at 35.97%. Lender First Home Buyers was the strongest in the category, with its share rising from 31.31% to 33.38%. Other non-majors to increase their share were AMP, from 2.27% to 4.62%; Homeloans, from 0.14% to 0.33%; and WA-based Keystart, from 0.18% to 0.26%. Non-majors seeing a decrease were Suncorp, with a fall from 4.21% to 2.81%, and Macquarie, declining from 4.66% to 4.26%. Bank of Queensland lost almost 50% of its share to finish February at 0.86% of the market.
The Competition Index only calculates loans written through AFG, but it does give a good indication as to where mortgage flow is strongest. AFG’s general manager of broker and residential, Mark Hewitt, said the results showed that mortgage brokers were the only way Australian borrowers could get the whole picture. Preliminary findings of the recent ACCC interim report showed that borrowers could not easily determine their options and were turning to brokers for help. Hewitt said: “A consumer dealing directly with a lender has limited negotiating power or knowledge of the interest rates and lending criteria offered by competitors. This has been further validated by the findings of the interim ACCC Residential Mortgage Price Inquiry. The presence of the mortgage broking channel is one of the few drivers of competitive tension in the Australian lending market.”
NEWS
LENDERS ANZ AGREES TO ENFORCED UNDERTAKING has been ordered to pay $3m after an investigation by ASIC. The investigation looked into ANZ’s ‘‘fees for no service’’ conduct with respect to its Prime Access service package, which offered customers access to financial planners and investment alerts for an annual fee. The investigation found that ANZ had failed to provide documented annual reviews to more than 10,000 customers from 2006 to 2013. ANZ
EX-BENDIGO MANAGER JOINS AUSSIE state manager SA/NT Aaron Hockey was formerly a regional manager at Bendigo and Adelaide Bank. As part of his new role, he will have responsibility for supporting and growing Aussie’s SA and NT network, which includes 12 retail stores, over 30 mobile mortgage brokers and six team members. The appointment comes after Aussie Home Loans expanded its number of stores in Darwin and regional areas of the NT. NEW
BROKER BOOST FOR ME BANK ME’s home loan portfolio growth and underlying profit growth of 26% has been attributed to increased demand from brokers and improved customer experiences demand from brokers is among a number of factors helping ME bank achieve strong profit growth, according to the company’s CEO, Jamie McPhee. Speaking after the bank published its half-year results late last week, McPhee said the bank’s brand and competitive pricing were partly to thank for underlying profit growth of 26%. He also said increased demand from brokers had played a role in this growth, as had improved customer experiences, made possible by new technology. “The home loan portfolio grew by 1.6 times system during the period, and total assets hit $27.5bn, up 5% on the previous corresponding period,” said McPhee. “Higher net interest margin [NIM] of 1.62% has INCREASED
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been a key driver of improved NPAT, although we expect NIM to decline slightly over the remainder of the year.” ME settled $3.3bn in home loans in the first six months of the financial year, up 4% year-on-year, including record-high owneroccupier lending – up $478m on the same period last year. “Customer deposits grew 10% to $13.8bn and now represent 54% of total funding, while customer numbers reached 446,235, up 13% year-on-year,” McPhee said. The bank also confirmed that home loan delinquencies (90 days or more) were tracking below the average at just 0.54%. Further boosting growth, the bank made two significant investments in its credit card
business during the period, signing contracts with Mastercard and FIS. The new contracts will enable ME to launch new credit cards while giving customers access to the latest payment experiences developed through Mastercard. ME expects the contracts will provide strong customer growth in future years. McPhee also addressed ongoing discussions with regulators and the federal government on the issue of competitive neutrality. “We are pleased by recent statements on capital requirements, open banking, comprehensive credit reporting, and a recent draft report by the Productivity Commission, all of which highlight that more needs to be done to improve competition in the banking industry,” he said. “Improving competition in banking ultimately benefits consumers – supporting greater choice, encouraging service and product innovation, and creating a stronger and more stable banking system. ME will continue to work towards levelling the playing field.”
“[The] industry, and the people within it, need to do more to support the proper functioning of the financial system” James Shipton Chairman, ASIC
NEWS
MARKET IO DEMAND DROPS 20% Choice says demand for interest-only loans dropped by more than 20% between February 2017 and February 2018. “We have seen a dramatic decline in the proportion of interest-only loans, and it does not come as a surprise,” said Mortgage Choice CEO John Flavell. The company’s data revealed that interest-only loans accounted for 12.22% of all home loans written nationally throughout the month of February – down from 35.95% in February 2017. MORTGAGE
GREENS CALL FOR PEOPLE’S BANK leader Richard di Natalie has called for the RBA to allow cheaper home loans by becoming a people’s bank. The move would mean homebuyers could borrow up to 60% of the cost of a house, with interest set at 3.5%. In a bid to encourage more people to buy their first home, the rate would only be available for owner-occupiers and those borrowers with no other properties, with the value capped at $500,000. GREENS
BORROWER LIMITS SET TO FALL Potential changes to borrowers’ estimated cost of living could see falls of 35% after 400 loan approvals were examined by APRA by UBS suggests that mortgage borrowing limits could fall by 35% if changes are made to how the cost of living is estimated. The report comes after findings by the royal commission revealed that some banks were not completing adequate checks on borrowers’ living expenses. ANZ admitted to using the Household Expenditure Measure (HEM) benchmark to determine living expenses. The current benchmark for living expenses for a family of four is $32,000, less than the benchmark for an old-age pensioner. UBS called out brokers after APRA analysed up to 400 loan approvals in 2017. It found that this benchmark was used for 100% of low-income borrowers ANALYSIS
“If we continue to insulate major banks from the consequences of their poor decisions, we risk stifling the cultural change many say is needed” Rod Simms Chairman, ACCC
and for 75–80% of middle- to high-income borrowers, saying this was “especially the case via the broker network”. Counsel assisting Rowena Orr said there had been “a lack of questions and verifications about expenditure”. UBS believes the royal commission will take a strict view of these inquiries, which may result in a much higher estimate of customers’ living expenses. This would in turn cut the amount a customer could borrow to buy a property. The company believes this would lead to a ‘credit-tightening scenario’ with larger price falls and the RBA not raising the cash rate for both 2018 and 2019. In its analysis, UBS said: “The banks are currently undertaking
significant work to improve underwriting standards and comply with APRA’s ‘sound lending’ guidelines. However, we believe there is much further to go to potentially comply with a strict definition of ‘reasonable inquiries’ which may be recommended by the Royal Commission. “We estimate what this could mean for borrowing capacity. We assume borrowers’ living expenses for a family of four with gross income of $100,000 moves closer to the HEM ‘lavish’ lifestyle benchmark ($58,320). That said we do not believe that raising two children in Sydney or Melbourne on approximately $58,000 would provide a truly ‘lavish’ lifestyle, especially when lumpy, unexpected items and potentially school fees are taken into consideration. “We believe once banks undertake proper due diligence on many living expenses this is more likely to be closer to reality than the current ‘basic’ HEM assumption,” it concluded.
