Mortgage Professional Australia magazine Issue 11.6 by Key Media

CELEBRATING 10 YEARS

www.brokernews.com.au ISSUE 11.6

Superbrokers

2011

Aggregators have their say on key industry issues COMING UP SHORT HOUSING SUPPLY ISSUES DISCUSSED

THE FIFTH PILLAR? A LOOK AT THE MUTUAL SECTOR

STOCK EXCHANGE HOW TO CATER FOR FOREIGN INVESTORS

EDITOR’S LETTER

Aggregator answers Having published the results of our annual Brokers on Aggregators survey last month, we deemed it only fair to let aggregators take centre stage in this issue. We canvassed opinion on challenges facing brokers, licensing, commissions, competition, mergers and more, as well as collating information such as broker numbers, loan book size and settlement figures. The good news is that our featured aggregators have come through the GFC relatively unscathed and are conscious of ensuring they continue to add value for brokers. Elsewhere in the issue, we look at the mutual sector and whether credit unions and building societies can continue to provide genuine competition to larger lenders. We also investigate how you can take advantage of increased interest in the Australian property market from foreign investors and what can be done to address the nation’s housing supply problems. We also look at how technology can assist brokers with compliance, find out what the latest big bank stance on accreditation is and collect the latest musings of our multimedia stars in our Big Story round-up. As of this month, we have also introduced a new statistics section for your benefit. This issue’s featured sector is property investors, so turn to page 54 for some facts and figures that may help you and your client.

MPA 2.0 Our multimedia edition features on-camera interviews with the industry’s biggest players. Visit Brokernews. com.au/MPA to hear their thoughts on the hottest issues facing mortgage brokers.

Finally, we catch up with newly-appointed ALI Group CEO Ray Hair, profile Citibank’s Vibha Coburn and find out more about Smartline’s Chris Acret and Gerald Foley of National Mortgage Brokers. Enjoy the magazine and all the best for a busy month.

Barney McCarthy Editor

11. 06 issue

CONTENTS

special report

Super brokers

24 Superbrokers 2011

48 Credit checks MPA interviews the Big Four banks on accreditation processes and broker segmentation

Aggregators respond to our broker survey and give us their thoughts on key industry issues

2011

11. 06 issue

THE BIG STORY

Kim Cannon

Visit our website to watch our latest weekly investigation. The latest clips look at: »» Age discrimination »» First homebuyers’ confidence »» Lending competition www.brokernews.com.au

CONTENTS

NEWS ANALYSIS 10 The Big Story: A compilation of the top quotes from our weekly multimedia broadcasts

EDITOR Barney McCarthy COPY & FEATURES CONTRIBUTOR Andrea Cornish

FEATURES 20 F oreign currency: Housing affordability may be an issue for domestic buyers, but to cashed-up foreign property investors, the Australian market looks very attractive 40 Supply and demand: An investigation into the housing shortage and what it means for your clients and your business 44 M utual benefits: A look at the credit union and building society sector

PRODUCTION EDITORS Carolin Wun, Moira Daniels, Jacqui Stone ART & PRODUCTION DESIGNER Doug Jeans SALES & MARKETING NATIONAL SALES MANAGER Rajan Khatak BUSINESS DEVELOPMENT MANAGER Lisa Tyras ACCOUNT MANAGER Simon Kerslake MARKETING EXECUTIVE Kerry Buckley MARKETING COORDINATOR Anna Keane TRAFFIC MANAGER Jessica Jazic CORPORATE

COLUMN 52 Technical support: How technology can help support mortgage brokers through change and keep on top of compliance demands

PROFILES 16 Newly-appointed ALI Group chief Ray Hair on why the time is right for the insurance sector 36 Vibha Coburn of Citibank discusses her return to the Australian financial services sector

11. 06 issue

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STATS 54 In the first instalment of a new monthly statistics round-up, we take a look at state-by-state information that may interest property investors

LIFESTYLE

DIRECTORS Claire Preen, Mike Shipley CHIEF OPERATING OFFICER George Walmsley PUBLISHING DIRECTOR Justin Kennedy ASSOCIATE PUBLISHER Rajan Khatak CHIEF INFORMATION OFFICER Colin Chan HUMAN RESOURCES MANAGER Julia Bookallil

Editorial enquiries Barney McCarthy tel: +61 2 8437 4790 barney.mccarthy@keymedia.com.au Advertising enquiries Sales Manager Rajan Khatak tel: +61 2 8437 4772 rajan.khatak@keymedia.com.au Account Manager Simon Kerslake tel: +61 2 8437 4786 simon.kerslake@keymedia.com.au Subscriptions tel: +61 2 8437 4731 • fax: +61 2 9439 4599 subscriptions@keymedia.com.au Key Media www.keymedia.com.au Key Media Pty Ltd, Regional head office, Level 10, 1 Chandos St, St Leonards, NSW 2065, Australia tel: +61 2 8437 4700 fax: +61 2 9439 4599 Offices in Singapore, Hong Kong, Toronto www.brokernews.com.au Copyright is reserved throughout. No part of this publication can be reproduced in whole or part without the express permission of the editor. Contributions are invited, but copies of work should be kept, as MPA magazine can accept no responsibility for loss

62 A day in the life of … Gerald Foley, nMB 64 My favourite things … Chris Acret, Smartline

This magazine is printed on paper produced from 100% sustainable forestry, grown and managed specifically for the paper pulp industry

NEWS MARKETS

Price falls ‘natural cycle’: REIA The REIA has claimed recent drops in median prices are temporary and will not result in a significant downturn. REIA president David Airey said reports of median price decline can be attributed to the natural cycle of the housing market. “It is important to understand that house prices, whilst increasing over time, have periods when price growth either subsides or decreases, however, over time the fundamentals are there for continued growth. The drivers for this growth will come from lack of supply, population growth and changes in the household formation rate.” According to the REIA, any slowdown or decline in house price growth can be attributed to a number of factors, including the RBA’s tightening policies, low affordability, consumer caution and the exit of first homebuyers from the market.

MFAA hits out at clawback paradox As more lenders begin to institute clawbacks under the DEF ban, brokers are being sent mixed messages about helping clients switch lenders, the MFAA has said. MFAA CEO Phil Naylor said clawbacks have typically served as an incentive for brokers to keep clients in a loan facility, while the government’s ban on DEFs is attempting to encourage brokers to help clients switch. “We have on the one hand, a governmentenforced incentive for consumers to switch lenders, and on the other, a lender-enforced disincentive for brokers to encourage, or even allow innocently, consumers to switch lenders,” he observed. Naylor called the extension of clawbacks under the DEF ban a paradox. “What message is being sent to brokers? That it’s OK to encourage another lender’s borrower to come to you, but you will be punished if one of your borrowers switches to another lender, whether or not you were involved?” As the DEF ban comes into force, Naylor said the MFAA will advocate for brokers if clawbacks begin to become a common occurrence.

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increase in broker loan volumes in final quarter of 2010 Source: MISC

Brokers record milestone volume reversal Brokers posted a 7% jump in loan volumes to $14.8bn during the December quarter 2010, in what has been labelled a “milestone” reversal of five successive quarters of declines in intermediary-sourced lending. Data released by the Market Intelligence Strategy Centre (MISC) shows the single quarter recovery of 7% contrasts with the 11% reduction in broker-sourced loans in the September quarter 2010, as well as the 13% decline that was experienced in the last quarter of 2009. “The full quarter was something of a milestone in the broker channel,” a statement from the MISC said, on behalf of lender and broker pool members which represent 80% of all broker home loan business. According to MISC, the result was aided by a period of rate relief at the end of last year – prior to November’s bank rate rises – as well as the acceptance by consumers of less intervention by the government in stimulating the housing market. “The better result also came on the back of a generally more active and competitive mortgage market in the broker channel,” MISC claimed, citing low variable rates, fixed-rate offers and fee waivers. The MISC data also showed that smaller lenders – which include boutiques, building societies, credit unions, originators and mortgage managers – managed to increase their share of broker-sourced loans during the December quarter, from 11.2% in the September quarter to 13.6%. This came at the expense of major and regional banks, which garnered 86.2% of loans, down from 88.8%.

NEWS LENDER

ANZ impresses business borrowers ANZ has become the Big Four lender with the highest satisfaction ranking among business customers. The latest Roy Morgan Research Business Bank Monitor shows ANZ rose to 62.1% in the satisfaction rankings for March, up from 58.6% in February. Westpac ranked second in the ratings with 61.2% customer satisfaction, up slightly from 60.5%. CBA and NAB remained largely unchanged. Though ANZ now leads the Big Four in business customer satisfaction, it remains significantly behind St.George (65.3%) and Suncorp (68.2%). While business customers typically rate banks more harshly than personal banking customers, the Roy Morgan Business Bank Monitor is generally an indicator of how banks will be rated by personal banking consumers. The most recent Roy Morgan consumer banking survey indicated NAB had gained ground on the other members of the Big Four, inching closer to taking over third spot from Commonwealth Bank, while the other majors saw declines in customer satisfaction.

Non-banks not a last resort: Homeloans Non-banks are no longer perceived by brokers as a last resort for borrowers with poor credit, Homeloans Ltd has claimed. Its research found only 13% of brokers see non-banks as being most suitable for customers with poor credit. The result represents a 7% drop from the same research conducted six months ago. Homeloans general manager of third party distribution Tony Carn said the survey shows brokers’ changing perceptions of non-banks. “Non-bank or alternative lenders are no longer being perceived only as lenders of last resort or for those with poor credit histories,” Carn said. “Brokers are now more open to recommending non-banks. Almost half of brokers said they wouldn’t find it difficult to recommend a home loan provider to a client who wasn’t familiar with that provider. That compares with 40% in August last year.” Consumers are also becoming more open to non-bank lenders, Carn said. The survey indicated 73% of non-first homebuyers are open to using alternative lenders, and 69% of first homebuyers would consider securing their home loan through a non-bank.

$1,814

the minimum necessary monthly expenditure for an Australian couple Source: The Henderson Poverty Index

Poverty line no barrier for Aussie banks Australian banks are too lax in their lending standards, a study has claimed. The Bank of America-Merrill Lynch report found that Australian banks estimate the amount borrowers need for cost of living expenses at up to 7% below internationally recognised poverty indicators and will therefore lend to borrowers below the poverty line. The Henderson Poverty Index projects the minimum necessary monthly expenditure of an Australian couple at $1,814 a month, while Australian banks project the amount at $1,708. Bank of America-Merrill Lynch, however, puts the number at $2,018 for a ‘bare bones’ budget and $2,504 for a normal budget. Merrill Lynch analyst Matthew Davison said banks are being too aggressive in growing their market share, while overestimating borrowers’ ability to service a loan. Davison said rising costs for household necessities such as food, transport and healthcare have not been taken into account by banks in the loan approval process.

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NEWS ANALYSIS MULTIMEDIA

The Big Story Every week, Australian BrokerNews rounds up influential figures to discuss the major issues in the mortgage industry. You can watch these bite-size videos online in the multimedia section of our website, but here we bring you the highlights from last month’s clips ON THE TOPIC OF…

Age discrimination Darryl Benn, The Mortgage Planner Group: “Two weeks ago, ASIC came out with a variation to the RGT 209 ruling to say we shouldn’t be discriminating based on age, that we should use the entire responsible lending laws and regulations and look at the client more holistically.” Darryl Benn

Kim Cannon

Tim Brown

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Kim Cannon, FirstMac: “There’s a problem if the broker or the person who is dealing with the customer isn’t questioning the client about what they are going to do. That’s the whole idea of NCCP – to know your customer and know their financial position and what their plans are. That’s why aggregator groups who hold licences for brokers are trying to make sure they ask the right questions.” Tim Brown, Vow Financial: “It’s not a real issue. There are a couple of banks who have become very conservative and they are probably just cautious because they are wondering where ASIC is going to go with this and that’s a natural thing from a lender’s perspective. I think there are still a number of lenders out there for the right borrower with the right asset and the right income.” KC: “We had an 87-year-old customer who bought an investment property a number of years ago and while their age was a factor, we had to look at what their wider financial position was,

whether they had a will and who the executor was. I think the estate was being left to the son so it was a case of whether the son had the capacity to carry on afterwards. Age shouldn’t be a barrier; you don’t give up your ability to be able to do financial things just because you turn 65.” DB: “I’ve spoken to a number of brokers recently and they have given me experience after experience where the banks – since the introduction of the NCCP – have actually started declining loans on the fact of age.” TB: “If the borrower is a first homebuyer applying for their first loan at 55, you would have to have some concerns. You would have to ask how a borrower with no assets would be able to pay the loan off within the required timeframe, and if they didn’t have enough in superannuation then you would have to have some concerns. From a broker’s perspective, they have to look at it from a common sense approach as well.” DB: “There is one solution and that would be to provide life insurance protection for older clients. The problem is, when you turn 65, life insurance becomes prohibitively expensive and that makes it very difficult.” TB: “I’ve been on both sides of the ledger, being on the lender and broker side. The lender has to look at the assets and liabilities and the borrower’s

NEWS ANALYSIS MULTIMEDIA

capability of paying the loan off in retirement, so what levels of income are they going to have, and are they going to support repayments as well as their normal costs of living? If you find that level of comfort, the lender will do it. Most lenders want to do the deal if they feel there is a way to do it.”

