JULY 2020 ISSUE 17.14
E-signatures adopted As the big four bank unrolls e-signature capabilities, it seems tech advances are here to stay /08
Commercial finance What is the current state of play – and is this the time for brokers to diversify into commercial? /14
DEFERRAL EXTENSION With the September deadline for home loan repayment deferrals looming, banks have said borrowers can now defer for up to four more months /20
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Humans of SKY Broker John Ng’s initiative helps combat loneliness and isolation within his community /18
ALSO IN THIS ISSUE… The new normal There are two overarching considerations, argues risk expert Dr Gav Schneider /23 Not a ‘punitive regime’ Final regulatory guidance has been released for the best interests duty /24 In the hot seat Dan Peters: giving back to the community in a more meaningful way /30
20/07/2020 12:51:20 PM
NEWS
IN THIS SECTION
Lenders Bank of us introduces ‘history-making’ fi xed rate /04
Industry groups Final BID regulatory guide altered by COVID /06
Market Home loan commitments plummet in May /10
Aggregators AFG reports highest quarterly lodgements result /12
Technology Big four bank unrolls e-signature capabilities /08
www.brokernews.com.au JULY 2O20 EDITORIAL
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Editor Sarah Megginson
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News Editor Madison Utley Production Editor Roslyn Meredith, Clare Alexander
GLOBAL WATCH How is the mortgage and broking world responding to the COVID-19 pandemic overseas? Here’s your snapshot of the news that matters most to the mortgage industry in the US
STEADY RATE OF RENTAL AND HOUSING NON-PAYMENTS the fourth straight month, a historically high number of renters and FOR homeowners in the US were unable to pay their full housing bill. Apartment List found that 32% of Americans did not make a full on-time housing payment in July, up slightly from 30% in June. “This is really signalling that we’re far from having this behind us, and this will be an ongoing issue for the housing market,” said Chris Salviati, housing economist at Apartment List. In June, the national unemployment rate dropped to 11% as a result of states partially or even fully reopening. While this seemed like a positive signal, the data shows that difficulty with housing payments is not improving quite yet, despite a sprinkle of optimism in the economy. Particularly with the recent spikes in coronavirus cases, reopening plans are being reversed or delayed in some cases.
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AS COVID-19 LINGERS, FRAUDSTERS TARGET BORROWERS remarks to the US Senate Judiciary Committee (SJC) on 9 June, the assistant director of the FBI’s Criminal Investigative Division described for lawmakers a range of schemes being used to defraud unsuspecting Americans during the coronavirus pandemic. Rather than being brought under control, Calvin A. Shivers explained to the SJC that the threats had only become more frequent and sophisticated. “Moreover,” he said, “they adversely affect the United States by destabilising our financial system and institutions and harming people at higher risk, including older adults and people with underlying medical conditions.” Examples of the impact of fraud include business owners being unable to apply for PPP loans because their employer identification numbers have been stolen and used for fraudulent loan applications; and business email compromise schemes, similar to phishing scams, that fool businesses into sending information to what they think is a familiar email address.
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MARKET ON ROAD TO RECOVERY, SAY REAL ESTATE AGENTS than 90% of realtors in the US believe the market is on the road to recovery after months of setbacks brought on by the COVID-19 pandemic, according to a new study. The National Association of Realtors’ (NAR’s) 2020 Market Recovery Survey polled real estate agents about their respective commercial and real estate markets. Ninety-two per cent of respondents said that a portion of their buyers had either returned to the market or had never left. “The residential market has seen a swift rebound of activity as numerous states have begun to ease mandatory stay-at-home orders,” said Lawrence Yun, chief economist at NAR. “After being home for months on end – in a home they already wanted to leave – buyers are reminded how much their current home may lack certain desired features or amenities.”
Simon Kerslake +61 2 8437 4786 simon.kerslake@keymedia.com.au
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20/07/2020 12:52:28 PM
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20/07/2020 12:53:28 PM
NEWS
LENDERS DEFENCE BANK ANNOUNCES BIGGEST LENDING YEAR EVER non-major bank has achieved a record year of lending, reporting that its overall home loan portfolio growth has come in three times stronger than expected, despite the significant challenges Australia has faced over the last year. According to Defence Bank CEO David Marshall, the group’s “purpose over profit ethos” has helped it attract many new customers. “These results show that in banking you can be small but achieve big things,” Marshall said.
RECORD-LOW INTEREST RATES AT BANK OF US Source: Bank of us
A
has appointed Andrew Irvine as its new group executive for business and private banking. Irvine brings to the role nearly 25 years of experience in financial services, having previously been head of Canadian business banking at the Bank of Montreal, where he had end-to-end accountability for the division and was responsible for increasing customer loyalty, growth and market share through engagement.
“We can hold true to our original purpose by providing competitive banking products and services … designed by Tasmanians for Tasmanians” Paul Ranson CEO, Bank of us
4
Maximum loan-to-value ratio that rate can apply to
1–3 years Loan terms available
NAB NAMES NEW BUSINESS BANKING EXECUTIVE NAB
90%
1.99%
Record-low fixed interest rate on offer
BANK OF US INTRODUCES ‘HISTORY-MAKING’ FIXED RATE A non-major bank has announced a record-low fixed rate for new lending of just 1.99% customerowned Bank of us has introduced a “history-making” special fixed home loan product with an interest rate of just 1.99%. Bank of us CEO Paul Ranson expressed hope that the offer would help ease some of the challenges faced by borrowers in the current climate, and provide customers with “peace of mind” in knowing exactly how much their repayments would be each month. “At times like these, we know that Tasmanians have enough to worry about,” said Ranson. The interest rate special is available for one-, two- or TASMANIA-BASED
three-year terms on up to 90% property value on the Bank of us FlexiDiscount home loan product. “People are often hesitant to take on a fixed rate as they worry that they’ll be stuck with a high standard variable reference rate at the end of the fixed rate term,” said Ranson. “Well, at Bank of us we do things a little differently by offering loan revert rates that mirror our best rates in market, dependent on the loan-to-value ratio. With this in mind, we’ve gone ahead and reduced our FlexiDiscount variable rate for lending below 80% property value by 10bps to a competitive
2.83% with a comparison rate of just 2.85%.” The fixed rate special went live on 30 June 2020 and is available for a limited time. Although the offer is likely to be enticing for mortgage borrowers across the country, it is only available to Tasmanians purchasing or refinancing against a property security within Tasmania. Bank of us was established in 1870 as a building society around the singular goal of providing housing finance to help make it possible for Tasmanians to own their own homes. “Fast-forward to today and we’re in an enviable position where we can hold true to our original purpose by providing competitive banking products and services that have been designed by Tasmanians for Tasmanians,” Ranson concluded.
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20/07/2020 12:55:13 PM
NEWS
INDUSTRY GROUPS
COMPLAINTS TO AFCA UP 13.7% YEAR-ON-YEAR FY2019/20, Australians lodged 80,546 complaints with AFCA – a 13.7% increase in monthly complaints compared to the year before. Between 1 July 2019 and 30 June 2020, consumers secured $258.6m in compensation and refunds, with 73% of conflicts settled by agreement or in favour of the complainant. Banks were the most complained-about financial institution. According to CEO David Locke, most complaints were about credit, insurance claims, and superannuation. OVER
FINAL BID REGULATORY GUIDE ALTERED BY COVID-19 In the final Regulatory Guide 273 for the best interests duty published in late June, ASIC introduced two topics that were not covered in the draft materials new inclusions in the final regulatory guide to the best interests duty have clarified that brokers are expected to factor both current promotional offers from lenders and the availability of government schemes into their decision-making on which loan products will best meet their clients’ needs. According to ASIC commissioner Sean Hughes, the regulator has aimed for the guidance to be “as contemporaneous as possible”. “We are really dealing with the in-the-moment factors as and if they arise,” said Hughes. Regulatory Guide 273 listed cashback or rewards points offers, waived or reduced fees, or discounted interest rates as examples of the promotional offers credit providers may use to “entice customers to take out their products”. ASIC’S
6
“We expect that any promotional offer that is quantifiable will be considered as part of the cost of the credit product,” the final guide reads, emphasising that brokers should be aware of the eligibility criteria, exclusions and time limitations around such offers. “You should also consider whether a lower interest rate, or other features such as an offset account, would provide more benefit to the consumer than the short-term benefit offered by the promotion,” the guide continues. “For example, where a consumer has short-term expenses or debts, a cashback offer may provide them greater value than comparatively marginal cost savings over the life of the loan.” However, RG 273 also acknowledges that the value of
some promotional offers is not as easily quantified, at which point it explains that brokers must use their discretion to determine what is most valuable according to the priorities of specific consumers. As for government schemes, the guidance stressed that brokers should take particular care to research available options when working with first home buyers, pensioners or social housing tenants. “We generally expect you to educate consumers about the availability and eligibility requirements of these schemes. You may also help consumers to assess their eligibility and the potential benefits of the schemes,” the guide reads. Notably, it was not only the contents of the guidance that was impacted by the COVID-19 pandemic but the entire timeline for implementation. “We thought the entirety of the economic environment we are in made it appropriate to give brokers additional time. We think six [extra] months is about right, and don’t envisage there’ll be any change to the commencement date of 1 January 2021,” Hughes said.