LONG-RUN TRENDS IN HOUSING PRICE GROWTH Source: ABS, APM, CoreLogic, RBA
Housing price growth 40%
Inflation, housing prices and quality index 950
Nominal
30%
650
20% 10%
350
0%
June quarter 1986 = 100, log scale
Housing prices New dwelling cost inflation* Value of new dwellings** Headline CPI*
Real*
20% 10% 0% -10% -20%
1985 Period averages
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1991
1997 Year ended
2003
2009
2015
* Deflated by headline CPI
50
1985
1991
1997
2003
* Abstracts from quality improvements ** Includes changes associated with quality improvements; RBA estimates
2009
2015
NEWS
TECHNOLOGY
BANKS’ CONCERN OVER COMPARISON TOOL banks have expressed concern over Productivity Commission recommendations for establishing an online loan rate comparison tool for consumers. “The main problem with such tools is that they have a tendency to lead to ‘gaming’, whereby suppliers develop products that rate well on the tool but have shortcomings in other areas,” said key officials of AMP, the Bank of Queensland, Suncorp, Bendigo Bank, MyState, and ME bank in their joint response to the commission’s draft report. SIX
THE ‘AMAZON’ OF CHINA MAKES PROPERTY DEBUT Real estate in Australia, Canada, the US and the UK will be available for purchase alongside electronics, homeware, clothing and cosmetics property will soon be available online alongside groceries, household items and clothing. A new partnership in China could see international investors shopping for property on retail site JD.com before completing the sale with the country’s largest real estate agent for international properties, Juwai. It is hoped the partnership will make it easier for JD.com’s 292.5 million customers to research and buy property online. Juwai.com currently showcases more than 2.8 million listings from 90 countries but will be focusing on China’s four most sought-after countries to live in. Customers will be able to view real estate listings directly on the JD.com website for AUSTRALIAN
the UK, Australia, the US and Canada. Once the customer has expressed an interest in the property, Juwai will step in and get in touch to move forward with the purchase or help with further queries. Carrie Law, CEO of Juwai, said: “We are truly excited to be launching this partnership with JD.com, which is not just one of China’s but one of the globe’s most advanced commerce and e-commerce companies. “This partnership with JD.com is incredibly innovative and exciting on one level, but on a deeper level it simply represents Juwai.com continuing to fulfil its core mission of helping Chinese [buyers] become global residents and investors.” Juwai has also recently teamed up with Australian real estate
platform Ironfish, becoming the latter’s exclusive marketing partner in China. This gives Ironfish an extra reach of 2.2 million monthly users currently signed up on Juwai online. Ironfish CEO and founder Joseph Chou said: “Chinese buyers have an active interest in Australian property, and the evidence suggests they are still Australia’s largest foreign buyer group. This partnership helps us provide our services to an underserved group that we know can benefit from it.” Described as the ‘Amazon’ of China, JD.com is China’s largest online retailer and biggest overall retailer, selling fashion, electronics, technology, toys, home appliances, books and even wigs and hair extensions to 292.5 million unique users every month. Up to 80% of purchases on the site are placed through mobiles, and in 2017 the company’s net revenue reached US$55.7bn, making it China’s biggest internet company by revenue.
VV$40,614,829,064 AUSTRALIAN FINTECHS: THE YEAR AHEAD 63%
75%
63%
will grow revenue
agree Australian fintech companies will be able to compete internationally
54% 45%
agree Australian fintechs will be able to win against international fintechs
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Australian Payments Network CEO, Leila Fourie, has said open banking will provide “greater choice for customers” by allowing their personal data to be safely shared within the financial services sector. “With greater access to a wide range of data, third parties may well be able to develop competitive offerings that will deliver increased benefits to customers in the form of deals or improved convenience in managing their money.” Australia conducted an independent review into open banking in 2017, and concerns remain around data security and customer privacy. THE
Source: EY FinTech Australia Census 2017
will grow employee rate
OPEN BANKING IMPROVES CHOICE
will expand/expand further overseas
NEWS
A S S O C I AT I O N S
Peter White
FBAA URGES INCREASED COMMUNICATION are being called on to communicate directly to their customers at a time when industry transparency is being criticised. FBAA executive director Peter White says brokers are concerned about the effect public comments will have on their businesses, but also have an important part to play in correcting ‘misinformation’ being reported about the industry. He added: “Now is the time to change the conversation and focus on consumer outcomes by reinforcing the benefits of brokers to our customers through words and actions.” BROKERS
Mike Felton
Brian Hartzer
MFAA: BIG BANKS HIDING BEHIND BROKERS MFAA responds to recent scrutiny of brokers by both big banks and regulators, saying brokers deliver enormous economic value to the banks is a risk that the big banks are using brokers as a shield to divert attention away from allegations, according to a statement released by the MFAA. Allegations referred to in the statement include a “stifling of competition and massive community trust deficit”. Mortgage brokers have been particularly in the spotlight following the first round of public hearings by the royal commission. MFAA has also said that statements made by Westpac CEO Brian Hartzer at the Australian Financial Review Banking and Wealth Summit in April appeared to be “entirely self-serving”. Hartzer said, “One option that could be considered would be for brokers to charge customers THERE
royal commission has widened its focus to include industry bodies, associations and regulators, in addition to the big banks. On its ever-growing hit list are the Financial Planning Association of Australia, the Association of Financial Advisers, and Dover Group. Corporate regulator ASIC will also be called before Commissioner Kenneth Haynes, along with AMP and its subsidiaries, AMP Financial Planning, Charter Financial Planning and Hillross Financial Services, among others. THE
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HOUSING PRICES: THE LONG-TERM VIEW Source: Morgan Stanley
A longer-term view shows that Australia has had several housing price corrections 800 700 600
$ ‘000
INDUSTRY BODIES CALLED BEFORE COMMISSION
directly for their services, although the consequences of such a change for all stakeholders would need to be considered carefully.” The statement from MFAA continued: “This is not a viable solution to improve transparency around broker commissions, fees and costs to help consumers to make more informed choices. It will simply tip the balance back in favour of branch-based lending by making it significantly more expensive for a customer to use a broker rather than a bank branch to get a home loan. “Smaller lenders who do not have branch networks will be pushed out of the market, reducing competition, and allowing the big banks to restore the massive net margins they had on mortgage
products before broking gave consumers access to competitive financial services.” The MFAA described the current scrutiny around mortgage brokers as being ill-informed. The consumer fee-for-service remuneration model had been ruled out by the Combined Industry Form, ASIC, and the Australian Bankers’ Association. The association’s statement added: “While a consumer fee-for-service model would harm customers (especially in rural and regional Australia), reduce competition and hurt broker small businesses, it would significantly benefit the big banks, providing them with an unassailable stranglehold on the home lending market and interest rates. “Let’s be clear: brokers deliver enormous economic value to the banks, and now some big banks want customers to pay for it. This is like asking a homebuyer to pay the auctioneer and vendor’s selling costs.”