KC: “I just think they are asking people to be aware of the situation. I enjoy having the NCCP there – there have been a lot of ratbags in the broking game over the years and they’ve given the industry a bad name. A regulator will get rid of these people.”

ON THE TOPIC OF…

The exit fee ban and clawback crisis Sarah Wells, Redconcierge: “I think it will impact the value of trail books. If you are going to have clawback going out to three, maybe four years, there could be some issues around how you value your income, whether you have to have a certain amount of that put as unearned revenue or what the balance sheet liability going forward could be when you’re looking to sell your trail book. Secondly, there is an issue around being able to recruit new talent. If there is a possibility of having that income clawed back at some point, why would people want to transition from other industries into broking?” John Mohnacheff, Liberty Financial: “There will be all sorts of derivatives of clawbacks. In other words, ‘we will defer paying our trail’ or ‘we’ll spread our upfronts over first, second or third year’. There will be all sorts of things coming through where the longer the customer stays, the greater the reward will be to the broker.” SW: “The concern with clawback periods is ultimately, are borrowers going to have to pay somewhere along the line? They may be forced to pay increased upfront costs going into a loan or alternatively they could be asked to pay a fee through the broker channel. If there’s a choice from the banks’ perspective around where to push capital through the retail branch network or through the broker network, they may choose the former if it’s more profitable without having to pay commissions.” Lisa Claes, ING Direct: “We have no plans to change our commission structure. That’s not to say we’re blind to what might be happening in the market. There have been minimal plays in that space at the moment. As the true impact of DEFs settles, we will wait and see what our competitors’ response to it is.”

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JM: “The obvious outcomes are that banks or lenders will start raising their application fees and re-establishing application fees. Depending on the loan size, some may have rate differentials. Somewhere along the line we have to recoup our costs of establishing a loan. We do not have a definitive answer yet and I don’t think anyone else does either.”

Sarah Wells

LC: “It comes down to our distribution model as we’re a branchless bank. We rely primarily on our third party broker channel – they are our branches if you like. That being so, we don’t have the fixed costs to support and we like to see the savings we make from having a more efficient distribution network translated back for the customer. That translates into competitive fees, good products and no DEFs.” JM: “Liberty is in the fortunate position of having a rebatable establishment fee which is quite different to a deferred establishment Lisa Claes fee. We have the transparency there and we’ve always acknowledged that and put that into the loan. We’re in a strong position in that we can maintain what we’re doing until we see what the market does.” SW: “Throughout the last 18 months I’ve actually had a fee-based broker model and I’ve always been very open with my clients around things such as clawback and how I’m paid. I’m not too concerned about my model moving forwards, but I do have concerns for some of my counterparts in the industry about how they will adjust to the possibility of longer clawback periods and a concern that borrowers may start to refinance more as they rate chase rather than staying within their own loan and paying it off sooner.”

John Monacheff

NEWS ANALYSIS

MULTIMEDIA

ON THE TOPIC OF…

First homebuyer confidence Ian Jordan, The Selector Group: “What we’re actually seeing here is two separate camps. We are seeing people who are quite confident about property prices who believe there are good bargains to be had in the current market. There’s another group who are very nervous about future price growth and potential falls in the market. The similarities between both groups are that they are taking their time to buy their properties which is different to 2007, when people were piling into the market. People are now taking as long as 12 months to find a property.” Mardee Crane, 1st Street Home Loans: “There’s definitely an increased level of confidence in terms of being able to get that higher lending ratio without having to have so much saved. The time of year has a big impact too – there’s more stock coming out, more properties available and people are able to find some nice stuff out there.” Andrew Russell, Mortgage Choice: “Right across the board from the first homebuyer segment to

investors, they see blue sky, driven by the economic environment. People feel a lot more confident about their jobs at the moment, they see there’s a potential upside Andrew Russell in the property market considering prices have been relatively flat, so there’s that anticipation of wanting to get into the market now and make sure I can ride the potential upswing.” AR: “Particularly in the high LVR space, lenders see a new way to attract customers to the bank and FHBs see it as a quicker way to get into the market – saving less.”

Ian Jordan

MC: “We’ve definitely had more enquiries than last year, mainly due to LVRs as it gives buyers extra room to move.” IJ: “People are coming to us and they’ve already done their own serviceability. They say this is how much we can afford per week or per month

Mardee Crane

BROKERNEWS.COM.AU

NEWS ANALYSIS MULTIMEDIA

– how much can we borrow? That is what they are using to work out how much they should be getting, irrespective of LVR. This is a much more cautious approach to borrowing.” MC: “Obviously, you have to have the right type of client, but there’s a definite willingness from FHBs to take these loans on and not having to involve parents or family members to get them

into the market. They are happy to do it off their own bat.” AR: “Studious FHBs do their sums. If they are looking for a 95%+ LVR product, they’ve run their numbers and understood their perspective. Having said that, they should always be looking to see if they can still make their repayments if rates go up.”

ON THE TOPIC OF…

The lending competition bloodbath

Tony Bice

Tony Bice, First Choice Mortgage Brokers: “Market share is getting tougher [for lenders]. We are 20% down on housing volumes from this time last year which means the pie is smaller. A lot of lenders are looking for market share by offering incentives.” Doug Lee, Macquarie: “We’re seeing all sorts of offers and positioning going on in the market. In terms of competition, it’s certainly pretty fierce out there.” TB: “The banks are doing nil application fees. I don’t know if there is a bank at the moment not doing this, whereas a few months ago it was a point of differentiation.”

Doug Lee

Peter White, FBAA: “You’ve got banks saying ‘we’ve broken away from the pack and we’re doing our own thing’. There are all sorts of interesting little games being played behind the scenes.” TB: “LVRs are at 95% capitalising mortgage insurance, whereas a few months ago the maximum LVR with some lenders was 85%.”

Peter White

PW: “The greatest concern I have with some of the advertising – which is actually causing more competition in the market place – is that if today a bank says it is breaking away from the pack,

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does that mean history says it was all collusion and they were working together, which is why competition wasn’t there? You can’t break away from something unless you were part of it to begin with.” DL: “I don’t see this as a return to any bad lending practices, it’s just a part of what’s happening in the market and it’s a cyclical thing. If one lever doesn’t work, you try and pull another one.” TB: “The analogy of pulling at levers from the pre-GFC days is nothing new. Banks have been turning the tap off and on for many years and it’s all designed around whether they are confident the market is buoyant, which we’re seeing now through consumer and market confidence. They’re in a position with their funding lines and their ability to be able to lend and attract market share, and that’s what we’re seeing now. In a different market – and we can use the GFC as an example – there was no consumer confidence, the market was tight, lenders weren’t lending and LVRs were 85%.” PW: “It’s been going on forever. Yes, there is more competition, but there are some interesting question marks that sit behind it. Competition is great, but what government needs to do is support that non-ADI sector to ensure the banks don’t run rampant on their own little agendas versus having some true competition on the other side of it.” MPA

LEADER PROFILE RAY HAIR

Insuring

According to Ray Hair, industry heavyweight and newly appointed CEO of ALI Group, the time is right for the insurance sector

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success A

s the new CEO of insurance provider ALI Group, Ray Hair is hoping to emulate the success he had at PLAN Australia. The former aggregator head spent 10 years building the business, but has switched gears to jump on board an industry segment “whose time is right”. “Loan protection and the integration of loan protection into broker services – it’s the right time for that, it’s emerging and it’s going to be the growth segment for the next three to five years,” he says. Hair announced his departure from PLAN in February and officially started as the head of ALI in early April. In addition to taking up the reins as CEO of ALI, Hair will also take equity in the business. While the news might have come as a shock to some brokers, Hair says he had discussed his departure with upper management for a couple of years. “After almost 10 years at PLAN, I thought it was time for a change and I had discussed that internally with PLAN and Advantedge for some time. Certainly the opportunity to have an equity position was important for me – as was the opportunity to make a direct difference in the execution of strategy.” According to Hair, he’s looking forward to having a more direct impact on the business’ growth than was possible at Advantedge. “When you’re in a big organisation by default, you’ve got more bureaucracy, whereas here at ALI we are standalone,” he admits. “We have very important business partners in terms of the aggregators and the brokers and MetLife, who is our insurance partner and underwriter, but it’s much more entrepreneurial because it’s a small business with exciting opportunity. The idea was to have an opportunity to significantly grow a business in a market whose timing is right, like we did with PLAN 10 years ago.”

Hair is now responsible for a team of 50 – ALI has about 15 salespeople spread across the country, while the rest are divided between the company’s customer contact centre and product, finance and marketing teams. While the difference between the size of PLAN and ALI are significant, Hair says that in a way he’s still managing the same number of people, because the transition with PLAN into firstly Challenger and then NAB meant that he lost his back office to a shared services model with Choice and FAST. “In effect, before PLAN was acquired, I had a much bigger team but in fact after the changes – on a day-to-day sense – I was only managing the distribution team,” he explains. “For me, it’s a step back up and that’s kind of the rationale for the change – to take it all back under my wing.” The transition to his new post has been relatively smooth, which Hair attributes to the people at ALI and the related nature of the two businesses. “Leaving PLAN was hard because of the people, but ALI is also a good group. They’ve been on an incredible journey this past year. The transition hasn’t been difficult because of that. You come in; you’re made to feel welcome. It’s the same industry and the same people in mortgage broking.” Hair also notes that his focus on diversification as the head of PLAN will serve him well in his new role. “Even within the PLAN role, it was about diversification, because post-GFC reduced commissions and reduced volumes meant that both PLAN as a business and mortgage brokers as individual small business owners needed to embrace diversification, and really that’s what ALI is all about – it’s about integration of

LEADER PROFILE RAY HAIR

Personal fact file: ++ Ray Hair: CEO of ALI Group ++ Hometown: Auckland ++ Current home base: Melbourne ++ Education: BA of economics – La Trobe University; MBA with Australian Graduate School of Management (Sydney) ++ Age: 50 ++ Family: Married, two kids (19 and 16) ++ Career progression: • Tax specialist – Deloitte Australia • GM financial services – Royal Automotive Club of Victoria • National business development manager – Fortis Insurance • CEO at PLAN Australia (2001–2011)

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LEADER PROFILE RAY HAIR

“ At ALI … it’s much more entrepreneurial because it’s a small business with exciting opportunity ” protection into that home loan service if you like, as well as broking services, so there are a lot of similarities in both the day-to-day role, leadership and distribution, and the strategy and overall game plan.” Despite the similarities between the businesses, Hair says he has had to re-acquaint himself with Australian Financial Services regulation and licence requirements. But that aspect is made easier by the fact that Hair has a background in insurance. In addition to boning up on insurance industry regulations, Hair prepared for his new role by taking a good look at where ALI has come from. “When you come into a business as a new CEO or manager, obviously your focus is on the future, but you need an appreciation of what the company has been going through and experiencing. And ALI has implemented a number of significant changes in the last six months in particular, so it’s about understanding the journey the team has been on – both our staff and our authorised representatives – and an appreciation of that journey, so you don’t just come in all guns blazing.” ALI Group was established in 2003 and provides approximately $25bn worth of cover to almost 100,000 Australians. It now operates in all states and territories and has trained and accredited 7,000 brokers. The group sells both a loan protection plan and a mortgage repayment protection product. It signed a deal with life insurance provider Metlife Insurance in mid2010 and is hoping to leverage MetLife’s global life insurance expertise to improve its service proposition to mortgage brokers. Recently, ALI recently revised its products and improved some product features. As CEO, Hair’s job will be to provide leadership and strategy execution and his objectives are twofold. “It’s about improving the awareness of the need for income protection and improving the integration of that into the process so it’s not seen as an add-on or a cross-sell as such – it’s actually a necessary extension of something

