JANUARY 2020 ISSUE 17.01
Industry needs to prioritise financial inclusion in 2020 Promoting financial inclusion will be essential this year /4
Why mortgage brokers are bursting with optimism Brokers expect Sydney and Melbourne housing boom to continue /8
KEVIN WHEATLEY The founder of Bayside Residential and Commercial Mortgages explains why challenging regulation could drive an interest in private funding /14
A big deal Scott Roberts of IBN Direct on the importance of a second opinion /22
ALSO IN THIS ISSUE‌ Why the rise of alt finance matters Industry should expect strong growth in alternative finance this year /10 Mortgage Global 100 discuss the year ahead A closer look at some of Australia’s top industry talent /16 Get ready for open banking How the industry should prepare for the revised start dates /18
NEWS
IN THIS SECTION
Lenders Lender advocates greater financial inclusion /04
Associations Industry bands together for bushfire appeal /06
Technology The maturing of alternative finance /10
Regulators New doubts about first home buyer scheme /12
Market Why mortgage brokers are bursting with optimism /08
JANUARY 2O20 EDITORIAL
SALES & MARKETING
Editor Victoria Ticha
Sales Manager Simon Kerslake
News Editor Madison Utley
Global Head of Communications Adrijana Monevska
Production Editor Roslyn Meredith
DATES TO WATCH
Upcoming can’t-miss events
ART & PRODUCTION
FEBRUARY 12-26
FEBRUARY 24-27
27-28 FEBRUARY
MFAA PD Days
Women in Banking & Financial Services Leadership Summit
Australian Mortgage Innovation Summit 2020
The ninth iteration of the summit will take place in Sydney at the Radisson Blu Plaza Hotel. The event will address how to lead effectively when faced with change and adversity, with a particular emphasis on how to position oneself for success in the wake of the royal commission.
RFi Group will be hosting the 11th annual summit in Sydney, covering everything from the aftermath of the royal commission to the “visibly turning” credit cycle. In addition to the two days focused on innovation and efficiency, the group will be holding its Australian Lending Awards.
The MFAA has confirmed its 2020 calendar, kicking off the year with a round of PD events across the country. First up is Sydney (12 February), followed by Perth (14 February), Melbourne (19 February), Adelaide (20 February), Launceston (25 February), Darwin (26 February) and Brisbane (26 February).
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Designers Martin Cosme Jommel Ramos Production Manager Alicia Chin Traffic Coordinator Kristine Jamir
CORPORATE Chief Executive Officer Mike Shipley Chief Operating Officer George Walmsley Managing Director Justin Kennedy Publisher Simon Kerslake Chief Information Officer Colin Chan Human Resources Manager Julia Bookallil
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2-3 MARCH
18-19 MARCH
Responsible Lending and Borrowing Summit
Financial Inclusion Conference
To be held at the Radisson Blu Plaza in Sydney, Informa’s fourth responsible lending summit includes addresses from ASIC exec Tim Gough and Mortgage Choice CEO Susan Mitchell. Along with the other speakers, they will shed light on open banking’s impact on financial services and the industry’s recalibration following the royal commission.
The fourth edition of this event, dubbed ‘Roads to Resilience’, will be held in Sydney and aims to engage the community sector, government and peak organisations in working towards a more financially inclusive future for Australians. Conference content will cover the building blocks of financial resilience for consumers.
25–26 MARCH ASIC Annual Forum 2020 ASIC’s Annual Forum is a key event for participants in the financial services and markets sectors. This year’s speakers include Attracta Lagan, co-principal at Managing Values; Paul Harrison, deputy director at Deakin Business School; and Nicolette Rubinsztein, non-executive director at Zurich Australia.
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AFR Banking and Wealth Summit
Banking Summit Sydney
Future of Financial Services Conference
Banking and wealth leaders, regulators, policymakers and stakeholder groups will gather to debate the future of financial services at the Sofitel Wentworth in Sydney. The 2020 summit will provide the opportunity to hear from “key industry leaders” during the implementation stages of many royal commission recommendations.
This event will be held at Doltone House, Hyde Park, and will bring together over 100 chiefs and divisional heads from Australia’s largest banks and financial services organisations to share insights on industry trends and emerging technologies that will change the face of the industry in the coming years.
ST Media’s flagship event and the largest of its kind in the Southern Hemisphere, Future of Financial Services will set the digital agenda for 2021 and beyond. It will examine open banking, customer experience, AI and machine learning, data analytics, digital transformation, the emergence of neobanks, and much more. It will be held at the ICC Sydney Exhibition Centre.
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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Let’s chat. 13 11 33 Approved applicants only. Lending criteria apply. Other fees and charges are payable. Liberty Financial Pty Ltd ABN 55 077 248 983. Australian Credit Licence 286596.
NEWS
LENDERS REFINANCERS AVOIDING ‘LOYALTY TAX’ from Lendi shows just how much can be saved through refinancing, following the series of RBA rate cuts in 2019. Across all lenders on its panel, owner-occupiers who refinanced with Lendi in the first half of 2019 settled at a median rate of 3.76%, a 56bps rate reduction. But those who refinanced between July and the end of November settled at 3.19%, representing an average difference in rate of 127bps. Lendi executive director David Hyman said those who hadn’t refinanced were likely getting “slugged by a loyalty tax”.
UNDEREMPLOYMENT AND ANNUAL WAGE GROWTH REMAIN LOW Source: Australian Bureau of Statistics
Prioritising financial inclusion to support people will be key as underemployment and low wage growth persist
DATA
Underemployment
Unemployment
Annual wage growth (RHS)
10%
4.0%
9%
3.5%
8% 3.0% 7% 2.5%
6%
2.0%
5% 4%
1.5%
3%
SMALLER LENDERS WOOING MORE BORROWERS for non-big four lenders is growing, according to Lendi data. Only 20% of new and refinanced owner-occupier loans settled on the Lendi platform in 2019 were with the four major banks – down from 30% the year before. In the first half of 2019, 24% of owneroccupiers settled with a big four bank; in the second this dropped to just 17%. Lendi executive director David Hyman said, “A wave of borrowers were already showing a preference for smaller lenders and this has only strengthened as the year rolled on.” PREFERENCE
“That’s what inclusion is about: finding a way to help more people, and serving the community”
John Mohnacheff National sales manager, Liberty Financial
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1.0% 2% 0.5%
1%
0.0%
0% Sept 2010
Sept 2012
Sept 2014
Sept 2016
FINANCIAL INCLUSION MUST BE A PRIORITY, SAYS LENDER Actively promoting financial inclusion should be a key component of brokers’ day-to-day activities this year, according to a specialist lender inclusion is helping people from all walks of life access credit in a sustainable and responsible manner. It is also the very reason the broking industry was established in the first place – to help a multitude of customers with different needs by providing more choices, according to Liberty Financial. John Mohnacheff, Liberty Financial national sales manager, explained, “That’s what inclusion is about: finding a way to help more people, and serving the community.” “At Liberty, we welcome all types of customers, and we try to understand their financial position. This certainly doesn’t FINANCIAL
mean everybody has the same borrowing capacity – far from it; but we take the time to grasp the needs of each individual and do our best to meet them.” And brokers have much to gain from adopting the same attitude, according to Mohnacheff. “The benefit to the consumer is absolutely obvious, but there’s an equally significant benefit to the broker,” he said. “If brokers continue to make financial inclusion core to their business, they will grow their capabilities to help more people – growing their reach, skills and offering in the process.” He also explained that for brokers looking to improve their
Sept 2018
level of financial inclusion, the first step would be to take an objective look at their service offering and consider the other ways they could help customers access finance. In doing so, brokers were likely to find that ramping up the diversity of clients they supported would go hand in hand with diversifying their services. “Diversification is something we talk about a lot here at Liberty, and that’s because we truly believe in the power of a diverse broker offering,” said Mohnacheff. To reflect its main aim of helping customers of all backgrounds have access to finance, Liberty has recently joined the Financial Inclusion Action Plan program. “We know that customers are continually seeking out brokers who they can rely on for personalised financial support and who can advise them on all of their lending needs, rather than home loans alone,” Mohnacheff added.