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Macroprudential policy: banks increase SVR independently of RBA - Oct 2015
YoY real house price appreciation (RHS)
20
First Home Owners Grant boost, introduced October 2008, removed Juanuary 2010
Median house prices (inflation adjusted base = last Q)
15
500
10
400
5
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-5 First Home Owners Grant introduced Jul 2000
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Negative gearing quarantined 1985
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Negative gearing reintroduced 1987
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-15 Jun-65
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Jun-15
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SPECIAL REPORT
THE POWER OF KNOWLEDGE Arming brokers with the tools, insight and leads required for success, Blue Wealth CEO Tony Hayek reveals how value and service can be leveraged to accelerate business
KEY BUSINESS METRICS
34 staff – 3 in sales, 31 in support roles
91% of staff are property investors, 56% have more than one investment property
158 business partners in accredited network
145 educational events in 2017
19% of Blue Wealth clients have purchased more than one investment with Blue Wealth
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23 is the average number of months between multiple purchases
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it comes to business, knowledge is one of the most important assets an owner, director or even employee can possess. However, sourcing that knowledge is not always easy. For Blue Wealth, knowledge – hand in hand with the education that underpins it – is the key to effective decision-making and the foundation of a robust and successful brokerage. Delivering that knowledge through apps, accreditation and seminars, Blue Wealth CEO Dr Tony Hayek explains there is an urgent and growing need to help brokers understand and embrace their place in the market. Achieving this is the key to building the best and most effective business they can – for the benefit of themselves and their clients. “Mortgage brokers underestimate their place in the client’s world,” Hayek says. “For many years brokers sat behind financial planners and accountants in terms of their role and importance in the eyes of clients. However, we believe that brokers are the most influential of all these finance professionals because, ultimately, a broker who can help their clients access finance to buy investments is well positioned to help those clients become wealthier. They are in a unique position.” Providing a prime example of the results a broker can deliver, last year Blue Wealth completed its largest project to date, the Boat House located in Melbourne’s inner west. In Australia’s second-largest and fastest-growing capital city, median house prices are typically five years behind those of Sydney, Hayek WHEN
says, and arming brokers with fresh interpretations of key data sets, the company delivered an unmissable opportunity. “Markets are driven by four key fundamentals: population and demographics, economics and employment, infrastructure and government spending, and the balance or imbalance between supply and demand. Our job at Blue Wealth is to identify those key drivers in key markets around the country,” Hayek explains. Located within 5km of the Melbourne CBD and offering
landowners and developers, and our influence over what gets delivered to the market. Ultimately, all of this benefits the business of the brokers and their clients.” Diversification 2.0 Many brokers are currently expanding their portfolio of services to increase market share and reach, adding car loans, insurance and even reverse mortgages to their mastermind subject list. While this shift is necessary, it’s only the starting point. Embracing the intangible, Hayek maintains that the real expansion of services should incorporate value, solutions and the ability to think beyond the box. It’s diversification with a twist. “The industry has evolved substantially, so gone are the days a broker can compete on the upfront elements of a transaction only; many of them are continuing their
“The industry has evolved substantially, so gone are the days a broker can compete on the upfront elements of a transaction” sweeping views of the city and water, the Boat House comprised a series of two-bed/two-bath units priced in the range of $550,000. If that wasn’t attractive enough, the market outlook almost guarantees that value will increase exponentially over the coming years. The proposition was so attractive, brokers themselves invested in the project as well as their clients, with a total of 174 investors. “It was an incredible project and we are very proud because we are one of the only organisations in the country who can pull that off,” Hayek says. “That’s down to our history in the industry, our relationships with
evolution and becoming multidimensional in nature. Today, they need to bring something more to clients, more value,” Hayek says. If successful in this pursuit, the broker is positioned as a specialist investment property adviser, essentially rebranding their offer in the marketplace at a critical time and in a way that can support their business to truly accelerate. The rebranding of the mortgage broker is a topical issue; however, rather than being inspired by the recent “media noise” Hayek observes around the royal commission, it’s a strategy that has its roots in professional development. Drawing on a PhD in
In partnership with
While some may choose to release part of the value through a reverse mortgage or equity scheme, the solution is short-lived and diminishes what a homeowner can pass on to family members in their legacy. “What we are trying to do is make brokers more aware of the gap their clients will retire with and help them understand how to bridge that gap, and that is through education and appropriate well-researched property investment,” Hayek says.
Blue Wealth CEO Dr Tony Hayek
organisational psychology and a background in business coaching, Hayek explains: “In uncertain times, that’s when brokers are most required. “Currently, brokers have a great opportunity in that clients are looking for their expertise. Now is the time for brokers to be brave, to stand up and offer that. At Blue Wealth, we talk to our broker partners about being a solutions provider. Their job is to find solutions for their client’s problems and ambitions, and our job at Blue Wealth is to help the broker understand those solutions.” One major issue requiring a solution is that a significant number
of Australians have a shortfall in the vicinity of $1m–$2m in their retirement funds, meaning they will not be able to sustain the lifestyle
to as “the gap” through property and other investments. However, first of all brokers must be educated themselves, and this is a prime
“What we are trying to do is make brokers more aware of the gap their clients will retire with and help them understand how to bridge that gap” they desire once they stop working. Brokers have an unrivalled opportunity to educate their clients on how to bridge what is referred
objective for Blue Wealth as more Australians are lured into a false sense of financial security based on the value of their home.
The broker’s toolkit All lessons require resources, and in its vocation to educate Australia’s brokers on how they can maximise their reach and effectiveness, Blue Wealth has devised a number of innovative industry firsts. In 2017, years of work culminated in the release of the Blue Wealth Property smartphone app, replacing a suite of tools that previously existed online and placing market intelligence at the investor’s fingertips. Looking ahead, a broker version upgrade is scheduled to launch on the market in late June. It lists all the broker’s investments and allows them to pull up client details, the properties those clients have invested in, and the research around each of those. Further, work continues on more than one lead-generation scheme in order for Blue Wealth to drive leads back to the brokers who are referring business, and the firm’s accreditation process is being enriched with a step-by-step training and integration program. “We are heavily focused on education. We don’t believe in simply supporting brokers to help them diversify their income and propose a property solution for their clients. We also want to help them become better businesses that can provide better support for clients, better knowledge and better access to resources,” Hayek concludes. AB www.brokernews.com.au
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PREPARING TO DIVERSIFY PwC has advised its major clients that diversity legislation could be on the horizon in Australia. However, as women in the finance industry observe, ticking boxes is only half the story
March, PwC Australia revealed it was advising high-level clients, including major banks and C-suite leadership teams, to prepare for the introduction of diversity legislation specifically focusing on gender balance in the workforce. While the Workplace Gender Equality Agency (WGEA) collects data across six key areas from all non-public-sector employers with 100 or more employees, there are no mandatory reporting laws for gender pay gaps. However, PwC’s chief diversity and inclusion officer, Julie McKay, predicts that will change within three to five years. Self-regulated diversity and inclusion policies exist across Australia’s largest banks. Westpac was the first to publicly commit to appointing women to 50% of its leadership roles and achieved its target in 2017, the same year it achieved its target of 40% of all the bank’s GM roles being held by females. At Commonwealth Bank, new targets were set in 2015, following the fulfilment of previous targets set five years earlier. Currently, more than 50% of CBA’s graduate employees, 44% of all managers and higher, and 37% of all executive managers and above are women. ANZ ensures a female candidate is interviewed for every role, and that all its interview panels contain at least one woman. Looking ahead, NAB has set itself a 2020 deadline to achieve its gender parity targets. Currently, 39% of the bank’s executive management roles are held by women; 39% of directors on group subsidiary boards are women; and 54% of its total workforce are female. However, elsewhere things aren’t so positive. IN
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Globally, it is calculated that the average income of women would increase 76% if gaps in participation and pay were closed. According to the UN, these disparities cost the global
race have all been explored in UN studies over recent years, unanimously concluding that a diverse workforce underpins a robust economy. Social science aside, the business
“Men are deserving of credit here as they’ve played a huge role in mentoring, supporting and guiding women” Mhairi MacLeod, principal, Astute Ability Finance Group economy US$17trn annually – almost equal to the national debt of the US in 2014. The bottom line is, when women work economies grow, and it isn’t just women – age, ability, background and
case is equally strong. A 2015 report by McKinsey & Company concluded that US firms in which women made up more than 22% of the executive team were 15–35% more likely to report greater financial returns.