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that the customer needs. As a professional, a mortgage broker has an obligation to that customer; they can protect that relationship and they can obviously diversify their revenue.” His short-term goal is to help ALI double in size. Hair says the ALI product is best suited for and targeted to the mum and dad market – the $300,000 loan – or the type of customer that generally won’t look for and can’t afford full financial advice. “It’s a convenient and cost-effective solution for that type of customer. We saw quite a fall in sales as the First Home Owner Grant came off and we’ve seen those customers come back to the market now and really it’s about reengaging with those customers, increasing that awareness and improving the process to actually drive that. If you get integration of process, you automatically get conversion and better sales results as a consequence.” Brokers have embraced the idea of offering insurance to their customers, he says, but less than half are consistently putting that cross-sell in place. According to Hair, brokers have three choices when it comes to putting insurance in front of customers. They can advise or encourage the customer to look after their needs themselves, they can refer customers to an advisor, or they can actually provide convenient, cost-effective protection on the spot – which is all about integrating it into the process. “People are getting their head around it but are not particularly comfortable in being in the insurance space, particularly selling it. So it’s whatever fits within the individual broker business, but that’s the ultimate challenge – to just improve the take-up of that, so that ultimately all mortgage brokers are looking after their customers.” ALI’s BDMs will be responsible for working with mortgage brokers to help them integrate the insurance process into their service and get more sales or conversion of income protection products. According to Hair, it should be an easy sell to mortgage brokers, who can potentially increase their revenue by 20% by offering insurance. MPA

FEATURE

FOREIGN INVESTORS

Foreign curr€ncy Housing affordability may be an issue for domestic buyers, but to cashedup foreign property investors, the Australian market looks very attractive

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ousing finance commitments fell a seasonally adjusted 5.6% in February from January – a 10-year low for monthly housing finance approvals. The drop reflects reluctance among borrowers to jump into the market in an environment of rising rates. While demand from Australian property buyers may have slowed, foreign investors are showing a keen interest in the property market. Commercial and residential property firm Colliers International reports a 72% increase in investment from China during the 2009/10 financial year. According to the company’s director of project marketing Brinton Keath, rising rates are seen as a sign of economic recovery among Chinese investors. “It probably doesn’t help on the home front, but it’s seen in a positive light overseas,” he says. Otto Dargan, director of Home Loan Experts, says his company is experiencing similar levels of enquiry from foreign investors. “We’re receiving a steady stream of enquiries, particularly from mainland China,” he says. “In the past, we found the majority of Chinese investors were from Hong Kong.”

FEATURE

FOREIGN INVESTORS

“ In some parts of Europe, a loan is approved based on a meeting and a handshake … they have a hard time understanding why we need so many documents ”

Otto Dargan

In addition to servicing clients from China, Home Loan Experts caters for investors from Malaysia, the UAE, the US, the UK and Germany. The company decided to specialise in servicing foreign investors three years ago. “We have mortgage brokers and staff from many cultural backgrounds that speak different languages and that have relationships with complementary businesses overseas. It was a natural progression to capitalise on these strengths,” Dargan says. The majority of Home Loan Experts’ clients come from foreign businesses that are in some way associated with investing in Australia. Those businesses in turn refer their clients to Home Loan Experts. Catering to Chinese investors has its unique challenges, Dargan says, in that there are several dialects and large cultural differences across the country. Having a broker who speaks Mandarin and Cantonese is helpful, but some investors speak another dialect. Language differences aren’t the only barriers brokers face when dealing with overseas investors. While customers from Singapore, the UK and US are familiar with the service that

brokers provide, Dargan says he needs to spend more time explaining what Home Loan Experts does and building trust with mainland Chinese investors before they will do business with the organisation. Due to the fact the loan process differs from country to country, Home Loan Experts also has to manage clients’ expectations of the transaction and the paperwork involved. “Typically, we will do a more in-depth needs analysis focusing on their expectations and also how easily they can meet bank policy and identification requirements. For example, we did a loan recently for a customer in Siberia – providing ID was just the first challenge.” Dargan adds that Australia’s mortgage application process can sometimes prove to be a hindrance. “I feel very sorry for people from the UK that are applying for a mortgage in Australia,” he concedes. “Our banks’ systems and procedures are a long way behind their UK counterparts. As a result, there is a large gap between our clients’ expectations and what we can deliver. In some parts of Europe, a loan is approved based on a meeting and a handshake, and again these

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FEATURE

FOREIGN INVESTORS

“ The government is ensuring that investment in Australian real estate by foreign nonresidents … doesn’t place pressure on housing availability for Australians ”

Nick Sherry

customers have a hard time understanding why we need so many documents. However, customers from developing countries are amazed by how quickly we can get an approval.” Home Loan Experts has the capacity to email the loan offer to customers, which speeds up the process. It is also accredited with a wide variety of Australian and foreign lenders, giving the brokerage access to a greater number of loan products. Despite these in-house advantages, Dargan reports that securing finance from lenders has become increasingly difficult. “Recently, one major bank stopped lending to all foreign investors and many others do not have a specialised non-resident department, which means the credit assessors do not actually understand the application. You need to present the loan application very well to be able to get a quick approval. There are some foreign banks that allow Australian mortgage brokers to introduce loans, however only a few of them can take an Australian property as security.” While Colliers International says foreign investors represent a new market for brokers, Dargan warns that it’s tough to break into. “Yes, there are several very large businesses with experienced mortgage brokers that service the non-resident market. Most of them are true professionals and do a fantastic job. Some banks also have a specialist non-resident sales team or overseas branches, however they tend to be staffed with inexperienced lenders,” he says. “If it isn’t something that you do every day then I wouldn’t recommend that you service these clients. There is a higher risk of fraud and money laundering as well as the problems associated with identifying the customer. In addition to this, customers from third world or developing countries often do not have tax returns or have

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documents in a foreign language. There are potential tax implications for investing in another country and even issues to do with transferring large sums of money to Australia. If you don’t know what you are doing then it isn’t worth the trouble involved.” Despite the challenges that exist in servicing foreign investors, Home Loan Experts offers its services free of charge, however it will charge a fee if the loan is small or repaid in the first two years, and the business incurs a clawback from the bank. MPA

Foreign investment rules The government once again tightened rules on foreign investment last year in light of concerns that purchases from temporary residents and overseas buyers were contributing to Australia’s housing shortage. Former assistant treasurer Nick Sherry announced the changes in April 2010. “The government is acting to make sure that investment in Australian real estate by temporary residents and foreign non-residents is within the law, meets community expectations and doesn’t place pressure on housing availability for Australians,” he said in a statement. The changes reversed the government’s earlier relaxation of rules during the GFC, which allowed temporary residents to purchase established dwellings as their principal place of residence without notification to the Foreign Investment Review Board (FIRB). As well, temporary residents were allowed to purchase new properties regardless of purpose. The new restrictions, however, force all temporary residents purchasing existing property in Australia to apply through FIRB. As well, temporary residents are now subject to the same compulsory notification and screening processes as non-residents. Along with the changes, the government ushered in tough new civil penalties for buyers who break the rules, as well as a new monitoring system.

SPECIAL REPORT AGGREGATORS

Super brokers

2011

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SPECIAL REPORT AGGREGATORS

Last month, we asked brokers to rate their aggregators and provide feedback on a number of related issues, and more than 500 of you gave us your feedback. This time round we gave the platform to the aggregators to hear what they had to say about the issues of the day and to examine their latest figures. Barney McCarthy reports

n issue 11.5 of MPA, we published the results of our fourth annual Brokers on Aggregators survey and the results made for interesting reading. While the headline results seemed pretty pleasing for aggregators, reading deeper into the results revealed some murmurs of discontent from the nation’s brokers. A case in point was the question about whether brokers were looking to switch aggregators. Just 12% said they were looking for a new aggregator which, on the surface, would appear to suggest that 88% are loyal to their existing partner and are happy where they are. However, on reading the broker comments, many respondents said they were tied into contracts, didn’t have the final say on who they partnered with or could not afford the financial implications of any transfer. Opinions were neatly divided on other topics such as mergers, aggregator size, credit representative fees and commission satisfaction. Having heard what intermediaries had to say about them, we thought it was only fair to see what aggregators had to say about the market from the challenges facing them, the evolution of the sector, licensing and competition. We have annually canvassed aggregator opinion and collected data since 2007, so we have published historical and current data so you can see how your aggregator has developed over the past four years.

Strength to strength Despite facing a number of challenges, the individual statistics for each aggregator prove that the majority are going from strength to strength. Broker numbers have remained stable or increased, although it may be too early to tell what impact licensing has had on these figures, as many industry experts predicted that a significant number of intermediaries would walk away from the market. Loan book sizes have grown in the main, even though annual settlements seem to have tailed off slightly through the GFC. Even relatively new entrants such as LoanKit have been able to successfully enter what is a fairly crowded market and forge their own niche. Ranking aggregators has never been as clear cut as grading lenders – which we do so successfully in our renowned Brokers on Banks poll – as they don’t directly compete with each other in the way that lenders do. Different aggregators target and appeal to different cross sections of the broking community, and the reasons advisors choose to join them are various. Nevertheless, we have included some tables so you can see broker numbers and loan book sizes at a glance, but bear in mind there is more to an aggregator’s proposition than these headline statistics. So, without further ado, it’s on to the aggregator feedback on the burning industry issues.

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SPECIAL REPORT AGGREGATORS

“ The biggest challenge has been staying abreast of industry changes and to roll out enhancements to our systems in line with these developments ”

Broker challenges Aggregators were unanimous in their agreement that licensing was the biggest obstacle brokers have faced in the past 12 months, with responses referencing the “adjustment in processes” and the “short-term distraction” that preparing for regulation has caused. While compliance has undoubtedly been the main test, there have also been other trials for advisors. Mark Hewitt, general manager of sales and operations for AFG, cites “pressure on clawbacks resulting from the decision to abolish DEFs” as a concern for brokers, while Choice CEO Stephen Moore says the tight market has made business growth challenging. LoanKit head Kym Rampal agrees that broking competition is as keen as ever, with lead generation an increasingly difficult process for brokers. Vow Financial chief executive Tim Brown thinks the lending monopoly has been the chief concern among advisors. “Although the industry has settled down in the past year post-GFC, the Big Four still have a strong grip on the market and this has reduced the number of mortgage options for brokers,” he says. “This issue has been compounded by many borrowers wanting the security of a loan from one of the Big Four and their reluctance to examine other funding opportunities. That said, this conservative outlook to borrowing is slowly changing and I envisage more competition coming back into the market.” Brett Pilgrim, state manager for Loan Market, says brokers have done it tough on a number of fronts. “It’s hard to narrow it down to one challenge as the past 12 months have been one of the most challenging years in the industry’s short history of brokers,” he observes. “They had to face the first effect of a full year’s trail dwindling

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due to first-year trail cuts, the challenges and increased costs of licensing, lenders and aggregators getting stricter on quality, and on top of all that, most markets had to deal with a downturn.”

Aggregator tribulations Aggregators have faced many of the same challenges as brokers, with compliance again being a high priority. Choice’s Moore says: “Our performance is a direct reflection of our membership and it has been a challenging 12 months. Choice has invested significant funds and resources on both licensing and technology over the past year and while these were challenging initiatives, we are now very well placed for the coming 12 months.” Hewitt concurs, pointing out that not only have aggregators had to make sure they are prepared for NCCP, they have also had to help their members get ready, too. Vow’s Brown elaborates on this point and says aggregators have had to adopt the role of careers advisors. “The biggest challenge aggregators have handled over the past year has been helping brokers determine whether they want to remain in an industry that is changing rapidly because of market factors and greater regulation,” he recounts. “For those brokers that have opted to leave the industry, the onus has been on aggregators to ensure they have a dignified exit with financial security.” LoanKit’s Rampal says it isn’t easy staying a step ahead of a fast-paced industry. “The biggest challenge has been staying abreast of industry changes and to roll out enhancements to our systems in line with these developments,” he observes. FAST managing director Steve Kane adds that new capital requirements have posed a problem for aggregators.