NEWS
A S S O C I AT I O N S SUPPORT SWELLS FOR BUSHFIRE RELIEF fundraising for bushfire relief has ballooned, with support from lenders, aggregators, associations and brokers. The Broker Bushfire Appeal raised hundreds of thousands in just 24 hours, with recent contributions of $100,000 each from Loan Market, Mortgage Choice and Aussie. “We realise that many Australians will be affected by these fires, and while the initial loss is heartbreaking, the long-term effects will be a heavy burden,” said Loan Market executive chairman Sam White. INDUSTRY
AUSSIES LESS WORRIED ABOUT INTEREST RATES
INDUSTRY BANDS TOGETHER TO LAUNCH BUSHFIRE APPEAL Leading Australian associations have come together in the fight to save the country from the devastating impact of this summer’s unprecedented fires no end in sight to the raging fires, the Broker Bushfire Appeal was launched by the industry to mobilise mortgage brokers to come to the aid of those affected across Australia. The goal was to raise $100,000, with donations going directly to the Red Cross. Supported by the FBAA, the MFAA, 1st Street Financial, Shore Financial and Astute, among others, the initiative has raised $35,000 at time of writing. The FBAA has not only thrown its support behind the Broker Bushfire Appeal but expressed a desire to directly help brokers WITH
personally impacted by the disaster. Managing director Peter White compared the broking sector to a family, explaining that families look to meet each others’ needs wholly and speedily when troubles arise. “I recognise there are many wonderful appeals across the country, and we didn’t hesitate to be a part of the broader campaign launched by brokers, but we also know that in many cases it takes time for appeal money to get to those in need – and some needs are immediate,” he said. “Across the country right now, there will be finance and mortgage
brokers who have lost property or maybe even worse, and we want to stand with them and support them personally.” Liberty has also donated $250,000 to support communities affected by the bushfires. According to CEO James Boyle, the safety and wellbeing of customers is first and foremost. “We will do whatever we can to help customers who are dealing with the aftermath of the fires,” he said. Liberty Financial also encouraged its staff, family, customers and business partners to support the cause, matching contributions up to $100,000. ALI Group will donate a share of its January and February 2020 profits to those impacted by the fires. For each Loan and Mortgage Protection policy arranged by an authorised broker from 1 January to end February, it will donate $50.
Fast money. Short term. $100k - $10million. Real Estate backed lending.
2019 Consumer Pulse Report from financial comparison site Canstar is a survey of over 2,000 Australians to get insights into current trends and how they are likely to play out in the future. According to the data, fewer Australians are worried about mortgage interest rate movements than in previous years: just 7% named it as their biggest financial concern in 2019, as compared to 9% in the previous year. THE
“Across the country right now, there will be finance and mortgage brokers who have lost property or maybe even worse, and we want to stand with them and support them personally”
Peter White Managing director, FBAA
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The Real Life Alternative
NEWS
MARKET STRONGER RECOVERY OF HIGH-VALUE HOUSING top quartile of the housing market is outperforming the broad middle and lower quartile, with the trend most evident in Sydney and Melbourne, according to CoreLogic data. Head of research Tim Lawless said, “The stronger performance ... can likely be attributed to a combination of values falling more in this sector during the downturn, as well as recent adjustments to serviceability rules which have boosted borrowing capacity.” THE
A PROMISING UPTICK IN BUILDING APPROVALS approvals across Australia surged by 11.8% in November 2019, largely due to a significant increase in NSW. “The improvement in approvals ... is consistent with other leading indicators which show that the market started to stabilise around April 2019,” said Housing Industry Association economist Tom Devitt. “These improvements are a most welcome reprieve from the declines that began in late 2017 and reinforce the positive developments we have already seen.” BUILDING
“Brokers are reporting an increase in first home buyer activity, probably as a result of the cooling that happened in 2019, combined with lower interest rates” Arun Maharaj CEO, HashChing
WHY MORTGAGE BROKERS ARE BURSTING WITH OPTIMISM Mortgage brokers expect the Sydney and Melbourne housing boom to continue through 2020, according to HashChing broker survey of a HashChing broker survey have revealed that most mortgage brokers expect interest rates to be cut further in 2020 and investors to come back into the market. Commenting on the results, HashChing CEO Arun Maharaj said the brokers surveyed were being “justifiably optimistic” about the future of the housing market. “Brokers are reporting an increase in first home buyer activity, probably as a result of the cooling that happened in 2019, combined with lower interest rates. With those rates predicted to stay low, it’s easy to see why brokers are looking forward to a strong 2020,” he said. The view that increases in house FINDINGS
prices in Sydney and Melbourne will continue through 2020 was accompanied by expectations that first home buyer activity will increase and investors will reappear on the scene this year. “It’s clear that investors took a step back in 2019. With such optimism around prices and the government stepping in and loosening credit restrictions, it is hard to argue with brokers that first home buyers will once again find themselves competing with investors, especially in the Sydney and Melbourne markets,” Maharaj added. The government’s first home buyer mortgage guarantee scheme comes into effect this month.
“We expect this will be oversubscribed, and whilst 10,000 places is small in the context of the entire Australian market, it will help keep the First Home Loan Deposit Scheme group competitive, especially outside of the Melbourne and Sydney markets,” Maharaj said. However, first home buyers in Sydney and Melbourne might still find it difficult and struggle to utilise the scheme, he added. “The $700,000 price cap in New South Wales and the $600,000 price cap in Victoria will soon be surpassed by virtually all properties within commuting distance of the respective central business districts if price rises continue in 2020,” he said. The majority of brokers also predicted another RBA cash rate cut this year, although the expectation was split between the rate coming to rest at either 0.5 or 0.25 by the end of 2020. Very few brokers predicted that interest rates would be negative.
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La Trobe Financial Services Pty Ltd ACN 006 479 527 Australian Credit Licence 392385. La Trobe Financial Asset Management Limited ACN 007 332 363 Australian Financial Services Licence 222213 Australian Credit Licence 222213. Terms, conditions, fees, charges and La Trobe Financial lending criteria apply. To view our ratings and awards please visit our Awards and Ratings page on our website. This publication is for accredited broker use only and is not for distribution to consumers. Copyright 2019 La Trobe Financial Services Pty Ltd ACN 006 479 527. All rights reserved. No portion of this may be reproduced, copied, or in any way reused without written permission from La Trobe Financial.
NEWS
TECHNOLOGY
BROKERS URGED TO GROW SHARE OF COMMERCIAL some brokers have claimed majority market share in the residential channel, one industry veteran has called for a push to be made in the commercial space for brokers to become the authorities across all types of lending. John Mohnacheff, Liberty national sales manager, said: “The MFAA and FBAA need to continue reiterating the message that brokers are here to help with more than just home loans. As an industry, we can do more to promote ourselves as being the friend of and solution for small business people.” WHILE
WHAT THE MATURING OF ALT FINANCE MEANS FOR THE INDUSTRY This will be another strong year of growth for the alternative finance sector, with several trends already pointing to continued success, says an award-winning fintech lender date, fintech lender Prospa has lent $1.2bn across the Australian market to around 20,000 small business customers. In 2019, the company brought several tier-one big four Australian banks into its debt funding structure. “That was a real moment of maturity for the industry, seeing the institutional banks are now prepared to put hundreds of millions of dollars into this type of product category,” said co-founder and co-CEO Beau Bertoli. However, the development was not only exciting for Prospa but had industry-wide implications. “There’s a lot more momentum exiting 2019 than there was exiting TO
the year before,” Bertoli said. “A lot more parties are talking about alternate finance products, fintech, working capital solutions and so forth, given the work we’ve done, along with other lenders in the space, media agencies and advocates for this sector.” Prospa’s head of partnerships Alex Brgudac says the fintech sector as a whole is set to “become more mainstream”. “The last two years we were recognised through the MFAA as Fintech Lender of the Year – and the category didn’t even exist before that,” he said. “We’ve only been around a short time, but we’re having an impact, and the industry recognises that.
Our team is really proud of the fact we’re stacking up against organisations that have been around for a century or more and flourishing. I just see it growing from there.” The increasing acceptance of and reliance on alternative finance will cause offshoot developments that carry even further into the market, according to the Prospa execs. Bertoli adds: “The big trends for 2020 are going to be around product choice. There are a lot more products coming to market now, which is another sign of the maturing of the industry: accepting that small business owners don’t have one use case and need multiple products to support their businesses,” said Bertoli. “This makes it easy for a finance broker profiling a customer’s needs, being able to offer a solution that has more than one product.” Directly related to this is the consolidation already evidenced in the industry and expected to continue into the coming year.