SECOND ROUND OF FHLDS SCHEME KICKS OFF 1 July, 10,000 new places under the First Home Loan Deposit Scheme (FHLDS) became available for FY2020/21, with the same 27 lenders participating as in the first round. “To date, we’ve seen widespread appeal of the scheme across all states and territories ... Notwithstanding the current challenges posed by COVID-19, we anticipate that there will be continued demand for these new 10,000 places,” said National Housing Finance and Investment Corporation CEO Nathan Dal Bon. FROM
“We believe the [RG 273] changes have strengthened and clarified the guidance on broker obligations and the manner in which compliance with the new legislation will be assessed” Mike Felton CEO, MFAA
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20/07/2020 12:55:48 PM
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20/07/2020 12:56:30 PM
NEWS
TECHNOLOGY
NON-BANK UPDATES BROKER TECH FUNCTIONS has appointed a new general manager to head up origination channels and roll out upgrades and enhancements for its broker partners as part of its digital transformation. Chris Meaker, formerly the lender’s head of third party operations and transformation, has taken on the role of executive general manager, head of origination channels. Enhancements include the recent June upgrade to the lender’s ApplyOnline lodgement process, which now has a Supporting Documents functionality. LA TROBE FINANCIAL
FINTECH CLOCKS UP BIG GROWTH DURING COVID-19 86 400 has reported rapid growth in its digital mortgage offering, driven by an increase in broker lodgements during the lockdown period. Since launching exclusively via the broker channel in November last year, the lender has notched up $40m of loans settled or awaiting settlement. According to CEO Robert Bell, this growth can be attributed to its strong aggregator partnerships that have enabled it to accredit more brokers, as well as to its completely digital mortgage processing experience. NEOBANK
“While the current operating environment has accelerated its launch, the introduction of end-to-end mortgages has always been the next natural evolution of our strategy” Steve Kane General manager of broker distribution, NAB
8
BIG FOUR BANK UNROLLS E-SIGNATURE CAPABILITIES Eligible NAB customers across the country will be able to digitally sign their home lending documentation with the eSign feature powered by DocuSign its recent digital professional development day, NAB provided more than 4,500 viewers with an update on the digital enhancements being made to its residential and commercial broker propositions. A key announcement was the news that in the coming months eligible NAB customers across the country will be able to digitally sign their home lending documentation with the eSign feature powered by DocuSign. The capability was rolled out first in Victoria from 29 June, and then in New South Wales from 6 July. “While it’s fair to say the current operating environment has accelerated its launch, the introduction of end-to-end mortgages has always been the AT
next natural evolution of our strategy,” said Steve Kane, NAB’s general manager of broker distribution. “As the bank behind brokers, NAB will continue to invest in improving the lending journey for brokers and their customers in a streamlined and supported way.” The introduction of e-signature capabilities by the lender is timely as a recent survey conducted by NAB revealed that time frames and lending criteria are brokers’ most pressing concerns for the next 12 months, with nearly 40% of respondents naming one of the two factors as top of their list of concerns. The survey of over 1,800 brokers also revealed concern over slow economic recovery
(23%), the ability to stay across changing regulatory and education requirements (20%) and being able to grow or maintain their client base in the aftermath of the COVID-19 pandemic (19%). According to Kane, the survey findings highlight that brokers are more focused on the customer relationship than ever before. “There’s no doubt today’s complex environment has created more immediate challenges for the broking industry, beyond the usual legislative and regulatory developments,” he said. “[But] even with everything happening in the world right now, the primary concern for brokers at this time remains focused squarely on how they can best service their customers and achieve the best outcomes.” Kane reiterated that the current climate is leading brokers to find innovative ways to service and connect with their customers, which has “shown how flexible and adaptable our industry can be,” he added.
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20/07/2020 12:58:54 PM
TECHNOLOGY UPDATE
MODERN TECH STACK HELPS BROKER DEFY DISRUPTION “Although it’s been a challenging year, we’ve been able to weather it well due to our leading-edge technology stack and our ability to get the most out of it” Gio Migheli, co-founder and principal mortgage broker
a paperless office was among Astute North Sydney’s key goals when the brokerage opened its doors three and a half years ago. Co-founder and principal mortgage broker Gio Migheli says the ease with which their goal was attained reflects the high performance and seamless integration of their electronic lodgement and CRM system. “We’re very tech focused,” Migheli says. “Our aggregator has developed a cloud-based CRM tool called GEM, which is at the forefront of a lot of systems out there. “GEM is highly integrated with our lodgement platform, ApplyOnline – a comprehensive service that gives us access to all lenders’ serviceability calculations in real time, and enables us to efficiently and effectively achieve loan processing while avoiding time-wasting procedures.” The past 18 months have seen significant disruption, from the Royal Commission threatening revenue models, to additional compliance requirements, ACHIEVING
to bushfires, floods and the coronavirus pandemic. However, Astute North Sydney has succeeded in remaining virtually untouched by any of this, due essentially to its ability to leverage the full potential of leading technology like ApplyOnline to streamline and secure operations. “Gio undertook ApplyOnline training through AMP to help maximise their solutions and enhance their value proposition from a processing perspective,” says NextGen.Net Chief Customer Officer Tony Carn. “The basics of technology for brokers are pretty straightforward and easy to understand. What training does is highlight all the bells and whistles that you don’t necessarily find on your own. “One or two hours [of training] for you and your back-office staff enables you to get a handle on best practices and using the software to maximise efficiencies.” Migheli agrees, saying that while he was across most of the ApplyOnline user-friendly
technology, training gave him insight into the functionality of specific tools to achieve faster turnaround times. “I did learn a couple of really useful things, such as uploading large files in the ‘Supporting Documents’ service,” Migheli says. “Supporting Docs is excellent because we can upload documents to the correct section, which then allows the credit assessor to access that information immediately and make a quick decision on the loan approval. “From Supporting Docs to the new Document Verification Service (DVS) and ‘eSign’, to the whole range of efficiency tools and policy metrics within ApplyOnlne – it’s all easy! You just follow your nose. It’s a logical process. If it’s not right, you discover that during the process so you can correct it and put the right document up as you go,” Migheli adds. NextGen.Net trains over 5,000 brokers a year, something Carn is proud of. “Brokers are the backbone of NextGen.Net, and
we are proud to support our users and continue to add value to their day-to-day operations.” Joining in the conversation, NextGen.Net Customer Success Manager Amanda Ray reaffirms the value of brokers taking up the complimentary training, saying: “We mightn’t be as challenging as IKEA flat packs, but most brokers use a tool such as Supporting Documents without first consulting the instruction manual and then end up with a couple of loose screws at the end.” Migheli agrees and is looking forward to attending more training as the ApplyOnline platform evolves, declaring: “Although it’s been a challenging year, we’ve been able to weather it well due to our leading-edge technology stack and our ability to get the most out of it; and looking ahead, I’m predicting that we’ll be in an even stronger position when the market bounces back.” Brokers, and lender and aggregator BDMs can register for upcoming CPD-accredited ApplyOnline training at nextgen.net/applyonlinetraining.
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20/07/2020 12:59:19 PM
NEWS
MARKET ACTUAL CASH RATE SITTING LOWER THAN 0.25% the Reserve Bank held the official cash rate at 0.25% for the fourth month in a row in July, a researcher has helped explain how lenders have managed to continue cutting their interest rates nonetheless. “In a recent address by deputy Reserve Bank governor Guy Debelle, it was made clear that although the cash rate target has remained at 25 basis points, the actual cash rate traded in the market has reached around 13 to 14 basis points, which contributes to further reductions in funding costs,” explained Tim Lawless, CoreLogic’s head of research. WHILE
WEAKER HOUSING MARKET DRIVING MILLENNIAL ACTIVITY homebuyers are taking advantage of the weaker housing market brought about by the COVID-19 pandemic to achieve their homeownership goals, according to a new report from ING. The report revealed that almost half (46%) of millennial homebuyers say COVID-19 has made homeownership “more achievable”, while a third (32%) say they’ll buy a home “within the next one to two years”. Millennials are redirecting travel budgets to a home savings account (59%), taking on a side hustle (37%), and moving back in with their parents (36%). MILLENNIAL
HOME LOAN COMMITMENTS PLUMMET IN MAY New loan commitments for housing showed a record drop month-on-month in May, according to seasonally adjusted figures from the ABS chief economist Bruce Hockman said the fall in home loan commitments by 11.6% in May was largest on record and mainly driven by “strong falls” in NSW and Victoria. Broken down, the value of new loan commitments for owneroccupier housing fell 10.2%, while investor housing fell 15.6%. Meanwhile, the number of owneroccupier first home buyer loan commitments fell 9.3%. “While reduced transactions in the housing market stifled new loan activity in May, the value of existing owner-occupier loans refinanced with a different bank was by far the highest on record as borrowers responded to reduced interest ABS
rates and refinancing offers,” Hockman said. However, refinancing was up 27.5% from April and 91.6% from the year prior – the largest monthon-month increase since July 2002. Adrian Kelly, president of the Real Estate Institute of Australia, said the fall was not unexpected as “restrictions on movements throughout the month were in place and a general air of caution about the economy and its impact on activity in the housing market prevailed, suggesting that this would be the case”. “While reduced transactions in the housing market stifled new loan activity in May, the markets have held up through a low level
of supply. A situation that is continuing in the larger markets,” said Kelley. Canstar finance expert Steve Mickenbecker said investors would “continue to be bearish, with new commitments at their lowest level since November 2002”. “The new ABS lending commitment statistics are bad news for economic recovery, but borrowers are reshuffling the deck chairs, switching into well-priced loans in this highly competitive lending market,” said Mickenbecker. May recorded the biggest monthly drop in the value of new home loans settled due to a number of factors, including nervous vendors pulling the pin on listings, and onsite auctions being banned for a number of weeks. These restrictions have been eased across the country, except for in Melbourne, which is undergoing a second wave of virus infections and is (at time of writing) under lockdown once again.