SPECIAL REPORT AGGREGATORS

Evolution, not revolution The topic of how the aggregation sector will evolve in coming years was probably the question that got aggregators talking the most. Complacency was not on the agenda here – aggregators know they have to continue to grow and add value to remain relevant. Mark Haron, principal of Connective, says: “The emphasis will be on partnership, service and support as the differentiators. As revenue pressure increases,

brokerages will look for the more economical options and push towards a fair flat-fee option.” Moore says the onus is on aggregators to show their worth. “Traditional aggregator business models and margins are under significant pressure,” he warns. “Now more than ever aggregators need to prove their business value, and those who do not change to meet broker needs will really struggle. Aggregators who have the financial means and ability to reinvent

LoanKit» Year established: 2004 Head office location: Sydney, NSW

Survey year

2010

2011

States/territories operating in: NSW, ACT, VIC, QLD, WA

Employees

Lenders on panel

Average settlement by broker

$710,000

$830,000

Residential loan book

$2.16bn

Not available

Commercial loan book

N/A

Annual residential settlements

N/A

Annual commercial settlements

N/A

Number of brokers

150

Senior management team: Kym Rampal (head), Carolyn Samer, Trish Taylor (NSW BDM), Nick Crompton (QLD BDM) Industry association membership: MFAA/COSL Kym Rampal

Broker breakdown by state: NSW 82%, QLD 9%, VIC 6%, WA 2%, ACT 1%

Connective» Year established: 2003 Head office location: Melbourne, VIC

Survey year

2007

2008

2009

2010

2011

States/territories operating in: Nationwide

Employees

Lenders on panel

Average settlement by broker

N/A

$852,237

$905,000 $965,000

Residential loan book

$2.77bn

$6.5bn

$11.79bn

$18.6bn

$21bn

Commercial loan book

Annual residential settlements

$1.6bn

$4.5bn

N/A

$9.2bn

$9.8bn

Annual commercial settlements

N/A

$283m

$261m

N/A

Number of brokers

153

690

990

1,120

1,204

Senior management team: Mark Haron, Glenn Lees and Murray Lees (all principals) Industry association membership: MFAA

Mark Haron

Broker breakdown by state: NSW 43%, VIC 26.1%, QLD 14.2%, WA 8%, SA 6.8%, ACT 1%, TAS 0.7%, NT 0.2%

* figures included in residential loan book totals # figure included in residential commercial settlements

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SPECIAL REPORT AGGREGATORS

AFG» Year established: 1994 Head office location: Perth, WA

Survey year

2007

2008

2009

2010

2011

States/territories operating in: Nationwide

Employees

202

169

155

143

168

Lenders on panel

Average settlement by broker

N/A

Residential loan book

$39.6bn

$49bn

$53bn

$57bn

$62.67bn

Commercial loan book

$1.7bn

$2.7bn

$3bn

$3.275bn

Annual residential settlements

$18.8bn

$19.5bn

$16.2bn

$17.2bn

$16.128bn

Annual commercial settlements

$1.4bn

$1.6bn

$1.25bn

$1bn

$1.125bn

Number of brokers

2,270

2,285

2,129

2,363

2,200

Head office location: Melbourne, VIC

Survey year

2007

2008

2009

2010

2011

States/territories operated in: Nationwide

Employees

N/A

Lenders on panel

Number of brokers

1,271

1,394

1,442

1,362

1,250

Senior management team: Anthony Gill (chairman), Brett McKeon (MD), Bradley McGougan, Kevin Matthews, Malcolm Watkins (all executive directors), Jim Minto, John Atkins (non-executive directors) Brett McKeon

Industry association membership: MFAA and FBAA Broker breakdown by state: NSW 28%, QLD 25%, VIC 22%, WA 17%, SA 8%

Choice» Year established: 1997

Senior management team: Stephen Moore (CEO), Garry Dowd (National BDM), Dennis D’Angelo (national sales and commercial manager), Sean Reid, Jeanette Rowland, Scott Anderson, Brett Foster, Paul McMellon Stephen Moore

Industry association membership: Member of all industry bodies Broker breakdown by state: VIC 32.3%, NSW 25.3%, QLD 16.7%, WA 13.7%, SA 9.3%, ACT 1.1%, TAS 1%, NT 0.6%

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SPECIAL REPORT AGGREGATORS

“ Compliance will create a barrier to entry which is a positive thing for existing brokers and will ensure that new entrants are fully committed to working in the industry ”

themselves will be well placed into the future. For many, this means a much greater level of support to members, better use of technology and more sophisticated support services.” AFG’s Hewitt says lenders may start to become selective about who they deal with and says future aggregator mergers are inevitable. “When looking at who to deal with, lenders will increasingly focus on independence and aggregators who have made the investment in systems to improve quality and deepen customer relationships,” he states. “This will drive more consolidation towards the bottom end of the aggregation market in particular, as these players try and keep up.” Pilgrim sees retailbranded aggregators gradually gaining more market share, but is also mindful of the need to produce results. “Aggregators have to make sure brokers see value in them,” he admits. “When brokers are going through challenging times, the aggregator is put through a test from its brokers making sure they give direction and value. Brokers want to know they have the right business partner.” Brown concedes that aggregators will have to be even more proactive in future. “Vow envisages aggregators having to play a far more hands-on role to retain and recruit brokers,” he foresees. “The days of just offering software and commissions are drawing to a close. Training will become more important as brokers look to keep and motivate their staff. Other services such as legal, marketing, accounting and advice on succession planning will become more significant along with reward clubs to encourage brokers. In short, as brokers expand their businesses into new areas, aggregators will have to grow with them.”

Licensing While the consensus among aggregators and brokers alike is that preparing for licensing has been an inconvenience, nobody seems to doubt

that the market will be a better place for its implementation. Choice’s Moore says licensing is a fundamental step for mortgage broking to be seen as a true profession. “Like other significant changes, licensing has created some short-term pain as people get used to new requirements, documentation and interpretations,” he says. “We have seen a number of brokers choose not to be licensed, although the majority of these were part-time or brokers with low productivity who weren’t necessarily committed to our industry. The end result will certainly be positive, however, with net growth to total broker business. There will be less brokers enjoying a growing market which will be great for all those in the industry.” Hewitt agrees with the theory that those who make it through the licensing process will reap the rewards. “Compliance will create a barrier to entry which is a positive thing for existing brokers and will ensure that new entrants are fully committed to working in the industry.” Pilgrim says licensing has the potential to drive quality, but also expresses fears that it may push some brokers into a fee-for-service model. Brown, too, thinks the fittest will survive. “For those brokers that can adapt, licensing will prove challenging but ultimately rewarding,” he notes. “These are the brokers who have planned ahead and have always made clients their first priority and the new regime will hold no fears. But for brokers who don’t have good systems and processes, some will fall out of the industry, and we are already seeing this happening as they realise they cannot write – or don’t wish to write – the volumes needed to cover the cost of licensing and compliance.” Trevor Scott, CEO of PLAN, sees regulation as a real opportunity for brokers. “With an increased level of professionalism will come greater understanding of the quality services a broker can provide and this will lead to greater acceptance by the public in general,” he says. “I

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SPECIAL REPORT AGGREGATORS

would like to see the percentage of home loan customers that use brokers increase to 50%. Brokers will be more educated as a result of licensing, with a diploma being the minimum standard accepted.” Kane says compliance has given aggregators a further chance to show their worth. “The environment around legislation has been positive for aggregators,” he comments. “By providing licensing support to their members, aggregators have been able to enrich their relationships.”

Money matters The mood among aggregators is that commissions are only set to head in one direction in the coming year – up – and that will be music to the

ears of brokers. Loan Market’s Pilgrim thinks advisors have been through the worst already. “I like to think we have been through the trough for commission cuts,” he says. “If brokers and aggregators strive to provide quality, we may even see the reverse occur as lenders vie to buy market share, and there are some signs of this already.” Vow’s Brown sees commissions improving as non-bank lenders start to get traction in the market again, and Hewitt says further cuts are unlikely. Choice’s Moore is another who expects upward pressure on commissions. “This is a very competitive marketplace with most lenders looking to grow their books,” he says. “I see increasing focus on rewarding brokers for both quality of business and client loan retention. This

Loan Market» Year established: 1994 Head office location: Sydney, NSW

Survey year

2009

2010

2011

States/territories operated in: Nationwide

Employees

N/A

Lenders on panel

Senior management team: Sam White (executive chairman), Dean Rushton (chief operating officer)

Average settlement by broker

$1m per month

$13m p/a

N/A

Residential loan book

$13.5bn

$14.5bn

N/A

Commerical loan book

$400m

$500m

N/A

Industry association membership: MFAA

Annual residential settlements

$4.95bn

$5.49bn

N/A

Annual commercial settlements

$280m

$260m

N/A

Number of brokers

400

420

500

Sam White

Vow Financial» Year established: 2010 Head office location: Sydney, NSW

Survey year

2010

2011

States/territories operating in: Nationwide

Employees

Lenders on panel

Average settlement by broker

N/A

Residential loan book

$16bn

$17bn

Commercial loan book

N/A

Annual residential settlements

N/A

$3.6bn

Annual commercial settlements

N/A

Number of brokers

900

650

Senior management team: Tim Brown (CEO), Matthew Walton (CFO) Industry association membership: All bodies

Tim Brown

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Broker breakdown by state: NSW 46%, VIC/TAS 31%, QLD 15%, WA 6%, SA 2%

SPECIAL REPORT AGGREGATORS

makes sense as it aligns both lender and broker business value drivers.” Kane fears that brokers and aggregators may be adversely affected as the majors continue to battle it out. “We don’t want to become victims of the price war being played out by the big banks,” he says. “If they are cutting margins, we don’t want that pressure to be passed on to brokers.” Of even more interest than the level of commissions on offer is how brokers will be remunerated in future. Talk has been rife this year of a shift towards fee-for-advice or service models, but aggregator opinion on that is slightly more divided. LoanKit head Rampal says not all brokers will move to fee-for-service, regardless of how commissions move. “My reasoning behind fee-for-service is that you will need to perform at a level above and beyond that of the average broker to be able to justify the charging of a fee,” he explains. “Brokers will find it very difficult

to justify, and succeed at, charging a fee simply for placing a loan with a lender. They need to be able to demonstrate a service that genuinely adds value to be in a position to demand a fee from their clients.” Connective’s Haron feels it may be too early for brokers to adopt a new model and Vow’s Brown thinks there would need to be significant changes to current commissions before intermediaries seriously consider it. Moore is rather more pragmatic and says fee-for-advice has a key role to play in the future. “Unfortunately, debates about fee-for-advice get distorted into absolutes – that’s it’s for everyone or no one or that you are either right or wrong,” he says. “This is a flawed argument as brokers have different business models and deal with different clients with different needs. Fee-foradvice is an important additional source of revenue over and above commission that lenders pay for establishing a loan and to provide services

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SPECIAL REPORT AGGREGATORS

on the loan via trail. It is the advice that has additional value for the client over, above and independent to what lenders pay.” PLAN’s Scott believes brokers can start monetising the expertise they have acquired. “Brokers have a very extensive knowledge of the mortgage industry that has been gained over many years of operation in the industry, including the various lenders’ products and processes and the legal requirements,” he says. “This knowledge is invaluable when it comes to providing independent and impartial advice regarding the most appropriate product that meets the needs and requirements of a borrower.

I believe this has intrinsic value, for which a fee can be charged.” Diversification also cropped up as a way for brokers to make up any shortfall caused by reduced commissions. Pilgrim says Australian brokers can learn a lot from their Kiwi counterparts on this topic, and Hewitt adds that smart brokers will continue to boost their income via cross sales.

Lending competition Aggregators are optimistic that non-banks and second-tier lenders can continue to bring the fight to the Big Four, although the ban on

PLAN» Year established: 1999 Head office location: Melbourne, VIC

Survey year

2007

2008

2009

2010

2011

States/territories operated in: Nationwide

Employees

120

Lenders on panel

“Extensive”

Average settlement by broker

N/A

$600,000 N/A

N/A

Residential loan book

N/A

Commercial loan book

N/A

Annual residential settlements

N/A

Annual commercial settlements

N/A

Number of brokers

N/A

1,400

Head office location: Sydney, NSW

Survey year

2007

2008

2009

2010

2011

States/territories operated in: Nationwide

Employees

N/A

Lenders on panel

N/A

Average settlement by broker

$5.9m pa

N/A

Residential loan book

N/A

Commercial loan book

N/A

Annual residential settlements

N/A

Annual commercial settlements

N/A

Number of brokers

2,279

N/A

2,850

N/A

1,273

Senior management team: Trevor Scott (CEO), Brett Mansfield, Glenn Mitchell, Marita Gilmour, Barry Harrison, Clint Hawthorne, Michelle Middlemo, Craig Kitchen

Trevor Scott

Industry association membership: MFAA and FBAA

FAST» Year established: 2000

Senior management team: Steve Kane (MD), David O’Toole (national sales manager), Laurie Duffus (national operations, risk and compliance manager)

Steve Kane

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Industry association membership: MFAA and FBAA

SPECIAL REPORT AGGREGATORS

DEFs is expected to hamper the comeback, with Rampal describing it as “the fly in the ointment” and Hewitt branding it a “ridiculous decision”. Nevertheless, hopes are high for renewed rivalry. “We will definitely see a spread in competition again,” surmises Pilgrim. “The public are becoming more educated on what is out there, who is safe and that they can be a real alternative to the majors. Brokers have also become better at not aligning all their volume to the main lenders which will assist in business being shared around.” Funding issues continue to be a challenge for smaller lenders, but several respondents expect them to be able to overcome these. Brown expects the economy to continue improving over the next 12 months and lending competition to hot up off the back of this. “We expect funding costs will improve as cash starts to flow more freely and non-banks and regionals will be more competitive as they start to claw back market share.” Moore acknowledges funding constraints, but believes non-majors can distinguish themselves by dint of superior service and Kane adds that getting securitisation moving again is key to non-banks remaining competitive. Scott adds: “Government legislation will make it difficult for non-bank or second-tier lenders to compete in the home loan space, but these lenders have always shown the way in terms of innovation and product development and I expect we will see them rise to the fore with new product initiatives over the next 12 months.”