VV ADOPTION OF FINTECH IN AUSTRALIA IS GROWING Source: EY data cited in Business Insider Australia 2019
58%
37%
13%
2015
10
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2017
2019
SERVICEABILITY TO SUFFER DUE TO BUSHFIRES bushfires raging across Australia are likely to lead to elevated mortgage arrears in the coming months, and, if they continue, this could reshape the standard arrears fluctuations expected throughout the coming year, according to a new report from S&P Global Ratings. “Mortgage arrears typically increase during the summer period, reflecting the pre- and post-Christmas spending and extended holiday season, before declining during the second quarter,” the report reads. THE
NEWS
R E G U L AT O R S
IMPLEMENTATION OF OPEN BANKING DELAYED ACCC recently announced a postponement of the implementation of open banking to make time for additional testing of security and privacy protections. The Consumer Data Right is still expected to first go into effect in the banking sector; however, certain aspects of the reform have been pushed back from their scheduled February 2020 start date. Instead, from 1 July 2020, consumers will be able to direct major banks to share their credit and debit card, deposit account and transaction account data with accredited service providers. THE
NEW DOUBT EXPRESSED OVER FIRST HOME BUYER SCHEME While APRA recommends caution in lending to borrowers with small deposits, the government’s low-deposit scheme is encouraging the opposite, says RateCity research director the government’s First
WITH Home Loan Deposit
has formally commenced its APRA investigation into Westpac’s alleged breaches of the Banking Act. The regulator plans to focus on the conduct that led to the allegations in November by AUSTRAC, as well as examine the bank’s actions to rectify and remediate the issues after they were identified. APRA deputy chair John Lonsdale said, “While Westpac is financially sound, there are potentially substantial gaps in risk governance that need to be closed … this will necessarily be an extensive and potentially lengthy investigation.”
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Scheme having come into effect on 1 January 2020, both brokers and potential borrowers are being called upon to educate themselves on what the development means for them. Doubts over the reach of the scheme began as soon as its details started to be announced, with many voicing scepticism that an initiative with a small limit of 10,000 borrowers per year could have a material impact on the market; now, concern has been raised that the scheme is encouraging new buyers to “bite off more than they can chew”. RateCity research shows that while a person buying a $500,000
property with a 5% rather than 20% deposit would need $75,000 less initially, their monthly mortgage repayments would be $329 extra a month. Over the next 30 years, they’d pay the bank $43,546 in extra interest. “Just because the government is encouraging people to borrow with as little as a 5% deposit doesn’t necessarily make it a great idea,” said Sally Tindall, RateCity research director. “People that borrow with a wafer-thin deposit might get into the property market faster, but they’re likely to make higher monthly repayments and shell out tens of thousands in extra interest over the life of the loan.” According to the most recent
VV MONTHS OF SAVING NEEDED FOR 5% DEPOSIT BY INCOME LEVEL UNDER FHB SCHEME Source: CoreLogic
$30,000
$27,610 27
18
$25,000 Level of savings
APRA LAUNCHES WESTPAC INVESTIGATION
APRA quarterly property exposure statistics, just 7.35% of new loans settled in the September quarter had an LVR of over 90%, meaning a less than 10% deposit. “Over the last five years, APRA has been actively asking the banks to think carefully about approving loans to people with small deposits. Now the government is actively encouraging it,” said Tindall. “If you are thinking about signing up to this scheme, go in with your eyes wide open because it’s peppered with potential drawbacks.” On the broker side of the equation, FBAA managing director Peter White has encouraged the association’s members to self-educate regarding the “hurdles and limitations” that accompany the initiative. “It is important to note that the scheme will not be available to everyone and is limited to 10,000 people per financial year, so brokers need to do some research before walking potential borrowers down this path,” White said.
39
$20,000 $15,000
Upper limit of eligibility for First Home Loan Deposit Scheme
$10,000
Median income 10th decile income
$5,000 $
5
10
15
20 Number of months
25
30
35
40
This chart shows the number of months required to save a 5% deposit on the national median dwelling value as at December 2019 ($540,974). The median and 10th decile savings levels (10th decile representing relatively low inclome) are derived from ABS data (6306.0 - Employeed Earnings and Hours, Australia, May 2018), and assume a single, full-time working wage earner. The upper limit of eligibility for First Home Loan Deposit Scheme is $125,000 for a single income earner. All three leveles of savings are modelled based on a 20% savings rate on after-tax income.
FE AT URES
SPECIAL REPORT
2020: THE YEAR OF PRIVATE FUNDING? Due to the changing lending landscape, there is a strong demand for private funding in Australia. Kevin Wheatley explains to Australian Broker how this could impact brokers
BUSINESS METRICS
>$1bn
Total value of commercial loan settlements to date
>$10m
Average commercial loan size
$1.9bn
Total value of current development projects
11
Years as a commercial broker
Choice
Aggregator
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of Sydney-based Bayside Residential and Commercial Mortgages Kevin Wheatley works predominantly with clients from across the globe to deliver and maximise investments in property development. He established the company back in 2009, bringing to it years of experience as a logistician by trade, having worked on projects such as shipping ports and waste-to-energy facilities. During his time as a logistician, Wheatley – one of MPA’s Top 10 commercial brokers for 2019 – says he developed a passion for the financial industry and the way it could make a difference to people’s lives. He says: “In logistics, there’s a very high level of procurement, and procurement requires funding.” This led him to take a natural step towards offering financial services. “I’ve taken Bayside Residential and Commercial Mortgages from a one-man operation to what it is today, and this is just the beginning,” Wheatley says. In 2018, the volume of residential and commercial funds that came through Bayside totalled $249m. The volume for 2019 is also estimated at around $200m. Wheatley is also currently looking to provide about $1.9bn in development funding for three projects in Australia, including one in Port Melbourne and another major development in Cronulla. “Our core focus this year will be on raising the capital required for AusCity Capital, to take it to the next level,” he adds. FOUNDER
AusCity Capital is the private business arm of Bayside Residential and Commercial Mortgages. It aims to provide debt funding for construction development, stable income-producing properties, unlisted and listed property securities, cash and fixed-income securities. It gives investors access to premium construction and development projects that are not available on the public market. Access to private debt Wheatley explains that because banks are applying unyielding
more competitive rates,” he says. Another key focus for Wheatley is on AusCity Capital eventually becoming a non-bank. “Non-banks are here to stay. There’s demand now more than ever because of the lack of competition that’s been in Australia, allowing the big four to monopolise the industry,” he explains. “What has been found by the royal commission now is only the tip of the iceberg … you’ll see a lot more class action cases in the courtrooms this year because of banks’ misleading and deceptive conduct. “If anything, this has given a lot more credibility to our business, because we’re the ones now that are constantly finding an alternative funding solution for disgruntled borrowers.” He adds, “The private funding opportunities are going to be there for a long time.” However, Wheatley points out
“Private funding opportunities are going to be here for a long time” Kevin Wheatley, Bayside Residential and Commercial Mortgages disqualifying criteria, such funding opportunities are usually fulfilled by non-conforming lenders who offer premium rates and fees to their clients, knowing that institutional lenders are rigid in their financing requirements. But through the establishment of a debenture issuing company, he says the AusCity Capital fund is able to raise private funding for strong projects with time-sensitive needs, as well as those projects that have been unable to raise funds from banks due to overly prudent regulation stemming from the royal commission. “Our investment vehicles allow us to compete with non-conforming lenders by offering commercial mortgages to institutional clients at
that his business could be negatively impacted if the government was to go ahead with plans to scrap trail commissions. The future of trail commissions The biggest threat to Australian brokers is going to be the disruption that will come as a result of the 76 recommendations made by the Hayne royal commission, suggesting a crackdown on mortgage brokers. Wheatley says, “Josh Frydenberg, the treasurer, is proposing that by July 2020 he is going to cut trail payments. Do you think that’s not going to be detrimental to the industry?” Trail payments are designed to cover the time that brokers spend
the services that the Australian community now expects?” The only way to find a pragmatic outcome will be on the back of sensible discussions and, hopefully, by negotiating a result that’s going to work for the entire financial industry.
Kevin Wheatley, founder, Bayside Residential and Commercial Mortgages
keeping an eye on their borrowers. “Because we want to make sure the borrower stays with the bank,” explains Wheatley. “Commission payments are not worth nickels and dimes; my residential division actually loses money because of the time it takes to process home loans, and you get very little remuneration for it. “So if we have to rely on upfront commissions, which they’re talking about cutting back as well, to a fee for service, no one’s gonna pay that.” This is a complete backflip to what Frydenberg said in the lead-up
to the elections, Wheatley says. “That’s going to be the biggest disrupter in the industry over the next six months, and we are preparing for that now.” But for borrowers, he argues, it is cheaper to keep making trail payments than to carry the fixed costs of banks, which will have to find alternative resources to the third party channel. “If they cut trail payments, there will be three people here [in this company] that won’t have a job. We can’t survive on commissions alone,” he says.