“The markets have held up through a low level of supply – a situation that is continuing in the larger markets” Adrian Kelly President, Real Estate Institute of Australia
DECLINE IN HOME LOAN COMMITMENTS, MAY 2020 Source: ABS
Month-on-month fall in home loan commitments Month-on-month fall in owner-occupier home loans
Increase
10.2%
Month-on-month fall in investor home loans Month-on-month fall in first home buyer loans Month-on-month increase in refinancing
10
Fall
11.6%
15.6% 9.3% 27.5%
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13/02/2020 10:31:15 PM 20/07/2020 1:00:25 PM
NEWS
A G G R E G AT O R S
EDUCATION SERIES FOCUSES ON FEMALE CLIENTS has launched a new “female-centred” education series focused on providing “practical strategies to help brokers, their clients and their families” through the financial challenges of COVID-19, with a particular emphasis on supporting brokers with a high number of female clients. The ‘Empower’ series includes four webinars, all accredited for CPD points. The first was delivered in June and the rest will be released in July, August and September. CONNECTIVE
BACKING FROM STANDING COMMITTEE ‘VALIDATING’ House of Representatives Standing Committee on Economics’ questioning of the logic of overhauling the current broker remuneration model has been welcomed by the head of an aggregator group as reassuring and validating. “Recognition from the committee that Hayne’s recommendation to adjust the broker remuneration model, particularly regarding trailing commissions, has missed the mark is encouraging,” said Connective director Mark Haron. THE
“As some of the refinance incentives from the majors wound down, the market responded ... with a flurry of activity for first home buyers” David Bailey
CEO, AFG
12
AFG REPORTS HIGHEST QUARTERLY LODGEMENTS RESULT The aggregator saw its largest growth in quarterly lodgements between April and June at almost $17bn – a 30% increase on the same time last year Australian Finance Group has recorded stunning growth in loan lodgements during the pandemic period – and some of that growth has come from an unlikely place, according to CEO David Bailey. Bailey said it had been “very interesting” to see where mortgage activity had come from in recent months, as consumer behaviour had wildly shifted over the three-month period. “Ending the previous quarter, refinancing activity was extremely strong. As some of the refinance incentives from the majors wound down, the market responded in a different manner, with a flurry of activity for THE
first home buyers aided by the various government incentives, and an increase in upgraders from those more confident in their financial position,” Bailey explained. According to the AFG Index, first home buyer numbers surged to 21% in June, up from 12% in April, whereas refinancing activity peaked at 38% in April before coming to rest at 23% upon the close of June. Upgraders increased from 36% at the beginning of the quarter to 42% at its end. The index also emphasised that the major banks’ reclaiming of market share seemed to have peaked at 70% earlier in
the quarter before settling back down to 60% in the month of June. “Extremely competitive offers from the major lenders, including cash incentives of up to $4,000, led to a drop in market share for the non-majors. However, processing bottlenecks began to impact turnaround times for the majors by the close of the quarter, and the nonmajors have begun to take back some ground,” said Bailey. “ANZ was the big winner among the majors, from 9.92% market share last quarter, rising as high as 36.87% in May, driven by cashback offers and low fixed rate products. They increased their market share of fixed rate products to 33.66%.” Conversely, Westpac’s share of the loan market slipped from 20.14% at the close of the third quarter to 12.38% at the end of June as a result of its struggles with turnaround times.
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20/07/2020 1:01:01 PM
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23/03/2020 9:24 AM 20/07/2020 1:01:45 PM
FE AT URES
SPECIAL REPORT
COMMERCIAL FINANCE: WHAT IS THE CURRENT STATE OF PLAY? No one could have predicted the twists and turns that 2020 has delivered for the commercial property and finance market. But as we cautiously emerge from the worst of the pandemic, what does the road ahead look like for this sector?
COMMERCIAL SNAPSHOT: CBD OFFICE RENTALS
-7%
fall in Sydney prime office CBD rents
-5.4%
fall in Melbourne prime office CBD rents
-6%
fall in Brisbane prime office CBD rents
Source: CBRE Research, Q2 2020; data for 12 months to June 2020
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impact of COVID-19 has resulted in varying degrees of softening of the property market across Australia. In some areas, this softening is more pronounced than in others – and the commercial property market has borne the harshest brunt of the lockdown laws that swept the country in April and May. Considering the current environment, a softening of the market is to be expected, says Peter Vala, general manager, partnerships and distribution, at Thinktank – yet at the same time, it’s not the case that all commercial properties are responding in the same way. “At Thinktank we cover all of the main commercial property segments, namely industrial, retail and office space. Understanding how these markets are being impacted is critical,” Vala explains. “Our analysis illustrates the following trends: office has moved from good/fair to stable but will be impacted further by the reinstatement of COVID-19 restrictions in some areas and how businesses respond to stay-at-home [orders]. Industrial is proving remarkably resilient so far, with all capital cities continuing to maintain a stable position. Not surprisingly, retail has been worst hit, with the segment now rated as deteriorating and likely to continue in this direction for the foreseeable future.” Brokers need to be aware of these trends so they can respond THE
appropriately to their existing clients and be ready to take advantage of opportunities when the market recovers, Vala adds. “The current market is presenting some significant challenges, but it will also present significant opportunities when more normal levels of economic activity and business confidence return,” he says. Commercial property expert Scott O’Neill, director of Rethink
May and June, most affected businesses are now back paying full rent,” O’Neill says. “Other businesses were never affected, such as those based in industrial properties; the majority of logistics, trade and storagerelated businesses were able to operate even in the worst parts of the closure.” As a market snapshot, O’Neill says he has helped a range of clients purchase over $820m in properties;
“Diversification has never been more important, and adding commercial lending to your offering means that you have more ways to help a wider range of customers” John Mohnacheff, group sales manager, Liberty Investing, agrees with Vala that certain sectors of the market were hit harder than others. Any businesses that were forced to close, for instance, such as gyms, restaurants and other nonessential businesses, suffered the most throughout March and April due to COVID – and many are still struggling to get back on their feet. “These businesses often entered agreements with landlords for reduced rents for the months they were affected. We have seen that, as restrictions eased throughout
in that mix, a significant 95% of commercial properties “had no financial impact due to COVID”. “This is mostly because we target essential-service-type properties and industrial assets. If you stick to these types of properties, your odds of success will be greater in these strange times,” he says. Interestingly, leading up to the pandemic, the commercial property market was experiencing steady growth and was increasingly catching the interest of savvy property investors.
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Peter Vala, general manager, partnerships and distribution, Thinktank
John Mohnacheff, group sales manager at Liberty, says part of the reason why commercial property saw such an increase in popularity is that it offers so many different opportunities to invest – from office space and shopfronts to warehouses and factories. “By implementing safety precautions and following the relevant social distancing guidelines, many factories and warehouses have been able to continue their usual operations. And although many retailers have seen a significant reduction in foot traffic, online shopping has seen a spike, which has enabled many businesses to continue trading,” he says. “In the current climate, where the stock markets are in flux and reacting to world events, opportunities may emerge for astute commercial property investors, especially those investors that take a longer-term view of their investments.” Just where do these opportunities
lie, then? And how long will the pandemic and its associated health and economic influences continue to impact the commercial property and finance markets? “Coronavirus is forcing some
John Mohnacheff, group sales manager, Liberty
funds going to online marketing. Retail shopfronts may find that operating 100% online could be a better financial option, and flexible work agreements will continue to grow,” O’Neill says.