Aggregator mergers It would appear that the larger aggregator groups are safe for the time being, but some collaboration is expected among the smaller players. Rampal says: “We will possibly see mergers or acquisitions due to distressed aggregators needing to sell due to the changed landscape. However, professionally-run boutique aggregators do provide much needed competition, and competition in lending is just as desirable as competition in aggregation. It keeps us all honest and hungry to achieve and distinguish ourselves. Without this competition, aggregators would go back to the low service days of the late 1990s.” Brown says consolidation is inevitable and has always been part of Vow’s thinking. “We intend to continue growing, both by acquisition and organically,” he declares. “The rationale behind Vow’s launch in February 2010 was to establish a new aggregator group with a national presence to counter the growing dominance of the big, known players in the sector, and self-evidently growth will play a key role in achieving this goal.” Moore adds: “I see a future made up of very large aggregation businesses with deep pockets and some niche businesses who provide a genuine alternative, especially for those brokers focusing on niche areas. It is some of the mid-tier aggregators who may struggle in the future as the economics of the traditional aggregator business come under increasing pressure.” MPA

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HEAD TO HEAD VIBHA COBURN

Living

for the Citi

Vibha Coburn has returned to the Australian financial services arena after more than a decade away to head up the mortgage division at Citibank. Barney McCarthy caught up with her to chat about her comeback

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Q: I know you’ve spent the last part of your career in Singapore, but talk me through your career to date. A: I began my career in Western Australia with Challenger, around 22 years ago. It was what we used to call private banking in those days, so basically looking after high-net-worth individuals. A lot of it was mortgages, as property is the main cornerstone of wealth in Australia. It was a great area to be exposed to. I worked in risk management, commercial/ corporate and private banking – in those days there were no structured notes around so it was mainly about assets. I then joined a consulting company for about eight years – initially in Australia then I went over to Singapore with them – which was very financial services-based. I continued working with the assets and credit side of things with some branch interactions. I joined Citi almost nine years ago in the regional office and did a lot of work around mortgages and liabilities for the Singapore region. I had a spell as CFO in the regional treasury which was interesting as I got to see how it all worked behind the scenes. I then came to head Citi’s commercial business division which was focused on assets and liabilities. I then spent time in e-business and my last job before my present role was heading up secured finance solutions for

Citi in Singapore. I looked after mortgages, auto loans and share finance, so all secured lending came under that umbrella. I’m loving being back in Australia. Q: What made you choose financial services as a career in the first place? A: I fell into it really, but I had always been very analytical. I got a degree through the Securities Institute of Australia and was working in exhibitions. I had always been very numerical and bumped into someone who was in banking. I had moved to Perth from Sydney, was looking for a job and someone suggested banking and it sounded interesting. I started working in private banking and mortgages. I remember the first time someone asked me what a security was and I started talking about bonds and issuances, but they meant in terms of a mortgage document. I loved banking as it was about people. Even when I was a management consultant with PA Consulting Group, which was very implementation-oriented, I used to say I was a banker as that’s what I felt I was. At heart I’ve always been a banker. Sometimes when I speak to my marketing colleagues I ask them if they are bankers or marketeers. Personally, I love being a banker. Q: Did you learn anything from your time in Singapore that you can apply to your new role?

HEAD TO HEAD

Photo: Thilo Pulch

VIBHA COBURN

Vibha Coburn

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HEAD TO HEAD VIBHA COBURN

“ As far as I can see, Citi is the best global bank in Australia ”

A: It works both ways and we took quite a few things from the Australian market over to Singapore – it is part of being a global bank and working in a regional centre. In Australia, mortgages are embedded in the national psyche, consumers are very knowledgeable and innovation has been constant. Citi was one of the first to introduce the credit line concept in mortgages, so we took that over to Singapore as Mortgage Power. In terms of working with the branches directly, Singapore is more successful. It’s a city-state, remember, but some of the branch models can be replicated in terms of how we service customers, and that is our focus as we grow our distribution channel. In terms of disciplines around marketing and how we raise our profile to customers and brokers, we are fantastic at doing that already in Australia. Q: How hard was Singapore hit by the GFC? Did it experience tougher times than Australia? A: For about four months, no one wanted to lend, property prices fell and there was total silence. The market is slightly different to here. The developer market is very strong there – 20% of the market is private and the rest is public housing, so you’re only dealing with a fifth of the

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market. Of that 20%, most of it is new business coming through. The developer market is very important to us. During the GFC, Citi didn’t move because we’ve always held a good book. We didn’t do anything different, yet still increased our market share purely because we remained in the market. Singapore popped out of the GFC very fast and people realised their economy was doing alright although they remained wary of what was happening in the UK and Europe as it is an export-oriented market. It was a bit like Australia in that it didn’t drop off, but merely calmed down for a bit. In Australia, you wouldn’t really know there has been a GFC compared to some countries and touch wood that continues. At Citi, we spoke to Singaporeans who had moved to the UK but came back because there were no jobs or opportunities. The energy just isn’t there in the UK market. The Australian market is a great one to be in. Q: What’s your view on whether a property bubble exists? A: I’m not an economist, but I can’t see it existing. It’s something you need to observe happening and I’ve only recently returned to Australia. Usually with property bubbles, you see a high percentage of increases like we’re seeing in Asia at the moment. To hark back to my Asian experience, in Hong Kong and Singapore property prices would go up 5% or 10% per quarter. The government has intervened and the latest measure is that on a second property you cannot get a LVR of over 60%. These are serious interventions. In Australia, our risk policy guys intervene, so we don’t need the government to do that. I don’t see that galloping sort of rise you associate with a bubble in Australia, but there will be a period when prices don’t rise so sharply. Q: Has your return to the Australian market been less of a tough transition for you because Citi is a global bank?

HEAD TO HEAD VIBHA COBURN

A: Yes, on two fronts. Firstly I’m coming back to Australia having been here before and I kept in touch with the place and family. It is nice coming back after 13 years away and the plan was always to return at some point. Being within the Citi family is even better because all the people I work with are the same regionally and in other countries and I have a great, experienced team here. Q: What’s the plan for this year? Do Citi look at the Big Four enviously or are you just doing your own thing? A: We have three targets in 2011 and we’re already achieving them. Firstly, we are making sure our products are competitive. When I talk about products, it’s not just about rates, but about service and the whole package. We need to make sure we have good bundled packages for the right target market and basic rates for others so we are catering for everyone from first homebuyers to property investors to the affluent clients. Secondly, we want to maintain our relationships with our broker partners. I was speaking to brokers at an event hosted by the bank recently and they were praising us for staying in the market even though we priced ourselves out of it for a few years. We kept in touch with them and maintained that relationship and so brokers are happy to support us. We want to develop a premium offering to our key brokers in terms of turnaround times. Both of us have the same idea in mind – to service the customer fantastically. This all dovetails neatly into our last aim which is to service our existing customers and look after our Citigold and card customers. We reward them for being with us; they are part of the Citi family and they benefit from that. Q: Brokers have long memories and will remember who supported them through the GFC. A: If you look at the broker market a lot of them are aged 45+ and have been in the market a long time, so it’s not a

flighty industry. They understand and they have been there. Winning various BDM support awards shows we have stood strongly by our partners. Q: You mentioned recently that as Australia has such strong inward migration, there may be a generation of young customers for whom the Big Four banks may not have such a resonance. Can you expand on that? A: There is a great opportunity there. We have a global brand and people can have accounts across countries with just one log-in. When we have new immigrant customers, they want that globality and familiarity with the brand. As far as I can see, Citi is the best global bank in Australia. Q: Are customers fed up with the Big Four and do second-tier lenders stand to benefit from that? A: I think we have an opportunity as a second-tier bank and people are more willing to listen now and see the difference themselves. People want straightforward banking and to be able to speak to people in English. We have a dedicated customer care team for our mortgage business that isn’t just a generic 24-hour helpline. Customers love to have a mortgage, a credit card and a savings account in the same place. We were very visible in the market last year and our unaided brand awareness tripled, so we are investing in the brand like never before. Q: What do you like doing to unwind? A: I have three kids, so they take up most of the time. I love the beach and water sports and I’ve recently got into mountain biking, so I’m on the lookout for some good tracks. It’s nice to be back after being away for so long, so we’re trying to catch up with old friends. I love travelling and when we were in Asia we tried to do plenty of that. I’m an unashamed tourist and happy to say that. Give me the Pyramids or the Grand Canyon any day – I’ll leave the beautiful unspoiled parts of Tuscany for when I’m older. MPA

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FEATURE

HOUSING SHORTAGE

Every month new statistics spark cries of an impending housing crisis in Australia. Andrea Cornish looks at the housing shortage and what it means for your clients and your business

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Supply and demand H

ousing affordability has been linked to chronic undersupply of housing in Australia and if recent reports are to be believed, the situation is getting worse. The latest Housing Industry AssociationJELD-WEN report on new home sales released in April revealed that the number of new homes sold increased 0.6% in February, while sales of homes in multi-dwelling developments were down 7.6% and detached house sales rose 1.5%. “At the very time when new home conditions need to be continually improving, we are faced with compelling evidence of a considerably weaker 2011 compared to last year,” says HIA chief economist Harley Dale. “The fate of residential building in 2011 has been all but sealed by higher interest rates, continuing tight credit conditions, and a complete lack of progress on policy reform to reduce excessive new housing costs.”

The HIA forecasts housing starts will fall by 15% to a level of 143,430 in 2011 – effectively wiping out the majority of short-lived, stimulusdriven gains of 2010. Dale says housing starts have only increased in two of the last 10 years. According to a 2010 report from the HIA, the shortage of available homes will more than quadruple to almost half a million by 2020 if the nation doesn’t increase the pace of new construction. The association called for the construction of 466,000 new homes by 2020. While the HIA is a group with vested interest in new housing construction, it isn’t the only organisation to signal a chronic undersupply of housing in Australia – the RBA, the Urban Development Institute of Australia, BIS Shrapnel and the Housing Supply Council, to name a few, have all voiced concerns regarding a housing shortage.

FEATURE

HOUSING SHORTAGE

So how did Australia get into this situation? There are a couple underlying factors.

Changing demographics Many say population growth is a leading cause of the current housing shortage. At the time of writing, Australia’s population was 22,585,888. ABS statistics for the year ending September 2010 show an increase of 345,500 people during the previous 12 months. About 54% of that growth was the result of overseas migration, while the remaining 46% was due to births. The growth rate sits at 1.6% – higher than many developing nations, including the Philippines, Malaysia, India, Indonesia and Vietnam. The Treasury’s Intergenerational Report projects Australia’s population will reach 35 million by 2050. Melbourne was predicted to hit 7 million people, and Sydney would grow to more than 7.5 million. Prime Minister Julia Gillard has distanced herself from her predecessor stressing that she does not support the idea of a ‘big Australia’. “We need to stop, take a breath and develop policies for a sustainable Australia,” she has stated. “If you spoke to the people of western Sydney, for example, about a big Australia, they would laugh at you and ask you a very simple question: where will these 40 million people go?” The Australian survey of social attitudes found three-quarters of Australians also do not want a bigger population. However, in a recent submission to the government’s sustainable population strategy, Urban Taskforce Australia presented modelling which revealed real estate prices would plummet over the next decade if the federal government curbed population growth in the biggest capital cities. The report, which was prepared by MacroPlan, showed Sydney prices would drop 18.3%, while Melbourne’s would fall 15.3% and Brisbane’s by 14.7%. Some also attribute the housing shortage to changing household demographics. Multigenerational housing arrangements have decreased, while divorce rates have increased – both of which have led to more people living on their own and fewer people living in each home.