Creating culture To mark International Women’s Day, PwC Global surveyed more than 3,600 professional women aged 28 to 40, including 247 Australian women at manager level or above. The results highlighted a need for trust and transparency, strategic support and advocacy, and support to achieve a work-life balance (see infographic). “There are three main issues that I see,” says Julie O’Donohue, founder and CEO of Next Address. “Firstly, there is the broader question of flexibility with our conditions, hours of work, when we work and how we work. Secondly, we need to review our recruitment approach and choices to ensure the right skills are being hired, not just the right age or gender. Thirdly, we need to acknowledge that too many women continue to underrate their ability and as such do not apply for senior roles at the rate their male colleagues do.” PwC isn’t the only company crunching the numbers. Last year Astute Ability Finance Group principal Mhairi MacLeod commissioned her own survey on why workplace equality isn’t just about women. Questioning male and female respondents from the three “traditionally testosteronedominated industries” of mortgage broking, professional sports and the motor trade, the survey confirmed that positive changes have been made but the work is far from over.
FAST FACTS: WOMEN IN THE WORKPLACE Source: PwC Australia survey commissioned to mark International Women’s Day 2018
42%
66%
of women are actively seeking career advancement opportunities
of new mothers felt overlooked for advancement opportunities upon their return to work
58%
45%
of respondents globally said employers must increase transparency to improve career opportunities
38%
are nervous about the impact starting a family might have on their career
say taking advantage of work-life balance flexibility programs has negative consequences at their organisation
“I believe there is a need to create more positive information, messaging and communication about careers for women,” MacLeod says. “Then it’s crucial to ensure the right culture, policy and procedures are in place to promote this messaging.” In creating that culture, men also have a significant role to play. Observing a shift in thinking among male colleagues and peers, MacLeod’s survey confirmed a greater respect for and acceptance of women in senior roles, and that, she says, has been a team effort. “Men are deserving of credit here as they’ve played a huge role in mentoring, supporting and guiding women as they’ve found their way in these male-dominated industries,” she says. Committed to change There are pros and cons to legislating D&I, and the jury is still out on the effectiveness of imposed targets. While O’Donohue backs an approach that combines regulation and quotas with mentorship and flexible working conditions for all, not everybody agrees. “I do not believe that gender diversity in finance could soon be regulated, and I am not an advocate for regulating an outcome. I would, however, be supportive of regulating a process,” says Siobhan Hayden, adviser and COO of HashChing. “A great example is the Rooney Rule in American NFL, which is a policy that requires league teams to interview minority candidates for
From left: Mhairi MacLeod, principal, Astute Ability Finance Group; Siobhan Hayden, COO of HashChing; Julie O’Donohue, CEO of Next Address
appointments. Despite this, there are some stand-out pockets of progress. Australian finance is advancing ahead of the global rate of change, and that’s a testament to a strong national culture of inclusion and opportunity. Meanwhile, in Japan, which boasts a notoriously male-dominated business world, 60% of women leave work after having a child due to a cultural lack of work-life balance. WEF figures
“We need to acknowledge that too many women continue to underrate their ability and as such do not apply for senior roles” Julie O’Donohue, founder and CEO, Next Address head coaching and senior football operation jobs. In the same vein, regulating that 50% of interviewee candidates are female would assist in driving better outcomes.” In the first three years of the rule’s implementation, the percentage of African-American coaches in the league increased from 6% to 22%. At the current rate of change, the World Economic Forum (WEF) estimates it will take 217 years to address the complexities of the global gender gap regarding pay and
from 2017 rank the country 114th out of 140 global economies for gender equality. MacLeod says, “For me it is critical that leaders are committed to, and involved in, the change. Businesses must also have programs in place that enable change. Some great examples of how this can be achieved are leadership development or mentoring and coaching programs that are designed specifically to support the necessary workplace shifts at the employee level.” AB
DIVERSITY AT THE BIG FIVE
Board members: 10 total, comprising a female chair plus three female executives
Board members: 10 total, 3 women
Board members: 9 total, 3 women
Board members: 9 total, 2 women
Board members: 9 total, 2 women
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17
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BUSINESS PROFILE
BEYOND THE MAINSTREAM
As more Australians borrow on alternative forms of income, brokers, too, are being challenged to source alternative forms of finance. Three leading non-bank lenders discuss the trends defining the sector and the impact they have on brokers
PEPPER MONEY NON-STANDARD INCOME way Australians work has really changed over the last 20 years. More people are working for themselves, doing more than one job, or working different sorts of hours. The ABS says 17% of Aussies are self-employed, with around one million being independent contractors. And we don’t all do a 40-hour week; nearly a third of us work part-time. That’s why proof of standard income is often something many customers don’t have when it comes to applying for a home loan. Lending to a customer with non-standard income has been around THE
earner. That’s why we’ll consider different sources of income when evaluating loan applications. That may include income from part-time employment, rental income, regular government payments, and allowances like Centrelink payments, child support payments or pensions. The opportunity When thinking about where the opportunities lie, it’s important to consider if the industry’s definition of non-standard income needs to change. We all know that the definition of prime lending has altered over time
Our research found that 42% of Australians don’t feel as if their financial institution understands their needs and financial goals for many years, but in recent times the big banks’ appetite for this type of lending has been reducing – right at the time that the number of people earning non-standard income is surging. We all have a friend who is self-employed and doing their best to get ahead, or know a family who have their rental property on Airbnb. Research carried out by Pepper Money last year showed that more than a quarter (26%) of Aussies surveyed were turned down for a loan because they were either self-employed or worked part-time. At Pepper, we believe that everyone deserves a fair go, not just a PAYG 18
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and the industry has accepted the inclusion of ‘near prime’ as a category. But have we acknowledged that what we accept as a customer’s primary source of income in support of a home loan application may need to change? With more people earning or receiving alternative forms of income, we know that the growth in this type of lending will only continue – and the big banks’ appetite for anything outside of the norm is diminishing. That’s a lot of people potentially missing out on receiving home loan finance. The question for the industry is: are we keeping up with the changing
Aaron Milburn, director of sales and distribution, Pepper Money
dynamics and needs of the common Australian? Our research found that 42% of Australians don’t feel as if their financial institution understands their needs and financial goals. They also feel that their financial institution doesn’t fully understand their real-life situation. Broker impact Lots of brokers shy away from customers with non-standard income, but they shouldn’t. In future, they may be missing out on a lot of new business. That’s why Pepper Money made it even easier for brokers to help their customers through its unique
tool, the Pepper Product Selector. It takes all the hard work out of searching for and identifying the right product and can be utilised specifically for borrowers with non-standard income. We’re not just talking self-employed borrowers. While there are few statistics on this phenomenon in Australia, last year US television network CNBC found that employment in the gig economy – characterised by temporary jobs and part-time contracts – was growing far faster than traditional payroll employment. That scenario could easily play out in Australia too.