“A trusted broker who can help preserve and/or enhance cash flow reserves will be worth their weight in gold. And they’ll be sought after when pent-up demand emerges” Peter Vala, general manager, partnerships and distribution, Thinktank businesses to change the way they operate permanently. For example, some are shifting so they don’t rely so much on overseas manufacturing. Marketing spending may change, with less money spent on things like conferences and more
“Commercial investors must think about how these types of changes may affect commercial assets. Some business in retail and office markets may find they need less space as their businesses are not in growth phases, so this might
cause rents to decline in these at-risk segments of the market. But I see strength in the industrial markets as local manufacturing grows and there is a greater need for storage as online sales boom. Many boutique medical and office commercial purchases are also performing strongly.” With exceptionally competitive mortgage interest rates on offer, along with a broad range of high-yielding properties with long leases, O’Neill believes commercial assets will gain in popularity again as investors turn away from residential markets that have a weaker outlook for growth. “More people will flock to commercial for the cash flow that residential properties just can’t offer. This is contributing to capital growth, which has been evident in many markets throughout 2020,” he says. Thinktank’s Vala confirms that freeing up cash flow is where brokers can provide great value to www.brokernews.com.au
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“More people will flock to commercial for the cash flow that residential properties just can’t offer. This is contributing to capital growth, which has been evident in many markets throughout 2020” Scott O’Neill, director, Rethink Investing
Scott O’Neill, director, Rethink Investing
their clients at a time like this and unlock the best opportunities. “One way to help clients improve their cash flow is to restructure finances to the lowest monthly loan repayments possible, whilst still retaining the ability to amortise the loan at an accelerated rate if surplus cash is available. Another way is to explore releasing some equity, or establish a line of credit/working capital facilities in case the business is rocked by further lockdowns or shocks to trade,” Vala explains. “A trusted broker who can help preserve and/or enhance cash flow reserves will be worth their weight in gold. And they’ll be 16
sought after when pent-up demand emerges as it always does after a lull in lending activity.” In the second half of 2020, it’s “never been more important” for a broker to have an in-depth understanding of their clients’ needs and circumstances, and to respond quickly and flexibly, Vala says. “At Thinktank, our loans do not have annual reviews or revaluation requirements, making it easier for clients to navigate the challenges of COVID-19. But this is not the case with many lenders, so the onus is on the broker to ensure that their client can meet those review requirements and make the
process as smooth as possible. This is vitally important and will be one of the critical issues brokers will need to face,” Vala says. One of the strategies to consider is holding interim financial statements from July 2019 to end March 2020 to show the performance of a business prior to any impact of COVID-19, he advises. “Also, take care if using BAS statements to verify income as they may be reflective of a quieter last quarter and not be a true indicator of that client’s current and future trading and cash flow position. If brokers need assistance, Thinktank offers a range of alternative income verification solutions beyond just BAS,” Vala says. While this is a difficult time for the commercial finance and the broader property industry and finance market, Liberty’s John Mohnacheff remains optimistic that there are more opportunities now than ever for brokers to demonstrate their value to borrowers. “With many changes and increased uncertainty, it is so important for commercial property investors to have the guidance and support of a trusted broker. This presents an ideal opportunity for brokers to help customers through challenging times and build strong, lasting professional relationships,” he says. “Communication is key – and it’s important to let customers know about all the many ways you can support them with their lending needs. From here, the possibilities truly are endless. The
need for commercial lending is extensive, from office premises and furniture fit-outs to tools, trucks, training equipment – you name it. There are endless reasons why a business owner may require business or commercial finance, and even more opportunities for brokers to help. Diversification has never been more important, and adding commercial lending to your offering means that you have more ways to help a wider range of customers.” With no crystal ball to make predictions for the future, and the pandemic still an issue that’s evolving by the day, this is the time to reinforce commercial property investors’ need to take a longer-term view of their investments. “The market will continue to evolve, and although there is currently some uncertainty about the future, the commercial property market is anticipated to recover well post-COVID-19. We listen to what’s important to business owners and then construct innovative offerings to suit their needs. Helping business owners achieve their financial goals is our highest priority, and we’re committed to finding new solutions to help brokers take their businesses to the next level,” Mohnacheff says. “Mortgage brokers have more than 50% market share of the residential lending market, but when it comes to commercial, their market share is less than 5%. The opportunity is enormous, and you will be doing your community a great service by helping meet the needs of that market.” AB
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PEOPLE
Have an interesting deal? Had a particularly difficult or interesting deal? Why not share it with us? Email:
sarah.megginson@keymedia.com
BIG DEAL It should have been a straightforward deal: an equity release to fund cosmetic renovations. However, a strange interpretation of credit policy left these borrowers in the lurch – which is when broker Thuy Hook stepped in to save the day THE FACTS
Client Middle-age couple with two teenage children
Loan size and term $750,000 over 30 years
Goal To refinance and cash out $60k for cosmetic renovations
Location Brisbane metro
Aggregator Choice
works would be reduced. Prior to gutting the kitchen, the customers contacted their lender to seek approval for the $60,000. They received conditional approval subject to a restricted valuation, and their banker said this would not be a problem. The customers proceeded with gutting the kitchen. Suddenly, they received a call from a valuer asking to book in an appointment to view the property. The customers agreed, and the valuer inspected the house. The day after, their lender contacted them to advise that the loan had been declined, saying the house was “uninhabitable” due to the missing kitchen.
THE SCENARIO
When you’re presented with clients with long-term stable employment, an existing well-conducted home loan, no credit issues, minimal other debt, strong servicing and plenty of existing equity in an established Brisbane metro house, you’d probably assume that the home loan application would be approved without any issues. This story reflects how something simple can quickly become a ‘big deal’. When my clients came to see me, they assumed their loan would be easy to get. The reality, however, reflects how customers can be caught in a credit policy nightmare. They had been with their existing lender for 10 years and thought their loyalty to the lender would be enough to get this application approved. I won’t name the lender, but this story should serve as a warning to any borrower who thinks their lender will reward long-term loyalty. The customers had engaged the services of a licensed tradesman to build a new kitchen and bathroom. They were seeking to access $60,000 from their loan to fund this renovation, which would allow them to update their 1970s house. Other than the kitchen and bathroom, the rest of the money they were seeking to borrow was to install new carpet and floorboards, as well as repair the roof, guttering and fencing. There weren’t any structural changes to the property that required council approval; this was purely a cosmetic renovation, along with essential repairs to help prevent issues in the future. The issue arose when the couple were advised by the tradesman that they could save costs if they gutted the kitchen themselves. If they did this, the quote for
Lender Westpac
good existing connection; a lender can make a small issue into a big deal. I needed to find a lender that would consider the entire deal from a risk perspective, while making sure I could offer the customers a loan that suited their requirements. I knew I needed to get another valuation to see if the valuer would consider the house to be acceptable security for a proposed lender. I arranged a new valuation and informed the valuer upfront about the gutted kitchen. Fortunately, the valuer deemed the house to be satisfactory and commented that the kitchen, although gutted, did not render the house uninhabitable. The next issue was to find a lender with competitive interest rates that would take a holistic view of credit risk. I workshopped the deal with Westpac, which approved it with no issues whatsoever. THE TAKEAWAYS
Customer loyalty is not rewarded by some lenders, both in the pricing of their existing loans and when customers think the lender will use sound credit risk judgment. Lenders need to remember that a credit policy manual offers guidelines for differing matters, but a manual does not weigh up the overall credit risk. This lender has now lost a strong and loyal customer because they put a credit policy manual ahead of
This lender has now lost a strong and loyal customer … it’s unlikely I will consider this lender for my future clients if they cannot look after their customers It turned out that the lender had mistakenly ordered a full valuation when it should have been a restricted valuation. The customers appealed to the lender, which refused to budge, stating that it could not approve the $60,000, as the house was uninhabitable. The lender then accused the customers of modifying their security without permission. THE SOLUTION
Thuy Hook Owner and mortgage broker, EZ Financing
Lenders can sometimes prevent good deals from being written purely due to credit policy. It makes no difference if the customer has an impeccable history and a
sound credit risk. Plus, it’s unlikely I will consider this lender for my future clients if they cannot look after their customers in a holistic manner. I’m delighted I could help my customer in this scenario. I didn’t think this loan would be a ‘big deal’, but my customers now have a beautiful home they can be proud of and are paying 1% less in interest rates than they were previously. I thought this deal presented an acceptable credit risk to the existing lender, but this story should serve as a warning to lenders: if you make a small issue into a big deal, then your customers will walk away. AB www.brokernews.com.au
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COMMUNIT Y
BROKER’S TOP HONOUR FOR COMMUNITY PROJECT: HUMANS OF SKY Melbourne-based broker John Ng, owner of finance brokerage Money Jar Concept, has been recognised for his initiative that helps combat loneliness and isolation – a cause that has become all the more important during the COVID-19 pandemic
CONNECT WITH HUMANS OF SKY
www.humansofsky.com.au
facebook.com/humansofsky
instagram.com/humans.of.sky
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inspiration for Money Jar Concept owner John Ng’s social and community connection platform, Humans of SKY, came from his iPhone, which offered him a portal to the other side of the world. After following and enjoying Humans of New York, the famous photoblog of portraits and interviews collected in New York City, which was started 10 years ago by photographer Brandon Stanton, Ng modelled his Humans of SKY Facebook and Instagram pages on the same concept. (SKY stands for the suburbs that make up Ng’s local community: Seddon, Kingsville and Yarraville.) Now in its fourth year, Humans of SKY has more than 5,000 followers and allows Ng to exercise the writing skills he developed as a journalism graduate. “The idea behind Humans of SKY is to break down the barriers that have been developed over the years by people relying so much on social media and build rapport, harmony and common goodwill,” Ng says. “I want to help the local community and encourage people to get to know their neighbours.” Ng adds that he’s “excited by the humans who make up the social fabric of the inner west” and aims for his social media communities to be a “guide to food, drinks, services, community and, most importantly, the humans behind them”. His work on Humans of SKY THE
recently led to Ng receiving the City of Maribyrnong’s Citizen of the Year Award for his unique form of storytelling, which has spotlighted more than 120 people in Melbourne’s inner west. The annual Civic Awards, which were held on 30 January, celebrate the efforts of individuals and organisations within the community who help make the city a wonderful place to live, work and visit. Ng’s platform has connected people with distant family members from the other side of the world, raised awareness of cancer sufferers
While the Humans of SKY social media platforms have been running for several years, their ability to help people connect at a local level has become even more important in 2020 as the pandemic has forced people into lockdown; Melbourne is currently in its second quarantine period. Ng says he enjoys the combined challenge of running his mortgage broking business while further developing the Humans of SKY concept, while also spending time with his wife and three kids. This year, Ng plans to officially launch an
“The idea behind Humans of SKY is to break down the barriers that have been developed over the years ... and build rapport, harmony and common goodwill” and increased foot traffic for local small businesses. Ng says he has a series of questions he asks himself when canvassing the community for locals to highlight: Who are the humans who have transformed the inner west into such a liveable community hub? Why are they here, and how did they get here? Where are they from? What’s their story? Where can you find them?