Lack of finance Another underlying cause of the housing shortage is the decrease in commercial lending. Major banks simply turned off the tap on commercial

lending during the GFC, while many secondtier lenders and non-banks simply went into hibernation, both of which made it very difficult for developers to get funding approval for projects. There appears to be little improvement in this area of lending – ABS statistics indicated commercial lending declined even further in February by 6.6%. According to MFAA CEO Phil Naylor, the feedback from finance brokers suggests SMEs are having a difficult time raising capital from a decreasing number of lenders, with tightened Julia Gillard criteria that excluded many from mainstream borrowing. He adds that brokers who could not “ attract funding from mainstream lenders were We need to taking deals to private lenders where interest rates could range from 10–20%. stop, take “Our finance brokers are reporting that a breath many of the smaller banks and the non-bank and develop lenders have left the SME market, especially policies for when it comes to property developing and office a sustainable equipment and fit-outs,” Naylor says. Australia “That leaves the large retail banks with most of the market.” ” Brokers report that the major lenders are cherry-picking the market; asking property developers for larger equity commitments and at least 50% qualified pre-sales. One large lender was asking property developers to refinance their loans so it could exit that sector. Fact or fiction? Mortgage One Despite the never-ending flow of statistics from Australia’s Danny housing groups and building associations, there are Masri placed second some that argue the housing supply situation isn’t on MPA’s last annual really all that bad. Metropole’s property guru Michael top commercial brokers Yardney says we have to step back from the hype, survey, settling $118m industry exaggeration and vested industry groups and in 2009–2010. He look at the numbers more carefully. suggests there are too “Clearly, our population is increasing markedly and new construction has not kept up with this, but there many deals and not is no undersupply of new house and land packages enough appetite. “The – builders are ready and willing to build and there is biggest problem is available land, yet very little pent-up demand. There is capital requirements an oversupply of property in many holiday locations, for brokers,” he claims. for example, the Gold Coast and Sunshine Coast and “Lenders also don’t have in regional areas. That’s why prices are flat or falling.” access to cash and it is Yardney notes that the supply and demand ratio is one of the factors that maintains home prices – easier for them to lend obviously, when more people want properties than on home loans even there is available stock, prices increase. This is though the quality of currently being reflected in some inner suburban commercial deals is areas of Melbourne, Brisbane and Sydney where usually higher.” prices are holding firm and, in many cases, increasing. BROKERNEWS.COM.AU

FEATURE

HOUSING SHORTAGE

Red tape restrictions

Harley Dale

“ There is a complete lack of progress on policy reform to reduce excessive new housing costs ”

Others blame the housing shortage on poor government policy and planning. Mortgage Choice CEO Michael Russell recently called for urgent government reform to increase housing supply amid a deterioration of affordability. Russell’s comments followed the release of a Productivity Commission report released in March 2011, which linked undersupply to housing affordability issues. “It is time for governments to take immediate and effective action, which is long overdue, or suffer the consequences of even more Australians being pushed out of the market,” he reasons. Russell points to insufficient land release, poor development approval processes and high development costs for impeding housing growth. “Australians deserve transparent, effective housing decisions to be made quickly and regularly in the interests of turning around the deterioration of affordability. We call on the federal minister for housing to open up a much more productive, consultative communication channel with the state planning ministers to take immediate action to resolve the true cause of housing affordability.” Russell calls on the government to roll back the red tape and implement timeframes for rezoning and planning amendments to improve the development approval process. “We need to formulate planning guides so developers can be confident in their due diligence and we need to include automatic zoning of land for urban use to save time releasing land,” he concludes.

Cause and effect The housing shortage has been a critical factor in escalating home prices. A report by the Canadian Bank of Nova Scotia revealed that after adjusting for inflation, house prices in Australia rose by 9.4% in 2010 – more than any other country surveyed. According to the survey, low unemployment and tight supply in the housing market contributed to the rise. According to the Real Estate Institute of Australia (REIA), rising prices are keeping first homebuyers on the sidelines. The REIA’s Deposit Power Housing Affordability Report released in March revealed a 42% decline in first homebuyers in the previous 12 months.

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REIA president David Airey notes that first homebuyers buoy the market by purchasing properties at the lower end of the price scale, allowing consumers looking to upgrade to do so. “Despite the slowdown in house price growth, REIA’s research shows that Australia is experiencing the worst level of affordability since the turn of the century. With the average loan holder now contributing 35.3% of their household income to loan repayments, affordability is considered to be at a critical level.” The REIA is recommending a review of the First Home Owner Grant, as well as giving first homebuyers access to their superannuation for home purchases. Brokers dealing with first homebuyers will have to be more creative in helping them get into the property market. PLAN CEO Trevor Scott says the market will likely respond with new products to help people struggling to break into the housing market. “I think it will generate new products coming into the market like shared appreciation mortgages, home loans where other family members can use equity in their property to help first homeowners in. I think we’ve always found – as an industry – where there’s a problem, we’ll always find a way to overcome that problem.” For brokers targeting property investors, the situation is much brighter. RP Data’s senior research analyst Cameron Kusher suggests that 2011 will be the year of the ‘astute investor’, adding that investors should be looking for opportunities to enter the market now. “With fewer buyers around, active investors will have more choice and less competition for property and they’ll have time on their side to make a decision. With those factors at play, it could be the year to get a relative bargain.” MPA

Fast facts According to the ABS, there is: »» one birth every one minute and 45 seconds »» one death every three minutes and 43 seconds »» a net gain of one international migration every three minutes and 11 seconds »» an overall total population increase of one person every one minute and 37 seconds *This projection is based on the estimated resident population at 30 September 2010

FEATURE

Mutual benefits? MUTUALS

I While nonbanks continue to struggle, the government has thrown its support behind the muchtalked about fifth pillar. But can mutuals really bring competition to the home loan market and what does their presence mean for brokers?

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n terms of competition, the latest ABS statistics on housing finance paint a grim picture. Figures released in April confirmed that smaller lenders are losing ground to the banks. About 90.2% of housing loans transacted in February went through the banks – the highest share recorded since last September (90.6%). Around 80% of that total is held by the Big Four. Meanwhile, non-banks experienced their worst market share (1.9%) since they joined the mortgage market in 1995. It’s a huge drop from the pre-GFC heyday when non-bank lenders held 13.6% of the market. But there is competition building from another sector. While numbers were slightly down in February, the mutual sector has been on an upward trajectory over the last couple of years. December ABS figures revealed that credit unions and building societies wrote almost 11% of new owner-occupied home loans in Australia – up from 6.5% two years ago. Australian Prudential Regulation Authority (APRA) statistics show that the mutual banking sector grew 10.7% in 2010, with assets of more than $77bn. By comparison, resident assets for banks grew 4.4% over the same period. According to Louise Petschler, CEO of industry group Abacus, mutuals are benefiting from Australian’s backlash to the banks. “We think we’re seeing the start of a revolution in Australian banking, driven by customers who are tired of being taken for granted,” she says.

About 4.5 million Australians already bank with credit unions and building societies and the sector is working hard to convert more customers. Abacus recently launched a national television advertising campaign highlighting the benefits of moving away from the big banks. It’s the third time in a year that the group has run national advertising and Abacus reports that their efforts – which have cost the group more than $8m – are starting to have an impact. According to the industry group, general community awareness of the sector has increased by almost 10%.

Government support The mutual sector has certainly caught the government’s attention. In December 2010, the Deputy Prime Minister Wayne Swan announced that as part of the government’s competition in banking reforms it would build a new pillar of competition to the major banks. Government support of the ‘fifth pillar’ (made up of 115 credit unions and building societies) largely consists of building public trust in mutuals. To this end, Swan announced APRA would approve of more than 20 mutuals to use the term ‘bank’ if they apply. APRA is also to conduct a review of current guidelines permitting the use of the term ‘bank’ which will be concluded in March 2012. In addition, mutuals are able to display an official symbol that reads “government-protected deposits” to confirm to customers that their

FEATURE MUTUALS

savings are protected in the same way as bank deposits. The Treasury has also committed to helping mutuals generate cheaper funding. Abacus spokesperson Mark Degotardi says the government’s support of the mutuals sector at a time when many customers are unhappy with the major banks has been a “happy coincidence”. “The government provided awareness of the sector at a time when people were motivated to make a switch,” he adds. While Degotardi applauds the Treasury’s efforts in raising public awareness of mutuals, for the sector to really step up to the plate and take on the role of fifth pillar, Degotardi says there needs to be some concrete assistance. “If we want to grow we have to have a diverse funding base,” he warns. “The AOFM investment has been important, it’s one-off funding – [the government] needs to create liquidity.” Among the banking reforms introduced in late 2010 was government approval for banks, credit unions and building societies to issue covered bonds to improve access to cheaper and longerterm funding. Degotardi says it will be difficult for mutuals to take advantage of covered bonds in the first 12 months, but down the road there could be opportunities. The biggest issue, he says is a deposit guarantee which Abacus argues is not about stability, but is a competitive measure. “We think the threshold should be kept where it is now,” Degotardi says.

Third party distribution While the growth of the mutuals sector could bring greater competition to the banking industry, where does it leave brokers? At present, very few credit unions and building societies distribute loans through the third party channel. Degotardi attributes mutuals’ reluctance to source loans through brokers to their strong member focus. “Customer satisfaction ratings are 90% so we value that. I think mutuals have struggled devolving that member relationship.” While not all credit unions and building societies have been conservative in their distribution approach, funding concerns during the GFC led to several (of the very select few that did use mortgage brokers) pulling back from third party distribution in the residential space, or in some cases altogether.

Louise Petschler

“ We’re seeing the start of a revolution in Australian banking, driven by customers who are tired of being taken for granted ”

IMB, which is one of Australia’s largest building societies with assets of more than $4.6bn, offered residential and commercial loans through brokers until July 2008, blaming uncertainty in the global money markets, as well as the rising costs of funding for the change in its distribution strategy. The building society still offers commercial loans through brokers and supports commercial lending brokers with residential loan products in situations where they are originating both for a single client. Credit Union Australia (CUA) is Australia’s largest customer-owned financial institution. It continues to do limited business with brokers, but largely pulled back from the broker channel during the GFC as well. However, general manager of strategy and marketing Andrew Hadley has recently signalled it would consider reopening those distribution lines again if economic and funding conditions were right. Prior to the GFC, 30–35% of its origination came through brokers. “We’ve had an involvement with the mortgage broking industry that goes back to 2002 and at that point in time we were one of three credit unions that took an equity holding in Mortgage Choice ahead of its float. So that’s why we got back into the broker channel,” Hadley says. “We absolutely see an opportunity for us to get back in with the industry in the near future, however it really is going to be if and when the pricing returns to the point where it makes it financially viable.” One mutual that continues to rely on mortgage brokers as part of its distribution strategy is Heritage Building Society. While Heritage reduced broker-sourced loans during the GFC to 40%, it is ramping up distribution through the third party channel back up to 50% of all originations. The Queensland-based building society has been offering loans through brokers for 13 years. CEO John Minz says using mortgage brokers to increase geographic diversification has always been an important part of their growth strategy. “Our direct lending from our 58 branches is done all in South East Queensland, so by tapping into mortgage brokers we can get access to both volume of lending but also diversity of underlying security all around the eastern seaboard. So we have intermediary processing offices in Brisbane,

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FEATURE MUTUALS

Sydney and Melbourne, and we’ll take loans based on properties all across the eastern seaboard, the ACT and from South Australia,” he says. Why other mutuals appear to be so reluctant to use the third party channel, Minz doesn’t know. “I’m not sure – each of them would be different in terms of their physical distribution, how diverse or concentrated their existing lending is, how strongly they feel about those things. It could be as simple as understanding the broker proposition; it could be a misunderstanding around the value of the broker proposition. For instance, for us when we first went into the broker proposition, it was purely for a particular product called a mortgage loan. Nowadays through outbound phone calls, contact centres, electronic channels and different products we can actually provide more of our products and services to our broker-originated members, and it’s not just a single product. I don’t understand why they wouldn’t do it. Some people think it’s the cost of the distribution channel in terms of commissions but if you were to set up branch infrastructure around NSW and Victoria, that would be very expensive. So it does give you an alternate way of tapping into additional lending.” Minz says that the regulations introduced through the NCCP could convince other mutuals to use brokers, but adds that Heritage has never experienced problems with brokers in its previous 13 years of dealing with the channel. “I’ve never been aware through our dealings with them that they are churning the loans or in other ways distorting the benefits in favour of the brokers over ourselves. We take it on as a real partnership and as a relationship, and we manage the risks that may come from churning through contractual clauses and clawbacks. We’ve never had an issue with brokers in terms of integrity of their behaviour. Hopefully, the NCCP, the additional training, and the certification through MFAA will help. But for us, we’ve had long relationships that we trust in the benefit that each of us brings to them.” Since Heritage reintroduced its basic-priced loans back to the broker market, the uptake has been good. “It’s been a positive for us and at the end of the day we provide an alternative based upon competitively priced products, a really good service proposition where broker partners can phone and talk to our people rather than hop

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Mark Degotardi

“ The government provided awareness of the sector at a time when people were motivated to make a switch ”

on an IVR computer-linked line, and they can manage loans through, whether they need to be done in a hurry or given priority or whether its just a normal process. So for us, it’s that service and the value, and brokers obviously appreciate that value and are patronising the channel as we wish it,” Minz says. While he wouldn’t confirm Heritage’s commission rate, Minz says their upfronts and trails are market-competitive and haven’t changed in years. Heritage currently has relationships with 10 major broking groups, but is looking to expand its network to a dozen in coming months.