BLUESTONE MORTGAGES SME AND SELF-EMPLOYED LENDING our inception in 2001, Bluestone Mortgages has actively provided alternative financial solutions to self-employed and credit-impaired borrowers. This strategy actualised an existing opportunity to provide otherwise unavailable products that directly meet the needs of two core groups. At this point, the company also focused its vision on an emerging sector: SMEs. SMEs are the engine room of the Australian economy and equate to 69% of the workforce. This is a sizeable and often underserved market segment, representing a significant and ongoing opportunity. Brokers who embrace SMEs tap into the most powerful economic voice in Australia. Since the year 2000, Bluestone Mortgages has originated more than $7.8bn worth of loans, helping more SINCE
an increasing volume of borrowers who are also being classified as credit-impaired due to the restricted lending criteria. The increasing demand correlates with immediate opportunity for brokers to be solution providers to a growing swell of borrowers. This is particularly pertinent at a time of growing pressure on the industry to provide recommendations that genuinely address a client’s circumstances. And there’s another long-term benefit to helping small businesses solve their problems: clients who need specialist help tend to remain loyal to the broker who helped them – even when they become mainstream borrowers. If you have taken the time to understand their needs, and not just with their home loan, you can become a one-stop shop helping them with everything from asset
We also suggest brokers develop relationships with accountants, particularly those with small-business clients, who can help them assess the options than 49,000 customers. Today Bluestone retains its stronghold as a leading provider of financial solutions for the self-employed. Our volumes of self-employed borrowers are at an all-time high, comprising 59% of total business, which represents a 76% year-on-year rise. The opportunity The ripple effect as the big banks tighten controls has resulted in a constant stream of selfemployed borrowers being driven to non-bank lenders that cater specifically to the segment. This movement is being compounded by
finance to short-term finance, business funding, lines of credit, commercial property loans and/or insurance. Further, if you can successfully position yourself as a broker with a deep knowledge of the specialist lending market, other brokers will pass off their more ‘difficult’ clients to you – to your benefit. We also suggest brokers develop relationships with accountants, particularly those with small-business clients, who can help them assess the options. Broker impact One of the biggest threats for
Royden D’Vaz, national head of sales and marketing, Bluestone Mortgages
brokers is being a ‘one-trick pony’. Embracing diversification continues to be important for brokers to strengthen their offering and get a competitive edge in an increasingly saturated market. It’s also a crucial tool that helps deepen client relationships and enhance a broker’s advisory capacity. The SME landscape will continue to evolve and mature, which is expected to correlate with a market that is increasingly receptive to alternative financial solutions. This represents significant and sizeable opportunities for brokers to meet the growing demand for specialist
lending, and those who embrace this segment will be in a much more robust position than those reliant on a linear residential portfolio. As the SME market continues to expand, demand for specialist lending and near-prime products will increase. Simultaneously, the uptake of alternative lending solutions will continue to rise as the big banks tighten control and knock back more and more borrowers who would have previously been issued prime loans. So in short, the opportunity will continue to evolve as both the climate and SME sector continue to flourish. www.brokernews.com.au
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LIBERTY FINANCIAL SELF-INVESTMENT the last three to four years, we have seen increased interest from brokers in professional development days, in addition to high attendance levels at lending seminars and other specialist education events. This indicates a significant shift among brokers in the marketplace towards self-development, professional education and continued learning. The fact is, brokers are realising that they must invest in themselves, their knowledge and their product base, but above all they must invest in their personal brand in order to generate a steady stream of business. Today, through social media platforms such as LinkedIn and Facebook it’s possible for brokers to tell their existing clients, potential OVER
finance has allowed us to help more than 270,000 customers by advancing over $25bn in funds. However, most consumers are very time-poor: they need personal loans, home loans, car loans and other products and are very happy to engage with a person who can help them obtain that finance. This deepens the relationship between the broker and consumer, and the next step is for brokers to work on generating repeat business from these clients. Today we see customers who took out their home loan a year ago and haven’t heard from their broker since. Brokers need to have a deeper understanding of their clients’ financial needs in order to meet them, and this is dependent on education, as well as the positioning of that all-important
This isn’t simply about being more innovative, but about creating relevance. If brokers are not investing in themselves and their business, both will quickly lose their momentum future clients and also their peers about the things they stand for, believe in and are motivated by. This unparalleled reach allows brokers to develop their network online as well as off and to broaden their scope of work. Crucially, once a point of critical mass has been achieved, a growing online network positions the broker as a person of interest in other networks, and they can therefore attract better referrals. The opportunity At Liberty Financial, an innovative and flexible approach to 20
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personal brand. This isn’t simply about being more innovative, but about creating relevance. If brokers are not investing in themselves and their business, both will quickly lose their momentum. Broker impact People have a preconceived notion that certain loan products are difficult to process and sell, but it’s time to bust that myth. When a broker lodges their first loan application it’s a difficult process, but by the time they have done 10 it’s much easier. It’s time to
John Mohnacheff, group sales manager, Liberty Financial
realise that different doesn’t necessarily mean difficult – once everything is stripped away, the only thing that changes between loan products is the asset. As brokers embrace this trend, they are showing the world – online, offline, client, lender or otherwise – that they are investing in their own professional development. The lender can observe how the broker is building their skills, business and client base, and this in itself is attractive
to them, often inspiring them to support further investment in the best brokers. Lenders, like everyone else, want the best possible outcomes for borrowers and will therefore back the brokers who pursue these. The key takeaway is that self-investment allows a broker to broaden their product suite. They can provide more services to the customer and generate greater engagement with them, much to the benefit of all involved. AB
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FE AT URES
IN THE NE WS
BACK TO SCHOOL
Following the launch of a first-of-its-kind certification to attract a new breed of commercial brokers, the Commercial and Asset Finance Brokers Association is on a path to international recognition. President David Gandolfo tells Australian Broker about the developments offer a credible and structured career path. The result of a recent strategic review at the association, this approach forms the basis of the advanced Diploma in Financial Services, due for launch later this year.