offshoot, Humans of SKY (Business Stories), which he believes will help local businesses recover from the economic impact of COVID-19. “In this day and age, it’s important to have your own brand and something you are recognised for outside of your job,” he says. “I’m often asking myself what kind of legacy I’m going to leave, and Humans of SKY is something I am proud to have created.” AB
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John Ng, owner, Money Jar Concept
Paul Hollema, resident of Yarraville, musician, performer, parent “I was born in 1957, in the small Dutch town of Culemborg, located along the River Rijn. I am the youngest of six, an unexpected child. I have five brothers who are all a lot older. One of them has since passed away. My parents were Catholic. Mum was 43 when she had me, a huge scandal at the time! Before she passed away five years ago, she once said, ‘If I lived today, I wouldn’t have listened to the Catholic Church. I would have used contraceptives, and I wouldn’t have six kids, but I do love you all very much!’ “I did all the things Dutch boys do in Holland. I went fishing every week and got into trouble. I would go ice skating when there was ice, and I swam in the lake in summer. I had piano lessons when I was six. Dad was a handyman and had fixed up a piano he had purchased. There wasn’t a lot of money to go around with six kids.”
Luís, resident of Maidstone “Greetings, I’m Luís (pronounced, in Portuguese, something like Luueesh). I have been living in Maidstone since 2017. I came to Australia in 2015 with my wife, Naomi, who is from Perth. We met in Timor-Leste in 2006. Our eldest son, Vasco, was born in Geelong in 2016, and our daughter in 2017 at Sunshine Hospital. “I grew up in Monforte, a small village in Portugal’s beautiful Alto-Alentejo. It’s a region of castles and Roman ruins, of rolling hills peppered with holly oaks and cork oaks. Here and there, you see vineyards or olive groves. I am one of six brothers and sisters. My parents and siblings all live in Portugal.”
Delia Paul, resident of Yarraville, writer, editor, UN watcher and believer in a better world “I was born in Johor Bahru, a coastal town at the southern tip of peninsular Malaysia. Growing up, I always wanted to travel, and I loved reading the atlas. I was a bookish kid. Johor Bahru had American Peace Corps volunteers stationed in the city in the 1960s, and a couple of them boarded with my parents. “I always had this feeling of wanting to be part of the wider world. At our local library in town, next to the post office, I’d borrow storybooks from the US and UK, and I’d imagine what life was like elsewhere.”
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NE WS ANALYSIS
BANKS TO EXTEND HOME LOAN DEFERRAL PERIOD The Australian Banking Association has announced that banks can extend the six-month loan deferral scheme by another four months for customers with reduced incomes and ongoing COVID-19-related financial difficulties. How can brokers help their clients access this?
LOAN DEFERRAL AT A GLANCE
800,000 Number of borrowers who have had their home loan repayments deferred
3 months The initial term of the deferral period, which expired mid-June
September 2020 End date of the original full six-month deferral period
January 2021 End date of loan deferrals for those granted an extra four months
Source: ABA
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the September deadline of home loan repayment deferrals looming, many have questioned how borrowers and the economy will cope with the double-whammy ‘fiscal cliff ’: the end of JobKeeper and the transition out of home loan deferrals. This month, banks and lenders provided some clarity around how they plan to handle the mortgage deferral side of the equation. The Australian Banking Association announced plans to implement a new phase of support to assist customers as the six-month loan repayment deferral period draws to an end. The loan deferral scheme, which was introduced in March in response to the pandemic, allowed eligible borrowers to pause their mortgage payments while they dealt with the financial impact of the coronavirusled economic slowdown. As customers approach the end of the deferral period in September, banks will begin to implement what the ABA calls a “new phase of support to assist customers to get back to making their repayments”. “Those who are able to repay their loans will resume doing so, which is in the best interests of those customers and allows support to be directed to those who need it. Encouragingly, many customers have already chosen to resume making repayments,” said Anna Bligh, CEO of the ABA. Customers with reduced incomes, however, will be contacted as they approach the end of their deferral period to ensure that, wherever WITH
possible, they can return to repayments through a restructure or variation to their loan. “If these arrangements are not in place at the end of a six-month deferral, customers will be eligible for an extension of their deferral for up to four months. Customers will be expected to work with their bank during this extra time to find the best solution for them,” Bligh said. She confirmed that deferral extensions would not be applied automatically and would only be provided to “those who genuinely
“If somebody’s lost their job and they’ve got a residential mortgage, or indeed if their business has been closed and they’ve got a commercial loan, then they would be cases where the customer would need to talk to their bank, and I understand it that the bank is going to be very supportive of their customers,” he said. Meanwhile, Adrian Kelly, president of the Real Estate Institute of Australia (REIA), said the plan was “to be applauded”. “As the September deadline draws nearer, the banks have
“Those who are able to repay their loans will resume doing so, which is in the best interests of those customers and allows support to be directed to those who need it” Anna Bligh, CEO, Australian Banking Association need some extra time” to get back on their feet financially. “Many customers may need less than four months to either restructure their loan or to get back into full repayments,” Bligh said. Federal Treasurer Josh Frydenberg welcomed the announcement and confirmed that APRA would continue to ease regulations imposed on the banks to encourage them to support customers.
made a sensible decision to give homeowners a bit more breathing space for those who need it, to work with the banks and get them on their feet financially. The government will need to consider further rent subsidies post-September in order to ensure that tenants who have lost employment are not evicted,” he said. “Supporting homeowners during this phase, where they may be
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Anna Bligh, CEO, Australian Banking Association
Adrian Kelly, president, Real Estate Institute of Australia
Gary Thursby, acting chief financial officer, Westpac
Daniel Walsh, director, Your Property Your Wealth
finding it difficult to continue paying their mortgage, is to be applauded. If owners and landlords are supported, then tenants, some of who are from the most affected industries through COVID-19, are also supported.” Kelly said the REIA had also put forward recommendations to the government to assist the real estate sector and renters to continue contributing to the economy as Australians collectively recover from the pandemic. “The government could go further in their support of the economy through the real estate industry by abolishing or temporarily ceasing stamp duties on residential property. An abolition or temporary concession on land tax would also help stimulate an economy in recession,” Kelly said.
“As the September deadline draws nearer, the banks have made a sensible decision to give homeowners a bit more breathing space … and get them on their feet financially” Adrian Kelly, president, Real Estate Institute of Australia “However, the banking industry is to be commended for their continuing support of current homeowners, landlords and tenants. It is hoped the government will also consider a stimulus to the sector to boost expected low levels of unemployment and address
growth in the Australian economy.” Brokers who have customers currently on deferral programs are likely to receive an increase in enquiries around eligibility for further mortgage relief. Eligibility for the four-month extension has yet to be confirmed,
although the ABA has warned that not all current repayment deferral customers will be eligible for an extension. Westpac has announced its support of the policy, revealing a raft of additional assistance on loan deferral packages for home loan and small business customers who continue to be significantly impacted by the COVID-19 pandemic. The measures include further support for customers who are not in a financial position to resume their full loan repayments from the end of September. “The COVID-19 pandemic is continuing to have a fast-changing impact here in Australia, and we know that for some customers, this will have a longer-term effect on their circumstances and further financial support will be required,” said Gary Thursby, Westpac’s acting chief financial officer. “In discussion with the industry and regulators, we will be making changes to allow more time and breathing space for customers who aren’t in a position to return to full payments again from October. This includes access to tailored support through our customer assistance program, where our specialist team will work with customers to review their financial circumstances.” For customers who remained under stress but could still contribute to their loan repayments, Thursby said the bank would “provide support where we can help work through options that may be available to adjust their loan”. However, he added that “we anticipate that a significant number of customers will be able to resume regular repayments when their deferral term ends. We expect these customers to start their repayments again, and we would encourage as many people as possible to do so”. For small business owners who require further support, the banks are also inviting eligible small business customers to apply to extend their business loan repayment deferral period by up to four months. Interest will continue to capitalise on these commercial loans during the deferred repayment period, as is the case with residential loans. According to CBA chief executive officer Matt Comyn, a number of the bank’s retail and business customers have resumed full or partial payments on loans that were placed in deferral at the start of the pandemic. As more www.brokernews.com.au
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customers restart their loan repayments, CBA plans to target its support at those people who most need it, he added. Comyn also confirmed that any customers who engaged in additional loan deferral for up to a further four months would see no impact on their credit report or their credit rating. “While many customers are doing better than we expected, we know that some customers will require further support, and we will contact them over the coming months to discuss the options that might be available to them,” Comyn said. “Supporting customers who continue to experience financial difficulty is a priority, and we are tailoring our support to make sure each customer gets the advice and assistance that suits them. This next phase of our support reinforces the strong collaboration and effective cooperation between federal and state governments, regulators, and the banking industry, which has allowed so much to be achieved in such a short time.” As for the impact loan repayment deferrals will have on the broader property market, the offer of additional mortgage repayment pauses by lenders is further proof that the September “property market crash” was always unlikely, according to Daniel Walsh, director of buyers’ agency Your Property Your Wealth. Walsh said buyer demand had already been steadily increasing in some markets before the announcement was made. “Savvy buyers and investors have recognised that lenders were never going to simply walk away from borrowers come September, so they have been more active in the market over the past two months,” he said. “Banks have a duty to assist borrowers experiencing genuine financial hardship, which is exactly what the Australian Banking Association has said lenders will do with possible four-month extensions of mortgage repayment pauses.” When the coronavirus first hit, buyers were able to get discounts on properties due to “poor consumer sentiment and concerns about the economy generally”, Walsh added. “In some locations, not only are those discounts now gone, but there is also now strong competition for listings, which is pushing prices higher. This is especially the case in locations like Brisbane, which aren’t dependent on international migration and were already the 22
Matt Comyn, CEO, CBA
beneficiary of strong interstate migration,” he said. Walsh’s comments are in contrast to a recent survey of property professionals conducted by NAB. Prices across most state capitals are expected to fall over the next two years as property sentiment deteriorates amid the COVID-19 pandemic, according to the Q2 2020 poll, which predicted that house prices would fall by 2% nationally in the next 12 months and by 0.1% in the year after.