Brokers crack into credit unions PLAN announced a new partnership with Phoenix Mortgage Management in February that will allow brokers to offer loans from a number of credit unions belonging to Cuscal. According to Phoenix CEO Allan Willoughby, this is a unique opportunity for brokers to access a range of lenders that have traditionally shied away from the third party channel. “Mutuals have also traditionally been a very cautious group and I think they see engaging with brokers as having an element of risk,” he says, adding that the majority prefer to keep their traditional membership bonds. In addition, Willoughby notes that the majority of mutuals are not structured to deal directly with the broker market either from a continuity of funding perspective or systems to manage dealing with a large number of brokers. “The processing of applications for a large number of brokers has its difficulties, particularly as brokers demand quick turnaround times and continual updates regarding the progress of their applications. Most mutuals are not geared for this sort of demand.” He also notes that some mutuals have trouble coming to terms with broker upfront and trail payments and how to factor the cost of these payments into a loan with the loan still remaining competitive. However, the PLAN/Phoenix arrangement means brokers will have a real and credible alternative to the banks, Willoughby says. In the initial stages of the program, PLAN brokers will have access to one credit union from each state in Australia, however other Cuscal credit unions are in the process of assessing the distribution model. Willoughby says he would like to expand the program to include other aggregator groups as well. Discussions are currently taking place with Connective and AFG. Phoenix Mortgage Management will reassess the program’s role after these negotiations have concluded.

FEATURE MUTUALS

As to the creation of a fifth pillar – Minz believes the mutual sector is already acting in that capacity. “The issue of the fifth pillar is it’s already there – there are 120 mutual institutions and Heritage is a strong one that’s had a very solid growth history for quite some time. But for us, it’s about ensuring we get access to cost effective sources of funding which allow us to offer competitive loan pricing. “I just hope as we move forwards, that whatever happens, either through the market, through the industry or through government involvement, that it doesn’t exasperate any discriminatory funding elements. And if that’s the case, and we’re able to compete fairly to access the funding, we will be able to provide an alternative to the Big Four banks. Many of us, I believe, are currently doing that.”

Detractors But not everyone believes mutuals are up to the job of bringing competition back to the home

John Minz

“ It’s about ensuring we get access to cost effective sources of funding ”

loan market. Aussie chairman John Symond has called the ‘fifth pillar’ a joke. He told a senate inquiry into the banking system: “It wasn’t the banking sector that brought competition, it wasn’t the mutuals,” he said. “I’m a fan of the mutuals, but to suggest that the mutuals can become the fifth force in banking, quite frankly is a joke. They are small corner stores, they don’t have infrastructure, they don’t have technology, don’t have the clout and reach, and we need the government to go back to firstly understand where competition came from.” Symond says the government needs to back more initiatives to support securitisation, which was the vehicle which originally allowed nonbanks to bring competition to the home loan market in the first place. “In fact, when I stepped into the market in 1992, mutuals – building societies included – and banks all charged exactly the same high interest rates,” he says. “The mutuals provided a better service, they were the corner store, but in terms of pricing they were all the same.” MPA

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FEATURE ACCREDITATION

Credit checks

One year on from our last segmentation report, MPA revisits the Big Four to see what their latest stance on accreditation is, how licensing will affect it and what their future plans for the third party channel are CBA

Kathy Cummings, executive general manager, mobile and third party banking Will licensing negate some of the need for accreditation by weeding out some of the lowerperforming brokers? Licensing is an industry-wide requirement, while accreditation is a lender requirement. Accreditation is all about being proficient in an individual lenderâ&#x20AC;&#x2122;s product and credit policy so the broker can make the appropriate knowledgeable recommendation to their clients.

Kathy Cummings

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What is the rationale behind having accreditation processes in place? We are committed to the efficiency and long-term sustainability of the mortgage-broking industry and to further improving the professionalism of mortgage brokers through the submission of quality, error-free applications. Through the accreditation process, brokers develop a desired level of competency in Commonwealth Bank products, policies and processes and this equips them to meet their responsible

lending obligations and mitigate any compliance risks. How have accreditation processes changed in the past 12 months and how do you expect them to develop going forward? Our accreditation process has not changed in the past 12 months. Once brokers are accredited we encourage them to attend our professional development days at which they receive CPD points, so they stay on top of changes to products, credit policies and/or processes. Are volume hurdles compliant with regulation if brokers are placing business with certain lenders to meet requirements rather than doing what is best for the consumer? Commonwealth Bank requires brokers to submit a reasonable sample of applications, in our case that is four in a six-month period, to ensure brokers have a good knowledge of our products so they can deliver a good customer experience. A broker with poor knowledge runs the risk of misleading customers. A broker who is competent in our products and processes will ensure a positive experience for the customer. We believe this is in the best interests of the broker and the consumer. What are your plans for the broker channel in the next 12 months? To continue our partnership approach and be simple and easy to deal with. The projects we have in place to do this are: refining our compliance processes to ensure brokers meet the requirements, rolling out document-printing capabilities to more brokers and improving our straight-through processing rate to drive down our unit costs per loan.

FEATURE ACCREDITATION

ANZ

Andrew Everington, head of broker distribution Will licensing negate some of the need for accreditation by weeding out some of the lower-performing brokers? Accreditation will always be necessary as it is designed to give brokers new to ANZ specific detail regarding our products and policy to ensure they can confidently and accurately portray ANZ’s product offering to their client. What is the rationale behind having accreditation processes in place? ANZ’s accreditation process is in place to assist brokers to do business. It’s important that our brokers understand our products, policies and processes to ensure they are able to help their clients make the right decisions to achieve their financial needs. How have accreditation processes changed in the past 12 months and how do you expect them to develop going forward? Essentially, ANZ’s accreditation process has not changed in the past 12 months. The accreditation process for brokers is straightforward. For brokers to be accredited with ANZ they must be members of either the MFAA or FBAA. Memberships of both organisations require attainment of Certificate IV in Financial Services, and brokers must meet continuing professional development requirements. To become ANZ-accredited, brokers can complete their accreditation either: »» online – which involves training on ANZ’s products, policies and compliance requirements »» face-to-face with their business development manager where support material is provided, including an operations manual, training book, broker website, product fact sheets, and policy and product matrix

Andrew Everington

Are volume hurdles compliant with regulation if brokers are placing business with certain lenders to meet requirements rather than doing what is best for the consumer? ANZ does not apply volume hurdles to its broking business. Our accreditation process is focused on helping brokers do business without being hindered by volume hurdles. What are your plans for the broker channel in the next 12 months? The broker market is an important and integral part of ANZ’s business. We will continue to work with brokers on issues affecting them and their business and look for ways to assist brokers in doing business. We remain focused on building a sustainable model that allows brokers and ANZ to work together.

Westpac

Huw Bough, general manager, broker sales and third party distribution What is the rationale behind having accreditation processes in place? It is all about ensuring the right customer experience and that mantra can apply across a range of industries. Brokers who use and understand

Huw Bough

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FEATURE ACCREDITATION

a lender’s offering are more likely to give the customer the correct advice. The only requirement we have in place is that brokers have to put one loan through us every six months, but that is a no-brainer as they will probably be doing that as a minimum. We ask new brokers to take an accreditation session, be a member of the MFAA and undertake a business needs review. We also require that they complete a police check and belong to an aggregator.

and recourse. As a lender, we have obligations and requirements and part of that is making sure we tick the boxes in our dealings with brokers.

How have accreditation processes changed in the past 12 months and how do you expect them to develop going forward? From a broker perspective, we have the same methods in place as before but have been working on some details around the customer experience. Everything we do is always under review.

How have accreditation processes changed in the past 12 months and how do you expect them to develop going forward? We are constantly enhancing our accreditation process and are dedicating additional resources to this area in an attempt to make it easier. We still have our Star Rating system, which was introduced in 2008, that rewards brokers who write quality business. We have no volume requirements but instead focus on the quality of a broker’s portfolio and the percentage of clients who have gone into arrears. By focusing on conversion and settlement rates we can measure the performance of brokers.

What are your plans for the broker channel in the next 12 months? There is intense competition in the market at the moment and we have seen lending sentiment shift from a cautious view to a more confident approach. We have been channelling a lot of our efforts into the Davidson Institute, a financial education resource for the benefit of our customers. It offers free local seminars, education and advice, short courses and nationally recognised qualifications.

John Flavell, general manager of broker distribution

Are volume hurdles compliant with regulation if brokers are placing business with certain lenders to meet requirements rather than doing what is best for the consumer? Regulation is all about brokers being obliged to find the right solution for the customer – to find a product that is not unsuitable. Volume requirements can compromise that. How would customers feel about a situation where the mortgage option they are presented with may have been pre-determined? If volume hurdles were all on the front pages of the newspapers, how would it make us look as an industry?

Will licensing negate some of the need for accreditation by weeding out some of the lower-performing brokers? The introduction of licensing and regulation can only be a positive thing and we welcome the fact there will be accountability

What are your plans for the broker channel in the next 12 months? We have adopted an aggressive approach and continue to grow our market share. We have had the lowest SVR for more than 18 months now and have made significant enhancements to our products while removing a number of fees. Our strategy is three-pronged – to appeal to customers, to have good service and to deliver a compelling commercial reason for brokers to deal with us, and we have met the last target by giving suitable incentives and remuneration. MPA

NAB

John Flavell

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What is the rationale behind having accreditation processes in place? It’s about making sure we know brokers, making sure they have access to information about our policies and practices and making sure we understand what they need.

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COMPLIANCE SOLUTIONS

Technical support

Robert McCabe of Macquarie Adviser Services discusses how technology can help support mortgage brokers through change and keep on top of compliance demands

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he beginning of 2011 signalled a key milestone for the National Consumer Credit Protection (NCCP) regulations for credit activities. The introduction of the NCCP legislation has created a new imperative for mortgage brokers to implement a robust process to manage their compliance obligations. Under the National Consumer Credit Protection Act, credit licensees have general conduct obligations and responsible lending obligations which they are required to comply with. For brokers this means adopting new procedures, documentation and records which are required to comply with the new regulations. The NCCP Act was developed to give consumers greater transparency of the mortgage lending process and to provide a more comprehensive and consistent approach in the way that credit is regulated. While the introduction of the new rules and regulations by the NCCP Act may result in a more demanding regulatory environment and

more compliance requirements, it may also bring new opportunities. As the professionalism of the industry develops, consumers will develop a greater sense of trust in the mortgage industry and mortgage brokers and have the confidence that they are receiving the advice that best suits their needs.

Supporting diversification Trends within the financial advice industry indicate that both mortgage brokers and independent financial advisors are looking to diversify their business streams. In the context of a growing demand for advice, more mortgage brokers may diversify and look to facilitate insurance services or to form part of a broader financial advice practice. For brokers looking at options beyond organic growth to generate revenue, diversifying their income streams presents an additional opportunity. While diversifying into financial planning may not be as popular a choice for brokers as

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COMPLIANCE SOLUTIONS

it is for financial advisors looking to diversify into mortgage broking, it certainly opens up the debate about better referral management within the industry and strengthening relationships with referral partners. Stronger relationships can bring benefits to brokers, their referral partners and of course their clients. Technology can play an important role here as with most administration tasks. It can be used to create a referral management solution to track all clients referred to and from a business and provide a complete view of referral activity.