“The government has not spent enough time talking to the industry leaders.” Instead, Wheatley says what is needed is a two-year moratorium period for the government to consult the industry across the board. “These people need to come back to the table and talk to us,” he says. “This will impact the whole broking industry, because they won’t be able to afford to operate. Where will their cash flow come from? “It takes some two to three months to do a home loan, so how do we pay our staff and provide
Looking ahead Aside from new regulations and proposals to scrap trail commissions, the year ahead is “looking really exciting”, Wheatley says. “Not only with the development that we’ve got here in Australia but the projects I’ve got offshore; I pick the eyes out of what I want to do offshore. Because you could end up wasting a lot of time.” So, in between raising capital for major construction projects in Australia, the company will also be providing logistics support for a new waste-to energy plant in Phnom Penh, Cambodia. “We’ve already started, and it will take about two years to complete,” Wheatley says. Another reason 2020 could be an exciting year for Wheatley is that a number of venture capitalists in the US have expressed a strong interest in AusCity Capital’s fund. “We’re really excited about where AusCity Capital is going and the interest it has attracted,” he says. “It will be a very niche managed investment trust where we are going to handle the projects we fund directly with the capital we raise, primarily from our high-end borrowers – those that we have been working with for years.” “These financiers really have the capability and capacity to start a project and finish it, whether that is property development or infrastructure – projects like the waste-to-energy and port facilities.” In the Australian market, Wheatley expects to see steady economic growth and opportunities as the nation heals from the devastating impact of the summer’s bush fires. AB www.brokernews.com.au
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SPECIAL REPORT
WHAT DRIVES TOP AUSSIE BROKERS Australian Broker talks to some of mortgage broking’s biggest personalities, who feature among the top performers in the first annual Mortgage Global 100. They discuss their inspirations, plans for the turbulent year ahead, and much more
is proud to be part of a global portfolio of leading mortgage publications across the US, Canada, Australia and New Zealand. Together with its sister titles, including Mortgage Professional Australia (MPA), Australian Broker focuses on providing mortgage brokers, lenders, aggregators and other industry professionals with insights from some of the biggest names in this sector. The magazine’s global reach via print publications, news websites and events means it is in a unique position to engage with the very top performers in the mortgage industry worldwide. Indeed, as 2019 drew to a close, AB and MPA collaborated with their sister titles to put together the first-ever Mortgage Global 100. The list includes some of the industry's key personalities from Australia and beyond. These leaders are making a difference, whether through incredible advancements at their own companies; taking associations to new heights; providing education to industry members; or championing the key issues that will take it forward into a new era. Read on to find out what inspires and challenges these individuals and sets them apart from the rest. AUSTRALIAN BROKER
Drivers and inspirations One of the top Aussie personalities in the Mortgage Global 100 is Daniel Di Conza, chief executive of Acceptance Finance. Seeing his clients and team do well is what drives Di Conza and helped spur much of his success over 2019. He says, “The uncertainty of the 16
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royal commission and the concern it caused drove us to support each other in a way like never before, and I believe this was a big win for our team culture.” Looking ahead, Di Conza says there will be some challenges in relation to how the industry complies with the best interests duty, in particular how this impacts the sector commercially in light of the current clawback commission structure. He explains, “One of the challenges we had in 2019 was how to provide
constant in our industry, and with the support of Aussie, I’m confident I have access to the very best education, training and support network so I can stay focused on delivering exceptional customer experience in the year ahead.” What drives Glenn Gibson, head of third party distribution and direct mortgages at ING, and another Aussie Mortgage Global 100 ranker, is a passion for the industry and collaborating to achieve great customer outcomes. “I was very inspired by how we all
“I believe brokers are well-positioned to meet and embrace any changes that the new year may bring” Brendan O'Donnell, Liberty Network Services brokers with high-quality back-office support at a commercially viable price. We reviewed and changed our processes to allow us to use international resources to complement our local admin team. “To date, this has performed above our expectations and will remain a key focus for us in 2020.” Glenn English, mortgage broker at Aussie Carnegie and fellow Mortgage Global 100 ranker, says he is driven mainly by setting the bar higher for himself and seeing his customers’ goals being achieved. “That is what great service is built upon – making my customers feel valued and confident, knowing that their best interests are always first and foremost. “As we know, change is the one
worked together early in 2019, and I’m proud of the stance ING took in supporting our brokers throughout the year,” Gibson says. “It’s very easy to get distracted and pre-empt things we ‘expect’ to happen, and then before you know it six months have disappeared. “It’s just a fact that there’s a change in our industry every year, and every year we wonder how we’ll manage it. Yet every year we pull together as an industry and move forward.” Nevertheless, he says one key challenge will again be ensuring they focus on the business and customers as they navigate their way through the changing legislative landscape. But for Mortgage Global 100 ranker Tanya Sale, CEO at Outsource Financial, what drives and inspires
her is all about educating consumers. Sale explains, “I implore all Outsource Financial members to educate their borrowers on not just the lending transaction but that thereafter. This understanding and knowledge empowers the Australian consumer and enables them to make informed decisions about their financial future. This should be a driving factor for all in the third party channel, as I believe our borrowers are a key element in ensuring our industry’s success and longevity.” All brokers had to deal with a lot of change over the course of the year, and the way they dealt with it, focusing on the job at hand and their clients, was “exceptional”, says Mark Haron, executive director of Connective and yet another Mortgage Global 100 ranker. “There’s a very good reason why the broker channel continues to grow its market share, and I’m driven, and feel privileged, to advocate for our industry and tell our story,” he says. “Something that stood out for me in 2019 was the resilience of brokers from right across the industry.” Mortgage Global 100 personality Brendan O'Donnell, managing director of Liberty Network Services, says he was most inspired by the dedication and drive of advisers who have worked tirelessly to build their businesses. He says, “Having navigated some stormy seas in 2019, I believe that brokers are well positioned to meet and embrace any changes that the new year may bring. Moving forward, I expect we will encounter increased regulatory focus, with significant changes to how brokers must engage with customers to ensure good outcomes in an uncertain market." As well as this, he expects the industry will start to see competition in the local markets intensify, making it more important for brokers to diversify their service offering and keep up with competitors. “With our time becoming more precious, technology that supports brokers to streamline their processes will play a key role in the success of broker businesses," he says. “Looking forward, I am driven to support advisers to continue reaching their goals and take their businesses to new heights.” Biggest challenges The devastation caused by bushfires and drought has meant a tough start
to the new year for many Australians and small businesses, so it is important to remember that brokers play a key role in their local communities, especially in times of need. According to Beau Bertoli, chief executive at Prospa and another top-ranking industry personality, brokers should familiarise themselves with the different funding options and relief packages available to their clients to help ease stress where they can. “Small business owners have been hit hard – especially those who rely on tourism over the holiday period – and
He explains, “Key in 2019 was leaders and managers quickly getting their heads around the changes and supporting their teams and getting them on the journey to make it happen … This, combined with an ongoing focus on staff training and development will be vital in 2020.” He points out that in the last 12 months the industry has witnessed the passing of the Consumer Data Right legislation, the establishment of a senate committee on financial and regulatory technology, and the first fintech minister appointment.
Glenn Gibson, head of third party distribution and direct mortgages, ING
Beau Bertoli, chief executive, Prospa
Mark Haron, executive director, Connective
Brendan O’Donnell, managing director, Liberty Network Services
community involvement and support will be more important than ever,” he says. But brokers also faced a changing regulatory environment throughout 2019 that brought an ever-increasing focus on compliance, and the industry expects this will continue into 2020 and beyond. Gibson says the challenge in any period of change and uncertainty is focusing on where you want to take your business, how to support your customers, and creating a detailed plan on how to achieve your goals.
The customer will have more power, and they will need brokers who are on top of the alternatives available and can present solutions beyond a bank.” Indeed, it’s crucial that brokers understand the impact of open banking and the Consumer Data Right in terms of privacy and moving customer information securely. Bertoli adds, “Brokers that educate themselves will be the ones that can best leverage the opportunities of shared data, benefiting their clients and their own businesses.”