Alan Oster, chief economist, NAB
Alan Oster, chief economist at NAB, says prices could decline by around 10% to 15%, peak to trough. “While prices have held up slightly better than expected, they have now declined for two consecutive months across the capitals, and we expect this to continue for some time yet,” he said. Of the capital cities, NAB’s survey expects Melbourne to post the most significant annual price decline this year at 7.3%, followed by Sydney at 4.7%. Next year, it predicted prices
in Melbourne are likely to fall by a further 6.5%. On average, capital cities are slated to record declines of 4.6% this year and 4.3% next year, according to NAB. “While the initial COVID-19related restrictions on housing activity have eased, the economy has undergone a very large contraction, and while we appear to have passed the trough in activity, it will take time for the recovery to unfold,” Oster concluded. AB
HOW THE FOUR-MONTH REPAYMENT PAUSE EXTENSION WORKS
Eligible customers who have paused their home loan repayments for up to six months can request an additional four-month deferral
During the repayment pause, interest on the borrower’s loan continues to be calculated and accrues in accordance with their loan contract
Eligibility criteria apply to all home loan customers, including owner-occupiers and investors who have been financially affected by COVID-19
Eligibility will be determined on a case-by-case basis; those already on a six-month deferral will not automatically receive an additional four months
Options for the extension might include restructuring the loan to interest-only or extending the repayment pause for up to an extra four months
Borrowers who access an additional four months of loan deferral will not see an impact on their credit rating or credit report Sources: ABA, CBA, NAB
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OPINION
NAVIGATING THE RETURN TO A NEW NORMAL The world of mortgage broking, like many other service-based industries, has been significantly impacted by COVID-19. The return to a new normal will present challenges, says Dr Gav Schneider – but with some reflection, we can move forward with purpose and clarity up to the pandemic, the mortgage broking industry faced a string of challenging issues, from banking royal commissions to bushfires, which highlights the reality that a return to ‘the old normal’ is probably unlikely. The default realities of the fourth industrial revolution, which we are in right now, combined with globalisation and many other intersecting aspects of the market, mean that we are probably a long way off from the relative stability we enjoyed over the last few years. In looking at a return to a new normal, there are two overarching considerations that are useful to consider. The first is the internal consideration – how have our own business, staff and related aspects been affected? The second is the external consideration – how have our clients, prospective clients, regulators and the supply chain been affected? Let’s start with the internal. It is crucial that navigating a return to the new normal should start with a personal reflection on your own position – not just from a business and financial perspective, but also from a mental and physical health perspective. If you manage teams or run your own business, it’s important to remember that the disruption caused by COVID-19 has had a significant effect on all of us. Even if we feel fine, it is recommended that we closely monitor our own status, as issues such as leadership fatigue, change fatigue and many other high-impact factors can cause significant secondary disruption and potential damage later on. Once you are comfortable with your own state and feel strong, remember that these impacts have affected everyone in different ways, so staff and suppliers need to be handled with a level of empathy and understanding that, at times, may not seem warranted when we take into account the excitement of getting back to business. The next consideration is a solid review
of your business and teams’ internal working processes, systems and outputs. While COVID-19 has disrupted many sectors, some disruptions – such as more flexible work options, or expanding service footprints by offering virtual services – present great opportunities. Don’t focus on simply trying to get back to where you were prior to COVID-19. Try to develop a focus on presilience*, which is simply defined as ‘proactive resilience’ and is focused on the principal approach of ‘bouncing back better’. The return to a new normal is a great opportunity to build individual, team and business presilience that might not have existed or been a focus pre-COVID-19.
LEADING
creates opportunities to strengthen supply chains and simplify and embed compliance issues that might have been worrying you pre-COVID-19 – it’s a chance to build back systems and relationships so they are better and stronger. It’s important to remember that everyone externally has also been impacted by COVID-19, and the prospect of focusing on a partner-based approach (in which the critical aspects of your supply chain are nurtured and relationships are enhanced as we build back) is a great opportunity. Accepting that the world will not be the same again from the perspective of both opportunities and threats can be
While nobody has a crystal ball, one thing is for sure: in times of instability, people lean on trusted advisers and value them more than they would in times of stability
Dr Gav Schneider CEO and academic director, Risk 2 Solution Group
The next consideration is external factors. Many of you will remember the instability and challenges of the GFC and the tough times it led to. While nobody has a crystal ball, one thing is for sure: in times of instability, people lean on trusted advisers and value them more than they would in times of stability. So, when it comes to clients and external stakeholders, try to foster the mindset and attitude of being a trusted adviser. This means focusing on the human and service elements of interactions and not just their transactional nature – i.e. who could get me the best rate, compared to who actually cares about helping me? While both are important, the human aspect is now critical. As with the internal considerations, the recovery phase we are entering now
empowering. COVID-19 and other crises have shown us that disruptive events that are out of our control can truly hurt or help us, and they manifest at a rate that is quicker than non-agile, compliancecentric systems can respond to. No matter how much we want to get back to where we were, we should pause and think about what could be done better, both internally and externally. As we navigate the new normal, we should focus on a presilience-based approach that will strengthen weaknesses and capitalise on strengths. Making presilience your default setting, and focusing internally and externally simultaneously, will better enable you to cope with disruption while equally allowing you to capitalise on opportunities as they present. AB *Presilience is a registered trademark of the Risk 2 Solution Group and is used here with permission.
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20/07/2020 1:08:16 PM
PEOPLE
Get involved in the discussion Share your thoughts at
brokernews.com.au
FROM THE FORUM
Top comments from trending stories on brokernews.com.au
THIS IS NOT A ‘PUNITIVE REGIME’, SAYS ASIC COMMISSIONER On 24 June, ASIC published the much-anticipated final regulatory guidance for the mortgage broker best interests duty. Shortly after, ASIC commissioner Sean Hughes provided additional insight to Australian Broker regarding the manner in which the topics of concern raised by the industry were handled, how the regulator planned to enforce the duty and what brokers should be doing over the next six months. Much of brokers’ concern centred around the extent to which a broker is responsible for being familiar with lenders that are not on their aggregator’s panel. “This was one of the most significant questions coming out of the review we undertook,” Hughes said. “If brokers were aware there was a superior product they can’t access and isn’t on their panel, the question in their mind was, ‘Do I have the obligation to recommend the client go outside the panel?’ We didn’t go so far in our final guidance as to require that. But what we did leave open was for brokers to make sure they are fully aware of all the options available and to equip themselves with the knowledge their customers could benefit from.” Rather than placing additional onus on the broker, the guidance on this matter seeks to stimulate a more overarching shift within the marketplace. “If there is a superior product, then maybe that’s an opportunity for the broker to speak to its panel providers and say, ‘Are you aware I can’t get access to this particular loan product? Have you thought about providing a product with similar features to the panel that I can get access to?’” Hughes said. “If there remain any areas of grey uncertainty, we remain open and happy to hear from brokers and their associations for anything we can do to clarify them at all.” Brokers have expressed a range of concerns about how the BID will be implemented, particularly around who decides what is “superior”. Here’s a summary of what brokers had to say on our website. 24
Superior? Who defines that? Can we please see regulation that is not ambiguous? If you class lending by price (as seems to be mostly true now), then lenders jostle their price to accommodate their appetite. If you judge by some other criteria, lenders will simply juggle that to accommodate their appetite. Is a $4,000 rebate worth consideration in what is a superior product? If so, how do the regulators want those calculations to look? Because of a few rotten apples, we are all asked to act in the customer’s best interests and prove it ... Brendan
Meanwhile, bank staff can merrily continue to offer just their products – in the full knowledge that there are other, more competitive, more suitable products available to the client sitting in front of them, from the broker right next door. Nice one, ASIC. Eric
The consumer associations have culpability here too. They are still contending that brokers are unnecessary and that if you do your own shopping around, you can get a good deal all by yourself. What they fail to realise is that it is not all about price! There is the time value of money that they ignore (in the shopping around process), there are the policy differences that they ignore, there are the processing time frames that they ignore, and so on ... This has led to a complacency that BID is not needed in banks, as it’s the customer’s responsibility to shop around if they go direct. This premise also assumes that all consumers are equal in both their capability and capacity to source direct from a bank, and that is, as we all know, just not the case. Brad
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PEOPLE
CAUGHT ON CAMERA PLAN Australia hosted its annual Digital PD Day on 18 June, with a record attendance of 850 brokers. PLAN Australia CEO Anja Pannek and a panel of industry leaders provided an economic update on the impact of COVID-19 on the mortgage broking industry, as well as upcoming regulatory changes, including the best interests duty and conflicted remuneration. Brokers heard directly from lenders about the actions they’re taking to provide choice, competition and customer service in a challenging economic environment. An insightful broker panel delved into the big issues facing the industry today, including a timely discussion of how open banking will reshape broker-client relationships in the future.