academy in Seattle last year, to undertake CLFP’s commercial lending course and experience its eight-hour examination first-hand. “Whilst the program was very rigorous, the synergies in commercial
“The new curriculum is focused on learning about commercial finance, the products involved”
David Gandolfo, CAFBA president
3 April, the Commercial and Asset Finance Brokers Association (CAFBA) launched the Certificate IV in Financial Services: Commercial and Equipment Finance, the first dedicated curriculum for new entrants to the industry. Two years in the making, the game-changing development has been created to attract a new breed of commercial brokers to the industry. Now approved by vocational training body ASQA (the Australian Skills Quality Authority) and supported by the Australian Industry Finance Association, the course is available online or combined with offline workshops. It comprises four modules that train each student in the essentials of commercial and equipment finance, including the products used, tax treatments, legislative issues and regulation, marketing, pricing and credit. In launching Certificate IV, CAFBA has taken the lead at what is fast ON
22
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becoming a tough time for brokers, and its work to address the lack of specific training material for commercial finance has culminated in a definitive, recognised and industry-focused curriculum. In expanding the educational tools available to brokers, CAFBA also believes the industry can raise its profile with millennial entrants, who are known to choose professions that
“The launch of the Certificate IV is important for a number of reasons,” says CAFBA president David Gandolfo. “Firstly, as we seek to recruit a new generation of commercial finance brokers, we need a structured career path, and the Certificate IV is the first step to this. The new curriculum is focused on learning about commercial finance, the products involved and many of the practical aspects of these that would be used by the broker in their day-to-day activities. Secondly, as we move towards professionalising the industry, having designated credentials recognises the education and professionalism of the commercial broker.” Tried and tested Far from expecting brokers to do all the work, in the name of research CAFBA CEO David Gill attended the Certified Lease and Finance Professional (CLFP)
finance between our countries are very similar, the major differences being some tax treatments and local regulations,” he tells Australian Broker. The professional industry-wide qualification for both lenders and brokers, CLFP is the pre-eminent credential for equipment leasing and financing professionals throughout the world who have demonstrated competency through testing of knowledge, continuing education and a commitment to their business practices and dedication to the industry. Work is now underway to localise CLFP as part of a formal partnership that will see CAFBA gain recognition as an international body. In May, Reid Raykovic, executive director of the CLFP Foundation, will arrive in Australia to begin drafting the qualification with CAFBA and will address brokers at CAFBA’s professional development days. AB
AT A GLANCE: CERTIFICATE IV MODULES
Credit Application Process
Understanding and Analysing Financial Reports
Selecting and Presenting Products
Background and Marketing in Commercial and Asset Finance
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OPINION
UNDERSTANDING THE SME MINDSET Last year, the number of businesses turning to their primary banks for lending facilities declined 14%. Scottish Pacific CEO Peter Langham explains how brokers can meet the evolving needs of SME owners
latest SME Growth Index by Scottish Pacific paints a clear picture of SME owners, their pain points, and their funding needs and intentions. For brokers, these results can help them understand the SME mindset and why it is important to offer a range of suitable funding options, which allow both clients and their brokers to grow. Just over half the businesses polled expect revenue to grow in 2018, and two thirds reported improved cash flow for 2017. Those that are growing are growing strongly; however, growth businesses are more likely to be frustrated about cash flow. Supporting the positive outlook, SMEs are open to different ways of funding their growth. Increasingly, they are looking away from the banks to more flexible alternative funding options. More than one in five SMEs – a total of 22% – opted for non-bank alternatives to funding their growth. A further 24% looked to borrow from their main relationship bank, and this bank lending percentage has trended down from 38% in our initial 2014 Index. The most popular funding choices for SMEs using alternative working capital options in 2017 were debtor finance, which was used by 77%; merchant cash advances, used by 23%; P2P lending, with a total share of 10%; and crowdfunding, utilised by 9%. Combined, what these results demonstrate is that business owners are looking for flexible options, preferably not tied to real estate. In the case of debtor finance, not having to provide real estate security to fund business growth offers a level of security. Rather than taking on additional debt, the business receives an advance on money already owed to them
from outstanding invoices. This way, they gain better control of their cash flow and boost their working capital levels with a facility that grows in line with business revenue, and that usually comes with fewer covenants. It’s worth looking at the main pain points identified by the SME Growth Index, and how brokers can help to ease these issues. Putting aside high taxes – which, with unsurprising regularity, always top the poll – the Index shows that the three big concerns for growth SMEs are cash flow, conditions of credit, and availability of credit.
THE
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have traditionally used. Many fast-growth businesses have already grasped this concept, as the Index found they were five times more likely to seek alternative funding than their stable or declining SME peers. Being aware of alternative products, including debtor finance, means that when opportunities arise brokers have the contacts and the knowledge to make the most of those prospects and provide their SME clients with better access to credit. The next step is identifying debtor, trade, progress claim and asset finance deals. Extracting such information can take time, but when it comes to bottom-line questions, there is only one thing a broker needs to ask: “Is a lack of working capital hampering your business?” From there, more specific questions can pinpoint whether alternative funding is suitable. Do they have high levels of growth, rapid growth, or are they regularly impacted by seasonal issues? Are they planning acquisitions, landing a big new client, or undertaking succession planning? Are they raising progress claims under the Security of Payments Act? Do they have significant plant and equipment or property available to fund against? In all of these situations, Scottish Pacific works with brokers to put in place suitable funding, while they get to maintain the close relationship with their clients. By separating real estate security from business funding, brokers open up new
Extracting such information can take time, but when it comes to bottom-line questions, there is only one thing a broker needs to ask An overwhelming 90% of the 1,253 SMEs polled said cash flow issues negatively impacted on revenue in 2017. This was despite two thirds reporting that cash flow had improved compared to 12 months previously. On average, small businesses say that better cash flow would have increased their 2017 revenue by 5–10%, with growth businesses indicating an even greater positive impact on revenue.
Peter Langham CEO of Scottish Pacific
The broker’s role Brokers can introduce a range of funding options and can play an important role in identifying clients and highlighting the choice of funding options available to them, outside of what they may
opportunities to help clients with home loans, lease finance and other financial products. A client might come seeking a loan or overdraft, but don’t be afraid to put broader options on the table – options that provide viable solutions in strong times and in tough – and that will grow as they grow. Life’s all about choices, and there are many very credible choices when looking for working capital funding. The SME sector is hungry for working capital alternatives, and brokers interested in diversifying are in a prime position to be the trusted advisers helping those within the SME sector to expand their business funding horizons. AB
CAUGHT ON CAMERA The annual Ladies Lunch, hosted by Entourage Finance, welcomed more than 40 guests to Stokehouse in St Kilda last month. In line with Entourage’s work to embrace wellness through health, fitness and financial means, Bree Pagliuso and Emma Udorovic from Twosix Wellness shared their thoughts on work-life balance. Damien Roylance, director at Entourage Finance, said, “I couldn’t imagine running a business without the efforts of all of my staff, business clients and partners – our annual lunch is just one little way we say thanks.” Entourage is pursuing wellness across many facets of its business this year, focusing on wellness across teams; business support; and assisting clients in their pursuit of financial wellness.