Daniel Di Conza, chief executive, Acceptance Finance
Tanya Sale, CEO, Outsource Financial
Bertoli says, “Many Australians are realising they now have legitimate options, after years of inertia around switching lenders.” For these reasons, he predicts that the rollout of open banking will not only be one of the biggest challenges for brokers and lenders but the biggest opportunity. “It has the potential to revolutionise financial services in 2020. There will be more competition, more innovation, more transparency, and it will be easier than ever for customers to compare and then switch providers.
Glenn English, mortgage broker, Aussie Carnegie
Advice to brokers Brokers’ clients will continue expecting even more from their home loan application experiences as they become savvier than ever, especially with open banking just around the corner. But what does this mean for brokers? Change seemed to be the only constant in 2019, says Haron. “Although our industry will continue to face change in 2020, this change will ultimately deliver certainty for brokers – we are already seeing this play out with the
release of ASIC’s updated guidance on responsible lending obligations. “2019 saw our industry truly come together as one. By banding together as a united voice, we were able to stave off significant challenges and influence decisions that deliver better outcomes for consumers. “In the year ahead, we need to continue to demonstrate the value of mortgage brokers and how important they are to borrowers, particularly in their ability to act in borrowers’ best interests. “Brokers will need to focus more than ever on compliance in 2020 and will be looking to their aggregators to support them not only from an educational point of view but also in more practical ways through the provision of digital solutions that embed the compliance requirements into their day-to-day operations.” English adds that trust and the customer experience will be more important than ever, and that “as a broker, we need to work hard to keep delivering those exceptional moments for our customers”. “Repeat customers and referrals account for over 80% of my business, highlighting how important it is to build strong customer relationships,” he says. English also encourages brokers to have a sense of urgency, following up with customers regularly and thoroughly understanding their goals, as well as staying on top of the discussions across the industry to determine the direct effects of pending regulation on their business and customers. “Look at ways to make your business, the processes, data collection and follow-up into a seamless and effective structure,” he says. Gibson suggests brokers should focus on purpose. “Brokers are generally very passionate about the service they provide their clients, and it’s vital brokers continue to focus on this,” he says. In Sale's view, brokers will need to ensure they have the right structures and processes in place to handle what is to come and ensure nothing slips through the cracks. She says, “It is going to be critical for brokers to look within their own businesses to assess if they are currently meeting, or able to meet the additional requirements, responsibility and behaviours that are being placed upon them.” AB www.brokernews.com.au
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NE WS ANALYSIS
HOW TO PREPARE FOR OPEN BANKING
The start of the new year marks the beginning of the transition from a closed banking system to an open model in which consumers have control of their data and can share it with any institution they choose. Australian Broker examines how the industry should prepare
will soon transition from a closed banking system – in which each financial institution keeps and controls its customers’ information – to one in which customers control their own data. The new regulated system aims to allow customers to unlock their own financial data and to provide them with a wider choice of financial products and services, while enabling a more competitive marketplace. In July 2017, the government commissioned the Open Banking Review chaired by Scott Farrell, who was asked to recommend the most appropriate model for Australia. The time frame proposed by the Farrell report, and then accepted by the government, will see mortgage data and recommended financial products made available by July 2020 but with a transition period until 2021. Originally, major banks’ mortgage data was scheduled to be available from February this year, but the ACCC has deferred the launch of certain aspects of open banking to July, delaying the implementation and launch of the Consumer Data Right (CDR) in the banking sector. ACCC commissioner Sarah Court said, “The CDR is a complex but fundamental competition and consumer reform, and we are committed to delivering it only after we are confident the system is resilient, user-friendly and properly tested. “Robust privacy protection and information security are core features of the CDR, and establishing appropriate regulatory settings and IT infrastructure cannot be rushed.” AUSTRALIA
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What CDR means is that consumers will be able to direct major banks to share their credit and debit card, deposit account and transaction account data with accredited service providers from 1 July 2020. Consumers’ mortgage
UK, we have always believed the implementation of CDR [in Australia] needed to be exercised with care, so we welcome this considered approach to the CDR rollout,” Konstantinidis says. “The additional time available
“If we haven’t seen it already, open banking will certainly signal the death of ‘pen and paper’ broking” Jason Furnell, Loan Market Group and personal loan data will be able to be shared from 1 November 2020. Poli Konstantinidis, executive general manager, credit services and decision analytics A/NZ at Experian, welcomes the delay. “Based on our experience in the
should be used to increase the awareness of open data among Australians.” While he believes the ACCC’s caution has been appropriate until now, Konstantinidis warns that open banking should not
be delayed any further. “Greater data sharing will see the ownership of customer data put back in the hands of Australians and give them the power to access better deals,” he says. “While a true open data environment may be delayed for now, it’s vital CDR is implemented effectively and regulated properly so consumers can have access to the wide-ranging benefits.” Brokers’ role in open banking The data that will be made available is substantial; it will include all transaction information across customers’ accounts, including what they spend, their income, all loan details and repayment history. Stephen Moore, CEO at Choice Aggregation Services, says customers, as opposed to their institutions, will own their banking data for the very first time. But in order for open banking to work successfully, customers will have to provide permission to brokers to use such data. If they do, it means brokers will also have more insights into their clients than anyone else across the value chain. Moore says, “All of that is enormously valuable, and the exciting bit about it is how brokers can then support customers in an open banking regime.” He suggests brokers today know their customers at a personal level better than anyone else does. Brokers are aware of family circumstances, an individual's aspirations, and the ins and outs of what their customers are trying to
OPEN BANKING START DATES Source: ACCC
Implementing the Consumer Data Right in the banking sector 1 July 2019 Major banks: Accounts Four major banks make data available on all credit and debit card, deposit and transaction accounts
1 February 2020 Major banks: Mortgages Four major banks make data available on mortages
1 July 2020 Major banks: All products Four major banks make date available on all products
1 July 2020 Other banks: Accounts All other banks make data available on all credit and debit card, deposit and transaction accounts
1 July 2021 Other banks: All products All other banks make data available on all products
1 February 2021 Other banks: Mortgages All other banks make data available on mortgages
Jason Furnell, chief customer experience officer, Loan Market Group
achieve. The only thing missing until now has been the hard data around banking. Moore continues, “To me there are two key benefits for brokers: firstly, from an efficiency perspective, we've seen the ridiculous scenario of having to highlight items on a bank statement for expense categorisation – all that disappears, and it’s going to be a far more efficient system. “Secondly, and this is going to be the main benefit of open banking: having detailed insight into someone’s expenditure, savings, loan payment history, etc., will be enormously valuable from any lender perspective, and it will have a really positive impact on competition, and that’s where the true benefit for customers comes in.” He adds, “But, naturally enough, it’s more complex. You’ve got lots of data and a myriad of new lenders, so it does mean the role a broker plays in helping customers navigate through a competitive landscape will become even more important.” Jason Furnell, chief customer experience officer at Loan Market Group, suggests the changes could mean customers are more likely to choose brokers ahead of banks for the best mortgage outcomes. “Customers trust brokers to do right by them,” he says. But open banking won’t just benefit the consumer. Furnell
Stephen Moore, CEO, Choice Aggregation Services
suggests it creates a victory for brokers in numerous ways: • It recognises that customers’ banking and expense data belongs to them and not banks. • It will create competition among lenders, encouraging customers to explore new options – and guess who they’ll ask for help? • It establishes a global set of technical and security standards that make it easier and safer than ever before to share data. Furnell also notes that, in order to take full advantage of the opportunities, brokers need to be digitally savvy. He explains, “If we haven’t seen it already, open banking will certainly signal the death of ‘pen and paper’ broking.” This means brokers will need to ensure they’re digitally ready for the arrival of open banking, and it might prove too complex and expensive to try to navigate it on their own. “Customers want to win back their financial identities,” Furnell says. “They’ll want to use their own data to explore new options. And they’ll want experts with the knowledge of products and policies to help them utilise their data for better outcomes.” How to prepare A key thing to understand is that it isn’t just the influx of new data that is
key to open banking – those are just the facts that will be provided. Furnell says, “To prepare yourself to make the most of open banking, find an aggregator who is ahead of the tech curve. At Loan Market, we are working on further strengthening our security practices so we are prepared to hold even more client data. Plus, we are evolving our online fact-find so our brokers can collaborate transparently and easily with clients based on the additional customer data.” Indeed, the most important skill to have will be the ability to collect and store the data in a secure and natural way, suggests Moore. He says, “What will become fundamental is the ability to analyse and develop insights around that data, and this is where, in fact, we're already talking to a number of vendors to provide analysis tools to help brokers through that process. “What [then] becomes important – in an environment where more data is shared – is the ability to store, analyse and act on those insights. That will just increase the importance of having the right sharing system.” Moore also highlights the importance of analysis tools for the mortgage industry. “There are some of those expense tools around to date. The expense tools are an example of a precursor