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DATA
QUEENSLAND
The state has unveiled a $267m stimulus package to boost its construction industry As part of a major stimulus package, Queensland has allocated a $100m cash grant to the Works for Tradies program to support the construction of social housing across the Gold Coast, Sunshine Coast, Cairns, Townsville, Mackay, Rockhampton, Gladstone, Wide Bay, Moreton Bay, Toowoomba and Ipswich areas by the end of next year. Regional Queenslanders purchasing a newly constructed home will also receive a $5,000 grant as part of an additional $106m stimulus. This cash grant is on top of the existing $15,000 available to all Queensland first home buyers of properties valued at less than $750,000. A further $10m has been allotted to seniors and people with disability, who are eligible for grants of up to $5,000 to renovate and repair their homes. The state government has also set aside $50m for minor building projects in Southeast Queensland and $1.175m for upgrading technical and further education campuses to support tradies in training. Area
Median
Quarterly
12-month
Weekly
Gross
price
growth
growth
median
rental
rent
yield
Metro (H)
$545,000
0.0%
0.9%
$420
4.0%
Metro (U)
$385,000
0.0%
0.8%
$390
5.2%
Country (H)
$433,250
-0.9%
0.7%
$400
4.7%
Country (U)
$373,000
0.7%
0.0%
$360
5.0%
TASMANIA
Tasmania’s seller satisfaction falls from happiest in late 2019 to middle of the scale According to a RateMyAgent study, Tasmania has recorded the biggest drop in seller satisfaction levels of all states, from 55% in Q4 2019 to 39% in the past four months. Chief executive Mark Armstrong said this significant decline in satisfaction levels could be attributed to the unstable jobs market in the state and dwindling demand due to COVID-19. “Substantial demand for property in Tasmania comes from the mainland, and we saw this demand significantly decrease as COVID-19 travel restrictions were implemented,” he said. “These two economic factors alone can prompt buyers and vendors to action on the uncertainty of the market.” On an annual basis, seller satisfaction improved in the first quarter of the year. Armstrong said this could indicate that the initial impact of the outbreak on the market was not as severe as predicted. “While we still need to analyse the long-term effect of the pandemic and keep a close eye on economic conditions, we are seeing the industry begin to recover,” he said. Area
Median
Quarterly
12-month
Weekly
Gross
price
growth
growth
median
rental
rent
yield
Metro (H)
$512,500
1.0%
8.7%
$470
4.9%
Metro (U)
$490,000
3.8%
11.0%
$410
5.3%
Country (H)
$340,000
2.0%
8.2%
$330
5.2%
Country (U)
$295,000
2.6%
4.5%
$275
5.2%
26
WA SPOTLIGHT
RECORD SALES IN PERTH The WA capital reported record-high sales of homes and vacant land in the week ending 21 June to the Real Estate Institute of Western Australia (REIWA), Perth reported 613 home sales and 412 vacant land sales in the week ending 21 June, its busiest sales week since 2013. Both of these figures are significantly higher than the 52-week average. Sales of established homes increased significantly, rising 7% from the preceding week. Land sales, however, recorded standout gains. Damian Collins, president of REIWA, said the boom in land sales, which were at their highest level since August 2009, could be attributed to the various government grants and incentives announced earlier this month. “The schemes have certainly helped people who were undecided about a house and land package make their decision quicker, and we will likely see vacant land transactions remain at higher-than-normal levels until the end of the year, when the scheme concludes,” Collins said. Cath Hart, executive director for WA at the Housing Industry Association, said the ACCORDING
home-building industry throughout the state was also expected to recover over the next 12 months. “The revised outlook for the state’s homebuilding sector is a 15% improvement from the financial year 2019–2020, when we did about 13,800 starts, as the sector regains some of the momentum that was starting before COVID-19,” Hart said. The revised outlook took into consideration several factors, including the announcement of the Building Bonus Grant and the HomeBuilder Scheme, the plans to cut red tape in building approvals, and the campaign to encourage interstate fly-in, fly-out workers and their families to settle in the state. “These measures, plus the unique features of our extraordinary state, position Western Australia to come back better, emerging from the global pandemic faster than other states as an attractive destination for business investment and interstate and international migrants,” Hart said.
PERTH’S MARKET INDICATORS, Q2 2020 Source: Knight Frank Australia June 2020 Residential Review
-1%
$527,000
4.72%
-0.9%
Capital growth in houses, 12 months to March 2020
Median price of houses
Gross rental yield for houses
WA economic growth in 2019
2.3%
$348,500
5.4%
5.1%
Capital growth in apartments, 12 months to March 2020
Median price of apartments
Gross rental yield for apartments
Predicted growth in 2023
SUBURB TO WATCH: EAST FREMANTLE Median price (houses) $1,135,000
Median price (units) $505,000
3-year growth
Average annual growth
Weekly advertised rent
Gross rental yield
2%
1.7%
$650
3%
12-month growth
Average annual growth
Weekly advertised rent
Gross rental yield
25%
1.1%
$385
4%
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AUSTRALIAN CAPITAL TERRITORY
Freezing of residential rates and other fees aims to help households in Canberra The ACT government will be applying a $150 rebate to the fixed-charge component of all residential rate bills for the financial year 2020–21. Furthermore, it will freeze the fire and emergency services levy at the current level. Under the ACT’s economic recovery plan, government fees and charges will also be maintained in the upcoming financial year. These rates include fees for land titles; planning and development; birth, death and marriage registrations; emergencies; public health; the security industry;and vehicle registration. ACT Chief Minister Andrew Barr said the decision to hold any increase in residential rates would help reduce pressure on households “Many families and businesses are experiencing financial stress due to losing their jobs and personal or business income reductions. We know that every little bit counts, and this is one of the many ways the government can help address the cost of doing business, and the cost of living, during this pandemic,” he said. Area
Median
Quarterly
12-month
Weekly
Gross
price
growth
growth
median
rental
rent
yield
Metro (H)
$710,000
1.1%
3.8%
$580
4.4%
Metro (U)
$442,025
1.1%
2.9%
$480
5.7%
NORTHERN TERRITORY
$53m investment expected to support ‘shovel-ready’ infrastructure projects
HIGHEST-YIELD SUBURBS IN WESTERN AUSTRALIA Suburb
Property
Gross rental
Median
Quarterly
12-month
Average
type
yield
price
growth
growth
annual growth
SOUTH CARNARVON
H
15%
$105,000
-7%
-21%
-4.6%
CABLE BEACH
U
14%
$150,000
0%
-46%
-5.6%
UTAKARRA
H
12%
$118,500
0%
32%
-2.1%
SOUTH HEDLAND
U
12%
$140,000
4%
33%
12.2%
PINGELLY
H
12%
$110,000
0%
-21%
-7.8%
PEGS CREEK
U
12%
$195,000
0%
-0.1%
13.7%
WAGIN
H
12%
$120,000
0%
-14%
-3.0%
KAMBALDA WEST
H
11%
$100,000
-8%
9%
-5.6%
SOUTH HEDLAND PORT HEDLAND
H H
11% 10%
$210,000 $410,050
0% -0.6%
8% -1.3%
-7.1% -5.2%
As part of efforts to boost local jobs and underpin economic growth in the Northern Territory, a $53m package will build on an earlier $147m infrastructure investment announced by the federal and NT governments in November. The funding is expected to help the territory as it recovers from the impacts of the COVID-19 pandemic. The package consists of a $40.4m investment by the federal government, along with $12.7m provided by the NT. Prime Minister Scott Morrison said this investment would also play a crucial role in the federal government’s JobMaker plan. “Partnering with state and territory governments to invest in more major infrastructure projects across Australia is a key part of our JobMaker plan to rebuild our economy and create more jobs,” he said. The federal government is working closely with the NT government to identify ‘shovel-ready’ projects, with a focus on road safety upgrades, particularly along major routes such as the Stuart, Barkly, Carpentaria and Victoria Highways. Area
Median
Quarterly
12-month
Weekly
Gross
price
growth
growth
median
rental
rent
yield
Metro (H)
$480,000
0.0%
-4.1%
$480
5.3%
Metro (U)
$281,250
-1.7%
-10.6%
$360
6.3%
Country (H)
$419,000
1.7%
-1.2%
$500
6.3%
Country (U)
$305,000
0.3%
-4.4%
$373
6.4%
www.brokernews.com.au
27
DATA
NEW SOUTH WALES
Sydney rental market is starting to loosen as listings rise while demand depletes The share of advertised rental housing has increased in Sydney and Melbourne, bucking the downtrend recorded by other capital city markets, according to CoreLogic. The share of advertised rentals increased to 4.5% in Sydney and 3.6% in Melbourne. “An increase in the portion of stock on the market suggests higher vacancies and a looser rental market, which would coincide with falling rent prices,” said Eliza Owen, head of residential research at CoreLogic. Overseas migration is one of the biggest drivers of rental accommodation. Given travel restrictions and border closures, demand for rentals has slowed down. Owen cited Sydney and Melbourne’s exposure to international students as another reason for the shift. It’s also worth noting that NSW and Victoria account for the larger share of housing investments. Owen said almost two thirds of investment loans over the past 10 months originated in these two states. Investor activity, she said, contributes substantially to rental supply. Median
Quarterly
12-month
Weekly
Gross
price
growth
growth
median
rental
rent
yield
Metro (H)
$980,000
2.0%
1.1%
$550
3.1%
Metro (U)
$740,000
1.4%
0.0%
$530
3.9%
Country (H)
$480,000
0.4%
3.0%
$400
4.3%
Country (U)
$420,000
0.6%
2.4%
$350
4.3%
There were 1,202 homes scheduled for auction across the combined capital cities this week, much higher than the 847 scheduled this time last year. Of the 672 results reported at the time of publishing, 62.2% were successful, up from last week’s final clearance rate of 60.2% and lower than the 65.4% recorded at this time last year. In Sydney, 538 homes were scheduled for auction this week, down from 580 over the previous week, although higher than one year ago, when 316 homes were taken to auction across the city. Of the 294 auction results collected so far, 62.6% were successful. There were 475 auctions scheduled in Melbourne this week, up from 456 over the previous week and 348 over the same week last year. Preliminary results show that of the 256 results collected so far, 63.7% were successful, while 24.6% were reported as withdrawn (compared with only 12.2% of Sydney auctions), which is not surprising, given that Melbourne entered a six-week lockdown at midnight on 8 July.