www.brokernews.com.au
25
DATA
VICTORIA
WA SPOTLIGHT
Melbourne housing prices being pushed to stabilise Australia’s second-largest city is still running a tight ship. “Melbourne seems to be holding up a lot better – we’re not seeing the same drop in demand from buyers or renters, so they’re still on the way up,” says Nerida Conisbee, chief economist at REA Group. “But certainly, we’re not seeing the great leap in demand that we saw last year.” The stunted growth has been attributed to both offshore and local investors pulling back following loan restrictions. Negative gearing has also made its mark, and buyers have less incentive to consider off-the plan purchases. However, this could have a positive effect on highpriced markets like Melbourne because it pushes property values to stabilise. In the process, likely as a result of many buyers being priced out of the city, the outer-northeast and the outer-east rings are rising up as attractive areas that are seeing great demand. Stand-out suburbs include Briar Hill, Warrandyte and Kalorama. Area
Type Median value
Quarterly
12-month
growth
growth
Melbourne
H
$752,000
5.9%
13.2%
Vic country
H
$353,000
5.4%
6.3%
Melbourne
U
$542,000
3.2%
6.2%
Vic country
U
$280,000
0.4%
4.0%
QUEENSLAND
Brisbane market on track to lead capital performance Confidence is rising in coastal Queensland with an increase in activity from local buyers. “Local buyers led the charge, which is a promising sign for the Gold Coast,” says Dane Atherton, managing director of Harcourts Coastal. Interstate buyers are seeing the Gold Coast as a solid investment prospect that offers a valuable alternative to the more expensive markets to the south. “They are not just buying here for the lifestyle; they are buying here because they see excellent value and growth prospects. And that, in turn, is spurring local confidence in the market,” Atherton says. CoreLogic notes that right now Brisbane’s housing market is in contention to become the best performer among the capital cities in the next five years. Affordability is a major driver of housing demand in this area, given the price gap with Sydney and Melbourne – the balance between house prices and median household income in Brisbane gives buyers more opportunities to own a home. Area
Type Median value
Quarterly
12-month
growth
growth
POPULATION SHIFTS IN PERTH On an upward trajectory, Perth could finally be on the brink of stabilising as both activity and sales prices improve and a changing demographic boosts buyer demand a prolonged period of falling prices, Perth is at last seeing improvements in its market. “The Perth market found its floor and stabilised in the back half of 2017. We now appear to be entering a recovery phase,” says Hayden Groves, president of the Real Estate Institute of Western Australia. REIWA data from December 2017 shows that key figures like median prices, sales activity, listing levels and average time on market are all looking better than before. For instance, the final median price for the December 2017 quarter is already expected to be significantly higher than that of the September 2017 quarter. “It’s encouraging to see Perth’s house and unit medians increase over the quarter, because it suggests one sector hasn’t recovered at the expense of the other,” Graves says. “On an annual basis, the Perth market is very stable. We’ve observed consistent price levels between the December 2016 and 2017 quarters, which is a strong signifier the market has turned a corner.” Given the number of buyers in Perth looking to downsize as they reach retirement age, high-density living near amenities is increasing in popularity in the city. “Traditionally, the Perth real estate market has been dominated by larger family-style homes, but this is now rapidly changing due to our ageing population and the fact that more people are living alone,” says Shane Kempton, COO of Professionals Real Estate Group in WA and NT. “This population shift will have major implications for the Perth real estate market and, in particular, result in a growing demand for higher-density homes,” Kempton adds. In the outer rings of the city, more than 100 apartments are being developed in suburbs like Rockingham and Midland. AB FOLLOWING
H
$542,500
2.4%
3.1%
Median price (houses)
Qld country
H
$436,000
0.2%
1.4%
$1,539,897
Brisbane
U
$410,000
-1.2%
-1.7%
Qld country
U
$385,000
-1.3%
3.3%
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Demand shifts see lifestyle favoured over appreciation We have seen a significant rise in the number of loan approvals in the March quarter and attribute this to the steady growth and recovery of our property market. A great indicator of this growth has been the increase in enquiries from first-time buyers and new investors. Our ageing population, who once were our biggest investors and buyers, are now looking at how they can maximise their buying power. Perth has a lot more to offer: these days inner-city living for many singles and couples is very appealing and our savvy soon-tobe retirees are looking at lifestyle rather than appreciation trends. One recent client refinanced years ago and has recently sold the property to purchase in the Perth CBD, meaning they are not tied down to gardens and high property maintenance. Now, with apartments being built in the suburbs too, this will enable buyers to live close to family with the ease of ‘city living’.
Tracey Lea Gilbert Director, Diversifi, Perth
SUBURB TO WATCH: NEDLANDS
Brisbane
26
BROKER PERSPECTIVE
Median price (units) $579,281
Source: CoreLogic
12-month growth
3-year growth
5-year growth
Indicative gross rental yield
3.9%
6.7%
3.4%
2.3%
12-month growth
3-year growth
5-year growth
Indicative gross rental yield
-1.4%
-14.7%
-24.0%
3.3%
AUSTRALIAN CAPITAL TERRITORY
Canberra hangs on as echoes of Sydney move along the east coast OPPORTUNITIES AND KEY INFRASTRUCTURE
Key real estate metrics all up at the end of 2017
100 new apartment properties confirmed for development
Population could reach 4.4 million by 2046
Gross state product contracted 2.7% for the first time in Dec 2017
HIGHEST-YIELD SUBURBS IN WESTERN AUSTRALIA Suburb
Type
Median price
12-month growth
Gross rental yield
South Hedland
U
$77,500
-16%
18%
Kambalda East
H
$62,000
-15%
13%
Newman
H
$155,000
1%
12%
Rangeway
H
$95,000
-26%
11%
Utakarra
H
$125,000
-24%
10%
Despite the tumult on the eastern seaboard, Canberra, like Melbourne, is holding on. “[Canberra] will probably be a little impacted by what’s happening in Sydney, but at the moment we’re not seeing the same negative conditions,” says Nerida Conisbee, chief economist at REA Group. “I think everyone on the eastern seaboard is being impacted by [what’s happening in Sydney] in a different way, but I don’t expect Canberra to be as negative as Sydney because the pricing isn’t so expensive.” According to the March 2018 CoreLogic Home Value Index, Canberra dwelling values recorded a month-on-month drop of 0.3%. While lack of confidence in Sydney could wind up influencing sentiment in Canberra, thus far rental demand remains strong, particularly in the north, and a decline in housing approvals could help keep the city from experiencing oversupply down the road. Area
Type Median value
Quarterly
12-month
growth
growth
Canberra
H
$695,000
3.7%
8.7%
Canberra
U
$450,000
2.3%
0.0%
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27
DATA
NEW SOUTH WALES
12-month
growth
growth
Sydney
H
$980,000
2.8%
6.5%
NSW country
H
$460,000
2.2%
6.5%
Sydney
U
$717,750
1.8%
3.6%
NSW country
U
$383,000
-3.0%
5.5%
Economic growth and rising demand promise a strong decade ahead
$1,000,000
Quarterly
12-month
growth
growth
Adelaide
H
$461,500
3.7%
3.5%
SA country
H
$295,000
4.6%
2.7%
Adelaide
U
$382,500
3.4%
5.9%
SA country
U
$180,000
-0.6%
-4.3%
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Cleared
46
Uncleared
20
Clearance rate
69.7%
Total auctions
45
Cleared
8
Uncleared
14 36.4%
Houses
Sydney Melbourne Brisbane Adelaide
Perth
Hobart
$496,500
$475,000
$350,000
$0
$395,000
$100,000
$500,000
$200,000
$322,500
$300,000
$455,000
$500,000 $400,000
$530,000
$600,000
$745,000
$700,000
$726,000
$800,000
$925,000
$900,000
Developer activity and balanced supply and demand are two of the aspects brightening South Australia’s prospects, and, ultimately, economic development is what will push Adelaide to greater heights. Peter Koulizos, coordinator of the Property and Share Investment course at TAFE SA, says, “The future is looking bright for South Australia, with a burgeoning biomedical precinct and a growing defence industry. The next 10 years should see the South Australian economy perform better than the previous 10 years.” Alex Ouwens, president of the Real Estate Institute of South Australia, says, “The median price keeps going from strength to strength. Adelaide is a magnificent place to invest due to its consistency. “It is also fantastic to see that sales have picked up across all sectors of metropolitan Adelaide, as well as the whole state. When the price is right, when investors can see a great opportunity, when infrastructure is right, the market is also right.”