for some of the things we would be able to do in open banking. But it certainly goes beyond just expenses, looking at income repayment history, loan type, loan details, etc. “There are a number of people already developing tools in that space, and in fact that whole area will develop quite rapidly.” But what will truly become critical, aside from analysis tools, is being able to integrate data into brokers’ customer relationship management. “Otherwise, you're going to have all these disparate systems that do not talk ... the difficulty in managing customer data will just be a cost," Moore says. “But if you get it right and integrate the data and do so efficiently, then it's going to be a real efficiency gain for the broker market too.” There is also the issue of cost versus reward to be taken into account. Moore explains: “At the moment there’s a substantial effort that goes into reasonable enquiry to validate customers’ income and expenses. What open banking will do is remove much of that effort if it gets set up in the right way.” Furnell adds: “Open banking isn’t new. It’s been part of the world’s largest economies for several years, driven by the operators in the financial sector themselves.” Aggregators and support The role of aggregators in developing insights and providing support to brokers becomes critical in this space, especially through the transition period. Moore says, “At Choice Aggregation we see any open banking supporting tools as an extension of our platform systems ... in fact, we've designed Podium (the platform that we provide to brokers) with Salesforce [a globally leading CRM system] at its core. “Having a world best practice CRM means we're really building Podium with the future in mind for open banking – the ability to accept analysis tools and the ability to capture data and to manage it all the way through to the process.” He adds that developing insights will be fundamental to open banking’s future. The risk that needs to be managed is that the more data that is shared, the greater the privacy and cybersecurity risk. AB www.brokernews.com.au
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OPINION
COMMERCIAL FUNDING COULD PLUG RESIDENTIAL GAP
As finance brokers battle to increase their business amid a residential lending slowdown, they could boost growth by diversifying their revenue streams and providing clients with commercial funding solutions, writes Matthew Johnson, co-founder and managing director of Marketplace Finance
many clients feeling the brunt of large banks having wound back property lending appetites in recent years, and given the onerous capital controls imposed by APRA, there is a clear opportunity for mortgage brokers, lawyers and accountants to move into the commercial funding space. The commercial finance market has experienced steady growth in recent years, without the peaks and troughs of residential lending. While demand from investors for residential credit dropped 0.1% during the 12 months to 30 September 2019, down from 4.6% growth over the year to September 2017, the market for business finance has been mostly steady. Business credit grew by 3.3% over the 12 months to 30 September 2019, slightly down from 4.1% in September 2017, according to data from the Reserve Bank. Separate data from the MFAA shows that in the six months from October 2018 to March 2019, the total value of commercial loans settled by mortgage brokers slipped by 1.6% from $8.94bn in the previous corresponding period to $8.79bn. So commercial credit has fallen, but not to the same extent as home lending. That brings home a very important point: residential lending is becoming more onerous and less fruitful for brokers and other referrers, and the funding gap left by banks pulling back on their commercial lending is beckoning to be filled. Herein lies a clear opportunity for commercial lending to fill the gap. This
will help brokers and others achieve greater business growth, revenue and diversification, especially given the signs that the economic outlook is improving, which will likely trigger greater demand for commercial finance. While there are a range of commercial funding platforms that can help referrers fill the gap, brokers need to be confident that if they refer clients to a platform, they will keep their clients. A broker must be able to refer a deal knowing they will not lose their client; that a funding platform will never separately market to their client. If a debt facility is ever varied or
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required to assess a deal and thus provide a funding service to their client without needing a detailed knowledge of commercial finance. Most importantly, the success of any commercial funding platform will be determined by whether brokers can write more business without losing their clients. The opportunities are there for the taking for all referrers to extend into business lending. We’ve seen that access to business finance has improved markedly since the GFC, and debt-servicing costs are near historic lows. Nevertheless, small to
Residential lending is becoming more onerous and less fruitful, and the funding gap left by banks pulling back on commercial lending is beckoning to be filled
Matthew Johnson Co-founder and managing director, Marketplace Finance
increased, the broker must be able to continue to receive payments, including trail commission. The risk of a referrer losing clients is a big fear for many brokers, and a commercial funding platform must overcome this fear. Brokers must be able to keep their clients and manage loans from an initial enquiry all the way through to loan submission, with a commercial funding portal in place to support this function. This should also allow the broker to quickly summarise the information
medium-sized businesses continue to face challenges in accessing finance, and the domestic banks have scaled back their exposures to certain higher-risk sectors such as commercial property. This is just one example of the funding gaps that brokers can help to fill. Smart brokers will identify this gap and help fill it, while diversifying their businesses and growing their client bases at the same time. As economic growth improves, the opportunities for referrers will become even more bountiful. AB
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WEBSITE Breaking news, in-depth profiles, features, online forum and Australian Broker TV
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FOR MORE INFORMATION PLEASE VISIT BROKERNEWS.COM.AU
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PEOPLE
Have an interesting deal? Had a particularly difficult or interesting deal? Why not share it with us? Email:
victoria.ticha@keymedia.com
BIG DEAL
Scott Roberts, chief executive of IBN Direct, discusses how a second opinion and collaboration led to a client’s happy ending
THE FACTS
Loan size $23.5m
Loan term Five 12-month terms
Goal To complete development in five stages
client had an existing relationship with their bank and had been verbally advised that the bank would provide the funding required for their new development – a five-stage master-planned community outside Melbourne. The client was referred to us for a second opinion by a developer we have had a long-term relationship with. The developer was concerned for the applicant, as the bank had casually and informally suggested that new covenants would apply to the new development, but that “everything was good”. In January 2014, we were asked to quote and provide conditions on a second-opinion basis as a favour to our existing clients. The applicant was a generational client of their bank and they had a long history of completing successful property developments, all funded by the same institution. The client held large parcels of land – owned outright – with plenty of equity and a small debt to the bank. In March 2014 we received a frustrated call from the client. The application had been submitted, the deal assessed, and a letter of offer issued, but two days later the client received a call from the bank, which had changed its decision. The bank said there had been a change in lending policy and it no longer had the appetite for property development in this location. It wanted to see at least 50% worth of presales and had formally placed some excessive and demanding covenants on the amended offer.
Location Greater Melbourne
www.brokernews.com.au
Aggregator None
The client’s banker said they would be delighted to revisit the project once the presales requirement was met. The client was stunned, baffled, angry and upset at what he perceived to be the bank reneging on its word. At their request, we revisited the deal with the original private lender to which we had presented the scenario. This lender took a commercial view of
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Lender Private lender
long-term relationship with the applicant and could fund the remainder of the development. However, its funds weren’t available immediately after the expiry of the original loan. This left a three-month funding gap that needed to be filled to ensure no downtime for the project. Once again, we hit our panel of funders and located a purely short-term funder that specialised in development. While it preferred to lend only in Sydney and surrounding area, it took the time to speak to both the current and future lenders along with the applicant to understand the deal, location, market and requirements. Once this new lender had completed its assessment, it advised that it was able to fund the gap. We contacted the applicant and let them know they were fully funded to completion. It was one of those goosebump moments as the applicant shared the concerns they had had that we wouldn’t be able to assist, followed by their absolute awe and delight that we had secured funding for their entire project. As at December 2019, the final stage of the development was completed. The lots have now been registered and settlements are starting to flow through. The applicant and lender have commenced discussions around the
Working with specialists in private lending ensures that you are dealing with reputable funders who maintain a commercial attitude towards decision-making
Scott Roberts Chief executive, IBN Direct
the project and were comfortable with the track record of the developer and the ongoing viability of the deal. It was happy to take on the lending requirements but advised that it could only provide funding for an 18-month period as its funds were earmarked for another larger development in the future. The client said he was thrilled with this outcome and our ability to turn around what had become a dire situation for his development and ongoing business. The loan was settled, construction began, and we undertook to find a new lender to meet the applicant’s needs long term. We sourced a new lender with similar parameters to the first. It assessed the deal, again took a commercial approach, and advised that it was interested in a
applicant’s next parcel of land to be developed, and they continue to enjoy mutually beneficial commercial arrangements. Our ability to understand the market, the applicant’s needs and each of the lenders’ requirements and funding parameters made the process relatively quick and easy to get the deal done with minimal running around for the applicant. Working with specialists in private lending ensures that you are dealing with reputable funders who maintain a commercial attitude towards decision-making. Being able to fully fund a project of this nature is exciting, and it is what we strive for. This deal was a true collaboration between all parties, which resulted in a successful outcome for all. AB
Debt-Free Finance Rules
Introducing a genuine non-debt, off-balance sheet finance option for businesses
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Fifo Capital Supply Chain Finance is suited to business who • Are small business to corporations • Use suppliers with COD or short-term payment terms • Would like to negotiate better supplier terms • Want to free up working capital • Are looking to improve their bottom line • Need to pay local or international suppliers
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To set-up a time for personalised training, facility demonstration sessions or simply find out more please call 1300 852 556 or your local Fifo Capital office today. Invoice Finance | Trade Finance | Supply Chain Finance | Business Loans fifocapital.com.au | Backing business success www.brokernews.com.au
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PEOPLE
CAUGHT ON CAMERA The FBAA’s annual National Industry Conference returned to Sea World on the Gold Coast in November with more than 900 brokers attending to ‘Challenge the Future’. Participants were inspired by a range of powerful speakers before donning rock-star jeans and leg warmers for the ’80s-themed FBAA Gala Dinner and Annual Awards of Supremacy, held at Sea World Theme Park. FBAA managing director Peter White said the conference was again a huge success and, as the nation’s largest annual industry event, is now an essential part of the broking calendar. He also congratulated members who won awards for their outstanding achievements.