Total auctions
29
Cleared
19
Uncleared
10 65.5%
Clearance rate
PERTH Total auctions
8
Cleared
3
Uncleared
5 37.5%
Clearance rate
Median
Quarterly
12-month
Weekly
Gross
price
growth
growth
median
rental
rent
yield
Capital city
$447,500
Melbourne
-0.4%
-1.2%
0.0%
9.6%
Brisbane
0.0%
-0.5%
1.4%
4.3%
Adelaide
0.1%
-0.2%
1.4%
2.3%
-0.2%
-0.7%
-0.7%
-2.5%
-0.2%
-0.9%
1.4%
8.8%
3.9%
Perth Combined 5 capitals
5.0%
$705,000 13.1%
$435
4.8%
$512,500 2.8%
7.5%
$285
$535,000
-0.9%
1.8%
$350
$360,025
-0.2%
$590,000
5.6%
$450,000
Sydney
Metro (U)
9.3%
Canberra
12-month change
3.1%
1.3%
Darwin
Year-to-date change
$430
0.0%
Hobart
Monthly change
2.7%
$385,000
Perth
Weekly change
1.4%
$300,000
Adelaide
CAPITAL CITY HOME VALUE CHANGES
$750,000
Country (U)
Sydney Melbourne Brisbane
$287,500
$0
$370,000
$100,000
$328,500
$200,000
$474,000
$300,000
$365,000
$500,000 $400,000
$505,000
$600,000
$541,000
$700,000
Metro (H)
Country (H)
Units
$800,000
$679,000
Leah Calnan, president of the Real Estate Institute of Victoria, has said the real estate sector will continue to do its part to maintain safety among potential sellers and buyers in light of new restrictions to prevent a possible spike in COVID-19 cases. “Crowds at auctions and open house inspections will continue to be limited to 20 people. The expected increase to 50 people has been put on hold for now. Auctions and open-for-inspections will continue to operate under strict regulations,” Calnan said. Despite this, Calnan said property transactions remained vital to Victoria’s economy, making it a must that the housing market should continue to operate. “Victorian real estate is incredibly resilient. Virtual inspections, online auctions and video calls will continue to keep clients and investors engaged,” she said. With the proactive initiatives implemented for safety, the sector has managed to maintain some stability, Calnan added. In fact, figures indicate that the state’s housing industry is holding its ground.
Houses
$900,000
$650,000
Safety measures will protect sellers and buyers under new COVID-19 restrictions
28
ADELAIDE
MEDIAN HOUSE AND UNIT PRICES
VICTORIA
Area
WEEK ENDING 13 JULY 2020
$800,000
Area
CAPITAL CITY AUCTION CLEARANCE RATES
*The monthly change is the change over the past 28 days
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BRISBANE CANBERRA Total auctions
31
Cleared
20
Uncleared
11
Total auctions
53
Cleared
28
Uncleared
25 52.8%
Clearance rate
64.5%
Clearance rate
SYDNEY Total auctions
294
Cleared
184
Uncleared
110 62.6%
Clearance rate
TASMANIA
MELBOURNE Total auctions
256
Total auctions
1
Cleared
163
Cleared
0
Uncleared
93
Uncleared
1
Clearance rate
Clearance rate
63.7%
SOUTH AUSTRALIA
Area
n.a.
Median
Quarterly
12-month
Weekly
Gross
price
growth
growth
median
rental
rent
yield
Attention is turning to renovations as sales continue to moderate Dwelling values have remained resilient despite the market slowing down, said Jarrod Harper, local expert at Herron Todd White. In fact, CoreLogic figures show that values in Adelaide rose by 0.4% in May, defying the downtrend across other capitals. However, homes in the city are staying on the market for longer – 54 days on average, which is higher than the 45 days on market last year. Listing volumes are also trending lower. Harper said the slowing market was helping to shift the focus of homeowners and investors to renovation works. “With an uncertain sales market, we may, in the short term, begin to see a trend where homeowners renovate what they have instead of seeking something else. This, coupled with record-low interest rates, may provide the perfect excuse to get a project moving,” he said. “For investors, the main motivation to renovate is boosting the appeal of their rental property, especially amid the slow market.”
Metro (H)
$466, 000
0.5%
2.1%
$385
4.3%
Metro (U)
$337,750
-0.1%
-0.1%
$330
5.1%
Country (H)
$280,000
0.0%
1.9%
$270
5.1%
Country (U)
$205,000
0.1%
0.1%
$210
5.2%
Source: Except where otherwise stated, all data sourced from CoreLogic, July 2020
NICK YOUNG: TRAIL BOOK SALE EXPERT Sell your trail book in part, or in full. Release working capital. Keep your clients. 03 8508 6666 | 0417 392 132 | nyoung@trailhomes.com.au | trailhomes.com.au www.brokernews.com.au
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PEOPLE
IN THE HOT SEAT
The past year has prompted Dan Peters, partner at Edgeview Finance, to give back to the community in a meaningful way. ‘We want our contribution to charity to be significant, not a token,’ he says, ‘and to set the benchmark for what’s possible’
Tell us about your background and your previous charity involvement. I have a beautiful fiancée and two amazing young boys. I grew up A outside of Toowoomba and moved to the Gold Coast, where I spent a couple of years working in restaurants before starting my career in finance, first at Bank of Queensland, then NAB. Then the entrepreneur in me decided to take the plunge, and I founded Edgeview Finance six years ago with my current business partner. During this time, I also completed a master of business at Bond University. My charity involvement has included volunteering for Meals on Wheels and Daffodil Day, attending charity events and making donations. The last year, however, has really reminded me of the power and benefits of a great charity’s positive impact on society. Our eldest son loves the beach and wanted to go to Nippers – an amazing program run by Surf Lifesaving. I decided to get involved and completed a Bronze Medallion. I’m now a volunteer lifesaver at Northcliffe Surf Club, and I’m able to spend more time with my son. It was the culture of the club that reinforced the positive impact charities have on our communities.
Q
Your new donation program will see you pledge up to 20% of upfront commissions to charity. What made you decide to commit to philanthropy in such a meaningful way? A I conducted much research within our firm and externally to understand and select a sustainable and impactful amount. We considered some different ways we could contribute, but I wanted to feel that we were making a difference. We wanted our clients to know we’re serious in assisting them to support their charities in a meaningful way.
Q
Why did you choose now, in the middle of a pandemic and with extra pressure on the finance industry, to launch this program? That’s a good question. We have been researching our Donation Program A initiative for a while. We knew our proposed model was viable when we started working with Jessica Bowman, the CEO of The Good Cause Co. Under her guidance, all the pieces came together. We know from Jessica that charities are facing a perfect storm – a massive drain on resources to meet the increased demand to execute their social mandate, and a donor base facing a challenging future. We didn’t want to wait for a time that was best for us.
Q
30
Does the program have an end date, or will it continue indefinitely? We haven’t set an end date, but we will reassess it each year; it’s vital A to make sure it’s easy for charities and their members to access and benefit from our program. We see our initiative as us doing our bit. The mortgage industry is broad and deep; we know there is an abundance of good work that goes on every day to support both local communities and charities. This is our way of contributing. AB
Q
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16 OCTOBER 2020 • THE STAR SYDNEY
THANK YOU FOR YOUR NOMINATIONS Australian Broker would like to thank its readers for the incredible response to the call for nominations for the 2020 Australian Mortgage Awards. It’s great to see so many talented professionals and organisations who have excelled over the past year. Finalists will be announced in September. Winners will be revealed live and celebrated at the highly anticipated black-tie awards gala on 16 October at The Star Sydney.
BE PART OF THE INDUSTRY EVENT OF THE YEAR Visit australianmortgageawards.com.au for table reservations or sponsorship opportunities
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