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99
Clearance rate
MEDIAN HOUSE AND UNIT PRICES
Type Median value
Total auctions
PERTH
SOUTH AUSTRALIA
Area
ADELAIDE
Darwin
Units
$425,500
Quarterly
$367,000
Type Median value
Preliminary auction clearance rates softened as the number of auctions surged. There were 3,097 homes taken to auction across the combined capital cities this week, making it the second-busiest week of the year so far, with preliminary results showing a 67.5% success rate. In comparison, 1,764 auctions were held in the previous week and the final clearance rate came in at 63.3%. Over the same week last year, auction volumes were lower, with 2,916 homes going under the hammer across the combined capital cities, although the clearance rate was a stronger 74.1%.
$525,000
Area
WEEK ENDING 18 MARCH 2018
$650,000
Falling prices continue to define what was only recently the strongest property market in Australia. Sydney’s dwelling values continued their steady, if slight, drop heading into the March 2017 quarter, solidifying the conclusion of its growth cycle. “Propertyology believes that Sydney’s economy is too strong for double-digit price declines; however, the end of the growth cycle is well and truly over. The volume of properties now listed for sale in Sydney hasn’t been this high since the onset of the GFC, and auction numbers are consistently inferior to the same time last year,” says Simon Pressley, managing director of Propertyology. With apartment demand slipping and construction on the rise, oversupply could wind up becoming a big issue in the near future. Certain blue-chip suburbs already have various unit developments in the pipeline, including Botany Bay, Marrickville, Bankstown and Liverpool. Apartment demand is down 22%, housing demand is down about 4%, and rental demand is down about 9%.
CAPITAL CITY AUCTION CLEARANCE RATES
$341,500
Sydney property market shielded by economic strength
Canberra
CAPITAL CITY HOME VALUE CHANGES Capital city
Weekly change
Monthly change
Year-to-date change
12-month change
Sydney
-0.1%
-0.4%
-1.7%
-1.7%
Melbourne
-0.1%
0.0%
-0.3%
5.9%
Brisbane
0.0%
0.2%
0.1%
1.7%
Adelaide
-0.1%
-0.1%
-0.4%
1.9%
Perth
0.0%
0.0%
-0.5%
-2.7%
Combined 5 capitals
-0.1%
-0.2%
-0.9%
1.1%
*The monthly change is the change over the past 28 days
BRISBANE CANBERRA Total auctions
100
Cleared
60
Uncleared
29
Clearance rate
Total auctions
136
Cleared
53
Uncleared
42
Clearance rate
55.8%
67.4%
SYDNEY Total auctions
1,055
Cleared
534
Uncleared
254
Clearance rate
TASMANIA
MELBOURNE Total auctions
67.8%
1,656
Total auctions
6
Cleared
967
Cleared
3
Uncleared
437
Uncleared
0
Clearance rate
Clearance rate
68.9%
TASMANIA
Area
High-performing capital one of the strongest in Australia Hobart remains one of the best-performing capital cities in the country. CoreLogic’s Home Value Index for March 2018 highlights Hobart as the only capital to show month-on-month growth during February. “The property boom that commenced in Hobart in mid-2016 has no end in sight,” says Simon Pressley, managing director of Propertyology. Propertyology notes that Hobart reported all-time-low days on market and vacancy rates, underscoring the remarkable strength of demand in this area. Rental rates are soaring, and investors are making good profit from the positive cash flow. The firm predicts that Hobart may be able to expect growth levels of 20% in 2018, supported by the City Deal initiative to speed up economic progress through infrastructure.
100%
Type
Median value
Quarterly growth
12-month growth
Hobart
H
$421,125
6.6%
7.2%
TAS country
H
$277,250
0.8%
2.9%
Hobart
U
$316,250
2.0%
3.7%
TAS country
U
$235,000
0.4%
6.2%
All data sourced from CoreLogic.com.au
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29
PEOPLE
IN THE HOT SEAT A year after she walked away from corporate life, Justine McDonald, franchise owner and finance specialist at Nectar, tells Australian Broker about making the leap and what she would do if she won $1m Who or what inspired you to become a broker? After 27 years in other financial services roles the time A came at the start of 2017 to take stock and decide if continuing on in the corporate world, making other people wealthy, enduring long horrible commutes and politics, was how I wanted the back third of my working life to play out. It wasn’t. It really was time to do something for me that enabled me to be in control and make a real difference to the people I deal with. Choosing broking as my new career and first self-employment gig was not a difficult decision. I get to combine my love of helping people with my interest in property and my skills with numbers.
Q
What’s one recent career highlight? It would have to be the reaction I got from my very first A customers. I remember being, understandably, extremely nervous heading to my very first appointment. I was meeting with two lovely sisters who were hoping they’d be able to afford to buy their first investment property together but did appear to be doubtful that it was affordable. At the meeting, I went through the strategy I had devised, which involved both of them saving over $1,000 a month between them on their existing loans, and proceeded to advise them that not only could they afford one investment property but in fact they could afford two, possibly three. As I left their apartment, the door shutting behind me, all I could hear was them jumping up and down, along with squeals of absolute delight and excitement. I smiled the biggest smile. It was the best reminder of why we do what we do.
Q
If you won $1m, what would you do with it? Firstly, I’d lend a hand to a few people near A and dear to me. I’d then arrange for my whole family to be together for a white Christmas in America, where one of my sisters lives. Following that, I’d put some away to help my daughters with deposits on property for when they are ready. Some much-needed renovations at home would be next, along with a special treat for the man I adore… He’s a car guy … so a new car for him. That’s a good start. Now just to win that $1m! AB
Q
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