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Prospa’s Alex Bondoux has been a volunteer firefighter with the Country Fire Authority for 10 years and was recently deployed to NSW for a large multi-day mission in the outer region of Coffs Harbour and Port Macquarie. He says the state is experiencing unprecedented fire activity and their crews are inundated with work and understandably exhausted. “NSW RFS have done a terrific job and have been on the go now for months, with little to no rest,” he explains. “The bushfire-affected regions unfortunately are the same communities suffering from a terrible drought. Communities both locally and interstate are bonding together, helping one another where they can, but we’re expecting that the weather that has contributed to these droughts and bushfires will continue.” Many have now lost homes, livestock, businesses, land, native animals and, sadly, even people. “I really encourage the broker and lending community to support these regional towns by buying local and seeing local attractions when they can and donating to organisations like Rural Aid or Lions Club that are providing desperate livestock with feed,” he says.
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DATA
QUEENSLAND
ACT SPOTLIGHT
Investors forced to look beyond Brisbane metro as affordability declines Housing affordability in the Sunshine State continues to decline, with the proportion of income necessary to meet home loan repayments increasing to nearly 30%, according to the latest Real Estate Institute of Australia Housing Affordability Report. However, the median family income needed to pay rents fell to 21.9%. Investors have found greater success in looking beyond Brisbane’s metro. But Kate Forbes, national director at Metropole Property Strategists, says: “The Brisbane property market is very fragmented, and even though its overall performance is languishing, well-located properties in selected suburbs show strong capital growth.” She adds that strong demand from homebuyers and investors from the southern states is putting a floor under property prices. Upcoming infrastructure projects like Queen’s Wharf and the Adani coal mine are positive indicators for the Brisbane economy, although their effect on the job market is unlikely to be seen for a while. Area
Type Median value
Quarterly
12-month
growth
growth
Brisbane
H
$535,000
0.0%
1.3%
QLD Country
H
$434,000
0.0%
-1.7%
Brisbane
U
$390,000
0.0%
-1.3%
QLD Country
U
$362,000
0.0%
-1.3%
ACT ‘TICKING A LOT OF BOXES’ Low vacancies and low unemployment mean the Australian capital is continuing its steady growth renters, Canberra is the second most expensive capital city to live in, with an average rent of $538 per week. However, this certainly hasn’t stopped tenants from filling up vacancies. “The ACT seems to be ticking a lot of boxes, with low vacancy rates and low unemployment,” says Matthew Lewison, director of OpenCorp. “This bodes well for price growth, but being a smaller market that averages only a few hundred building completions each month, a slight increase in the supply of new houses FOR
could quickly change the economics of the city from a housing perspective.” CoreLogic’s Home Value Index for September 2019 indicated that over the August–September period Canberra was among the capital cities that saw positive increases in dwelling values, averaging 1% growth, alongside price rises in Brisbane, Sydney and Melbourne. Auction activity has risen in Canberra as well, another indicator that buyers are on the move. AB
, OPPORTUNITIES AND KEY INFRASTRUCTURE
SOUTH AUSTRALIA
Adelaide homeowners have much to gain in selling off properties Some 91.3% of Adelaide property resales were made at a profit in the three months to June 2019, says CoreLogic’s latest Pain and Gain Report. In fact, the suburb of Mallala reported that 100% of resales resulted in earnings for the vendors; the suburbs of Burnside and Mitchum followed close behind, with 96.6% and 96.5% of resales generating gains. Katherine Skinner, director of National Property Buyers SA, says: “We especially like parts of the North Eastern Corridor at the moment, and there are a few suburbs within this region where we believe you cannot go wrong.” She adds: “As an investor, there is no better time than right now to be doing a complete health check and adjusting rents to keep them in line with market conditions.” The rental market is quite rosy as well, with Adelaide the only capital city to report a monthon-month increase in rents as of September 2019, according to CoreLogic’s Quarterly Rental Review. Area
Type Median value
Quarterly
12-month
growth
growth
H
$464,000
0.7%
2.7%
Median price (houses)
SA Country
H
$270,000
0.0%
3.8%
$1,031,511
Adelaide
U
$342,000
0.0%
1.5%
SA Country
U
$220,000
2.4%
10.5%
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>5 million Number of visitors to the nation's capital in the year to June 2019
2,358sqm
>$1bn
Land area of the ACT, Australia's smallest mainland territory
Value of tourism’s contribution to the ACT’s economy
SUBURB TO WATCH: GARRAN
Adelaide
26
412,576 Population of the ACT as at June 2019
Median price (units) $608,720
12-month growth
3-year growth
5-year growth
Indicative gross rental yield
-2.2%
6.4%
27.2%
3.2%
12-month growth
3-year growth
5-year growth
Indicative gross rental yield
2.6%
17.4%
21.9%
4.8%
WESTERN AUSTRALIA
Improvement in housing affordability means WA suburbs are reselling at a loss
HIGHEST-YIELD SUBURBS IN AUSTRALIAN CAPITAL TERRITORY Weekly median
Suburb
Type
Median price
Quarterly growth
12-month growth
Hawker
U
$290,000
0%
17%
$380
7%
City
U
$460,000
-2%
-10%
$600
7%
Chifley
U
$315,000
-3%
3%
$410
7%
Lyons
U
$275,000
-2%
9%
$380
7%
Turner
U
$414,000
-1%
-18%
$510
6%
Harrison
U
$375,000
-10%
-18%
$450
6%
Watson
U
$360,000
0%
-5%
$430
6%
Gungahlin
U
$380,000
-1%
14%
$450
6%
advertised rent
Gross rental yield
Franklin
U
$370,000
-3%
-3%
$440
6%
Bruce
U
$378,000
-4%
-3%
$433
Wright
U
$400,000
-3%
1%
Barton
U
$479,000
-1%
-19%
Despite some economic recovery over the past 18 months, with a significant reduction in vacancy rates and an improvement in interstate migration, Perth’s housing market remains weak. Propertyology managing director Simon Pressley says, “On reflection, we probably underestimated the volume of supply which first needed to be absorbed before prices would start to grow again.” These conditions have played a part in many WA property sellers finding it a challenge to generate a profit, according to CoreLogic’s Pain and Gain Report for the June 2019 quarter. “Around half of all properties sold in the North and South Outback areas of WA generated a loss for the seller over the June quarter,” says CoreLogic head of research Tim Lawless. Nonetheless, he explains that the continued decline in prices has resulted in housing affordability improving, with the proportion of income necessary to meet home loan repayments dropping to 22.4% – a fall of 1.5% compared to 12 months previously. Area
Type Median value
Quarterly
12-month
growth
growth
Perth
H
$475,000
-1.0%
-3.0%
6%
WA country
H
$319,000
-1.2%
-1.2%
$460
6%
Perth
U
$367,750
-1.3%
-6.0%
$570
6%
WA country
U
$195,000
-3.6%
-5.8%
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27
DATA
VICTORIA
12-month
growth
growth
Melbourne
H
$690,000
-1.0%
-4.8%
VIC Country
H
$371,000
1.4%
4.3%
Melbourne
U
$545,000
1.9%
1.5%
VIC Country
U
$283,250
2.3%
1.9%
MEDIAN HOUSE AND UNIT PRICES
Outlook is rosy for NSW as housing is expected to see strong growth
$1,000,000
Quarterly
12-month
growth
growth
Sydney
H
$870,000
-1.7%
-7.2%
NSW Country
H
$470,000
-0.2%
-0.9%
Sydney
U
$682,000
-1.1%
-4.1%
NSW Country
U
$410,000
0.0%
1.9%
28
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146
Cleared
47
Uncleared
29
Clearance rate
61.8%
PERTH Total auctions
48
Cleared
11
Uncleared
11 50.0%
Houses
Sydney Melbourne Brisbane Adelaide
Perth
Hobart
$480,000
$490,000
$360,000
$0
$347,500
$100,000
$470,000
$200,000
$310,000
$300,000
$455,000
$500,000 $400,000
$570,000
$600,000
$727,500
$700,000
$720,000
$800,000
$886,500
$900,000
The availability of housing finance is on the up in NSW following the recent downturn, and construction activity looks set to pick up in the near future, according to the latest ANZ/Property Council Survey. Jane Fitzgerald, executive director of Property Council NSW, says it is “great to see an improvement in the residential sector, with strong housing supply integral to our state’s economic future”. However, she warns that with a weaker national economy on the horizon it is imperative that the state government does not lose sight of the importance of reforms in enabling NSW to continue to thrive, allowing for continued investment in the property sector and jobs growth for the people. In line with the improvement in the overall market, rental vacancies have also been tightening again in Sydney, with the average vacancy rate hitting its lowest number in 2019. Type Median value
Total auctions
Clearance rate
NEW SOUTH WALES
Area
ADELAIDE
Units
Darwin
$440,000
Quarterly
$375,500
Type Median value
There were 2,837 homes taken to auction across the combined capital cities this week, returning a preliminary auction clearance rate of 74.5%. This was the second-busiest auction week of 2019. In the previous week – the busiest auction week of the year – 3,206 auctions were held, and the final clearance rate came in at 73.6%. One year prior, the clearance rate was just 43.8% across 1,283 auctions. Auction markets have been tested with higher volumes over the past few weeks and the highest number of auctions held over the year. Despite higher supply levels, clearance rates held above 70% across the largest markets, demonstrating that the market has some depth and sellers remain in a strong position.
$531,500
Area
WEEK ENDING 8 DECEMBER 2019
$685,000
Population growth in Melbourne is higher, unemployment lower and jobs growth stronger, which is providing a solid platform for housing demand, according to the CoreLogic Home Value Index for September 2019. Melbourne has seen a comeback in the market for high-priced suburbs as buyers scramble to capitalise on low interest rates and the loosening of lending restrictions, according to Antony Bucello, director at National Property Buyers Victoria. “[But] there are some great suburbs out there that offer bang for your buck for the savvy investor,” he says. “For example, Watsonia ticks a lot of boxes: proximity to amenities, public transport, the CBD, goods schools and parks.” OpenCorp director Matthew Lewison says, “Premium suburbs, which were the hardest hit in the downturn, are likely to see strong gains over the next few months as the cut in interest rates and softer lending assessment results in much-improved borrowing capacity for high-income earners.”
CAPITAL CITY AUCTION CLEARANCE RATES
$225,000
Melbourne bounces back as population growth spurs demand for housing
Canberra
CAPITAL CITY HOME VALUE CHANGES Capital city
Weekly change
Monthly change
Year-to-date change
12-month change
Sydney
0.4%
2.2%
4.0%
2.7%
Melbourne
0.5%
2.2%
4.3%
3.2%
Brisbane
0.2%
0.7%
-0.1%
-0.2%
Adelaide
0.1%
0.4%
-0.6%
-0.4%
-0.1%
0.2%
-6.9%
-7.6%
0.3%
1.7%
2.1%
1.2%
Perth Combined 5 capitals
*The monthly change is the change over the past 28 days
BRISBANE CANBERRA Total auctions
93
Cleared
38
Uncleared
13
Clearance rate
Total auctions
120
Cleared
46
Uncleared
25
Clearance rate
64.8%
74.5%
SYDNEY Total auctions
936
Cleared
472
Uncleared
132
Clearance rate
78.1%
TASMANIA
MELBOURNE Total auctions
1,491
Total auctions
0
Cleared
876
Cleared
0
Uncleared
288
Uncleared
0
Clearance rate
Clearance rate
75.3%
TASMANIA
Area
Tasmania’s strong economy could continue to attract buyers CoreLogic’s Quarterly Rental Review for September 2019 indicates that the median rent in Hobart hit $464 per week, one of the highest rates in the country. But for Propertyology managing director Simon Pressley, Hobart could still be in the game, given the current strong and diverse economy of the state. “Tasmania’s remarkable economic turnaround has become the driving force that produced – officially – Australia’s best-performing property market over the last five years,” he explains. “Several metrics suggest that it could now find a second wind.” These include the fact that Hobart continues to top the capital city charts in terms of jobs, tight vacancies, rising migration, and initiatives for economic development. “Hobart is still the only capital city where one can buy a detached house within 10km of the CBD for sub-$450,000,” Pressley adds.
N/A
Type
Median value
Quarterly growth
12-month growth
Hobart
H
$472,000
1.1%
6.8%
TAS Country
H
$310,000
1.6%
6.9%
Hobart
U
$360,000
1.9%
7.9%
TAS Country
U
$258,000
0.0%
0.4%
All data sourced from CoreLogic.com.au
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29
PEOPLE
IN THE HOT SEAT
Kevin Frost, head of lending solutions at Centrepoint Alliance, discusses the benefits of boutique aggregators, as well as the biggest challenges for the industry in 2020 and how best to tackle them
Who or what inspired you to join a boutique aggregation business? I love the relationships you can build with all of your brokers when A working in a boutique aggregation busines. There are no numbers; every broker is important to us and gets attention. I also love that we can implement a model that allows every broker plenty of face time with our business development staff, when we can help and assist them in relation to their specific needs. Obviously, the scale can be an advantage, but some brokers really value personalised support.
Q
What is the greatest challenge for aggregators right now? The speed and degree of regulatory change has certainly been a A challenge for all aggregators in 2019. While it seems that things have calmed, there is no doubt that as we move forward into 2020 the best interests duty and remuneration reviews will be key, so it will be important to plan ahead of the curve and take regulation very seriously.
Q
What’s one of your recent career highlights? We were recently a finalist in the Australian Mortgage Awards under A the Aggregator of the Year (Up to 500 Brokers) category, which was a thrill. But perhaps the biggest highlight for us was putting the submission together, outlining all the services we provide and the programs we have put together for our brokers. Often, it’s not until you see it on paper that you realise the hard work you put in and your achievements.
Q
What’s your favourite way to relax after a stressful day at work? I live on the Gold Coast with my wife Robynne, and son, Jamison. A We are blessed to live in a wonderful spot on a waterway with a boat on our pontoon. Unwinding to me is cruising the Broadwater, anchoring out, fishing, swimming, playing some music, eating great food with a beer or a wine under the Gold Coast sky – that’s about as good as it can get, in my opinion. Beautiful sunshine during the day and glorious stars at night.
Q
What do you wish you’d known when you started out in the industry? There are probably a few things: how to play the guitar would be one! A Seriously, though, the easiest way to the next loan is through great customer outcomes. Compliance protects customers, but we shouldn’t need it. Just look after the client, stay in touch with them, do the right thing, act in their best interest, and the loans will come! Great brokers are talked about by their clients, and that’s why they are successful. AB
Q
30
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OUR NEW PROPERTY PRICE PREDICTOR
Now available in the updated ANZ Property Profile Report. Order directly via ANZ Valuation System or call ANZ on 1800 812 785
Property price predictions are estimates, not valuations. Predictions are available for listed properties only (exceptions apply), are for personal domestic use and may change daily. Actual sale prices may be different. Applications for credit are subject to ANZ’s credit approval criteria. Australian Credit Licence Number 234527. ANZ’s colour blue is a trade mark of Australia and New Zealand Banking Group Limited (ANZ) ABN 11 005 357 522. 32
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