Compliance assistance It was in anticipation of the NCCP changes that at Coin Software (COIN) we developed mortgage broking functionality as part of COIN Office and so we launched COIN Mortgage. COIN Office is financial planning software that supports financial advisors and brokers to grow their business and provides access to financial planning capabilities, including insurance and wealth creation, alongside a sophisticated referral management solution. We worked in close consultation with brokers and Macquarie’s mortgage team to develop COIN Mortgage, ensuring it was user friendly and comprehensive, and ultimately met the needs of brokers. One of the primary focuses of COIN Mortgage was to deliver a solution that can assist mortgage brokers meet compliance requirements under NCCP regulations. Specifically this focused on disclosure documents that brokers are required to provide to consumers at particular stages of the credit process, as well as providing tools that facilitate the business of mortgage broking. On recommendation of a loan, client and product information pre-populates a credit advice statement, which is a template tool COIN has developed specifically to help brokers meet their requirements. This statement can also be saved in the client’s records for audit purposes.

Work smarter, not harder Whether it is better practice management or the additional processes that the NCCP regulations have initiated, the focus on the advice process has highlighted the need for brokers to work smarter to maintain their competitive edge.

This is where technology can make a difference. By using technology, brokers can work more efficiently and streamline the advice process. COIN Mortgage was developed in response to feedback from brokers requesting solutions that respond to the changing needs of the mortgage industry, and one of the common requests was for a solution that made life easier for brokers at a time when there was a lot of change in the industry. Providing a solution that Robert McCabe helps brokers with both their compliance and efficiency, COIN Mortgage allows brokers to create customised workflows that build in regulatory requirements and automate business processes to ensure everyone can follow the same efficient process.

Moving forward One thing we know for certain is that the already rapid technology changes in the industry will accelerate during the next decade and will play a big part in shaping the future. Technology is already offering brokers new mediums for communicating and information sharing with their clients. Financial advice at its core is a relationship business, therefore the technologies that truly move the industry forward will be those that complement and enhance client relationships. As technology evolves, so will the mortgage industry. With more regulations to consider, brokers need to spend more time on compliance tasks and technology has a real role to play in streamlining some of these tasks. By giving brokers the tools and solutions to help them work more efficiently and helping them meet compliance requirements, technology can enable them to do what they do best, which is advising their clients. MPA Robert McCabe is head of product and technology for COIN/Web at Macquarie Adviser Services BROKERNEWS.COM.AU

STATISTICS

PROPERTY INVESTORS

Facts and figures

In the first instalment of a new monthly statistics round-up, we take a look at state-by-state information that may interest a particular market segment. In this issue, the spotlight is on property investors. For each region, we look at the top five suburbs in terms of price growth over the past 12 months, rental yields and average rents, for both houses and units

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STATISTICS

PROPERTY INVESTORS

Top suburbs by 12-month VBM price growth: houses State ACT ACT ACT ACT ACT NSW NSW NSW NSW NSW NT NT NT NT NT QLD QLD QLD QLD QLD SA SA SA SA SA TAS TAS TAS TAS TAS VIC VIC VIC VIC VIC WA WA WA WA WA

Rank 1 2 3 4 5 1 2 3 4 5 1 2 3 4 5 1 2 3 4 5 1 2 3 4 5 1 2 3 4 5 1 2 3 4 5 1 2 3 4 5

Suburb Waramanga Casey Ainslie Conder Weston Blue Bay Barraba Woolloomooloo Church Point Dudley Humpty Doo Marlow Lagoon Ludmilla Rosebery Tennant Creek Gumdale Mitchell Tinbeerwah Machans Beach New Farm Meadows Jamestown Unley Park Marino Frewville Franklin Exeter Orford Tranmere Sisters Beach Ivanhoe East Woodend Kooyong Heathcote Junction Sandhurst Wagin Ascot Highgate South Perth Shenton Park

LGA Unincorporated ACT Unincorporated ACT Unincorporated ACT Unincorporated ACT Unincorporated ACT Wyong Tamworth Regional Sydney Pittwater Lake Macquarie Lichfield Palmerston Darwin Palmerston Tennant Creek Brisbane Roma Sunshine Coast Cairns Brisbane Mount Barker Northern Areas Unley Holdfast Bay Unley Huon Valley West Tamar Glamorgan/Spring Bay Clarence Burnie Banyule Macedon Ranges Stonnington Mitchell Casey Wagin Belmont Vincent South Perth Subiaco

Growth 27% 25% 25% 24% 23% 50% 49% 43% 42% 42% 45% 36% 30% 29% 27% 38% 37% 33% 32% 31% 47% 40% 36% 36% 35% 47% 41% 33% 30% 29% 49% 46% 46% 44% 42% 43% 40% 34% 29% 29%

Property price growth The following tables list the top five suburbs per state in terms of price growth over the past 12 months, for houses and units. While the featured suburbs have posted impressive figures, capital city dwelling values in general are flat at present with a decrease of -0.6% in the year to March and even more negligible figures in recent months and quarters. At the end of the March quarter, in the capital cities the national median dwelling price was $455,000, compared to $410,000 for all regions across Australia. RP Data suggests key leading indicators point towards a sedate capital growth environment for the remainder of the year. Research director Tim Lawless says: “Clearance rates are bouncing around the 50% mark each week and the number of homes being advertised for sale is almost 30% higher than at the same time last year,so sellers are being forced to adjust down their price expectations. Before there is any real upwards pressure on home values there will need to be some absorption of effective supply and a return of sustained buyer confidence to the market.”

Source: RP Data

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STATISTICS

PROPERTY INVESTORS

Top suburbs by 12-month price growth: units Rank 1 2 3 4 5

Suburb Kaleen Casey Watson Turner Cook

LGA Unincorporated ACT Unincorporated ACT Unincorporated ACT Unincorporated ACT Unincorporated ACT

Growth 32% 21% 20% 18% 18%

State NSW NSW NSW NSW NSW

Rank 1 2 3 4 5

Suburb Narwee Glebe Soldiers Point Fairy Meadow Casuarina

LGA Hurstville Sydney Port Stephens Wollongong Tweed

Growth 45% 41% 41% 40% 38%

State NT NT NT NT NT State QLD QLD QLD QLD QLD

Rank 1 2 3 4 5

Suburb New Auckland Belgian Gardens Earlville Yeppoon Banyo

LGA Gladstone Townsville Cairns Rockhampton Brisbane

Glebe, NSW

State WA WA WA WA WA

Rank 1 2 3 4 5

Suburb Crawley Hillarys Jolimont Mandurah Wembley Downs

Source: RP Data

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Rank 1 2 3 4 5

Suburb Gray Driver Araluen Desert Springs Parap

Launceston, Tas

LGA Palmerston Palmerston Alice Springs Alice Springs Darwin

Growth 37% 27% 25% 24% 22%

Growth 43% 37% 36% 35% 33%

State SA SA SA SA SA

Rank 1 2 3 4 5

Suburb Plympton Park Goodwood Everard Park Renmark Semaphore

LGA Marion Unley Unley Renmark Paringa Port Adelaide Enfield

Growth 42% 40% 38% 38% 37%

State TAS TAS TAS TAS TAS

Rank 1 2 3 4 5

Suburb Longford Lindisfarne Lutana West Launceston South Hobart

LGA Northern Midlands Clarence Glenorchy Launceston Hobart

Growth 47% 23% 20% 19% 16%

State VIC VIC VIC VIC VIC

Rank 1 2 3 4 5

Suburb Portland Seddon Geelong Woodend Tarneit

LGA Glenelg Maribyrnong Greater Geelong Macedon Ranges Wyndham

Growth 46% 45% 43% 42% 40%

LGA Nedlands Joondalup Cambridge Mandurah Stirling

Growth 38% 33% 28% 28% 26%

Photo: Launceston City Council

State ACT ACT ACT ACT ACT

STATISTICS

PROPERTY INVESTORS

Top suburbs by gross rental yield: houses Rank 1 2 3 4 5 1 2 3 4 5 1 2 3 4 5 1 2 3 4 5 1 2 3 4 5 1 2 3 4 5 1 2 3 4 5 1 2 3 4 5

Suburb Holt Ngunnawal Higgins Monash Harrison Werris Creek Diamond Beach Broken Hill Abermain Wellington Katherine Farrar Driver Humpty Doo Rosebery Dysart Blackwater Moranbah Collinsville Cloncurry Carrickalinga Peterborough Burra Port Adelaide Quorn Zeehan Rosebery Queenstown Gagebrook Strahan Dimboola Warracknabeal Murtoa Nhill Rutherglen South Hedland Dampier Moora Kalgoorlie Katanning

LGA Unincorporated ACT Unincorporated ACT Unincorporated ACT Unincorporated ACT Unincorporated ACT Liverpool Plains Greater Taree Broken Hill Cessnock Wellington Katherine Palmerston Palmerston Litchfield Palmerston Isaac Central Highlands Isaac Whitsunday Cloncurry Yankalilla Peterborough Goyder Port Adelaide Enfield Flinders Ranges West Coast West Coast West Coast Brighton West Coast Hindmarsh Yarriambiack Yarriambiack Hindmarsh Indigo Port Hedland Roebourne Moora Kalgoorlie Boulder Katanning

Gross rental yield 5.50% 5.30% 5.30% 5.30% 5.20% 9.10% 9.10% 9.00% 7.60% 7.40% 6.10% 6.00% 5.60% 5.60% 5.50% 13.60% 9.00% 9.00% 8.40% 8.40% 12.10% 7.10% 6.90% 6.80% 6.70% 11.10% 9.90% 9.00% 8.30% 7.80% 8.70% 8.30% 7.80% 7.20% 6.70% 12.40% 9.00% 7.60% 6.80% 6.40%

Rental yield The following tables list the top five suburbs per state in terms of gross rental yield over the past 12 months, for houses and units. While capital city home values have been flat, rental yields have performed well. Units are now delivering a gross return of 4.9% with houses not far behind with 4.2%. RP Data says this is consistent with the sprightly rental appreciation documented by the ABS in its inflation measure, with the dollar value (as opposed to the price yield) of the rental component of the ABS’s inflation benchmark rising by 1.3% over the March quarter alone.

Port Adelaide, SA

Photo: The South Australian Visitor Travel Centre

State ACT ACT ACT ACT ACT NSW NSW NSW NSW NSW NT NT NT NT NT QLD QLD QLD QLD QLD SA SA SA SA SA TAS TAS TAS TAS TAS VIC VIC VIC VIC VIC WA WA WA WA WA Source: RP Data

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STATISTICS

PROPERTY INVESTORS

Top suburbs by gross rental yield: units State ACT ACT ACT ACT ACT

Rank 1 2 3 4 5

Suburb Gungahlin City Bruce Braddon Holt

Photo: John De La Roche, Hobart

Hobart, Tas

LGA Unincorporated ACT Unincorporated ACT Unincorporated ACT Unincorporated ACT Unincorporated ACT

Gross rental yield 6.80% 6.10% 5.70% 5.70% 5.60%

State NSW NSW NSW NSW NSW

Rank 1 2 3 4 5

Suburb Berkeley Vale South Tamworth Bradbury Singleton Carramar

LGA Wyong Tamworth Regional Campbelltown Singleton Fairfield

Gross rental yield 8.90% 7.60% 7.50% 7.30% 7.20%

State NT NT NT NT NT

Rank 1 2 3 4 5

Suburb Tiwi Nightcliff Rosebery Stuart Park Gray

LGA Darwin Darwin Palmerston Darwin Palmerston

Gross rental yield 6.40% 5.90% 5.80% 5.70% 5.70%

Rank 1 2 3 4 5

Suburb Sumner Bellara Andergrove Bowen Jubilee Pocket

LGA Brisbane Moreton Bay Mackay Whitsunday Whitsunday

Gross rental yield 30.10% 12.20% 11.30% 11.20% 10.00%

State SA SA SA SA SA

Rank 1 2 3 4 5

Suburb Millicent Whyalla Stuart Port Augusta West Elizabeth Vale Elizabeth East

LGA Wattle Range Whyalla Port Augusta Playford Playford

Gross rental yield 7.80% 7.20% 6.80% 6.30% 6.30%

State TAS TAS TAS TAS TAS State VIC VIC VIC VIC VIC

Rank 1 2 3 4 5

Suburb Carlton Stawell Mooroopna Notting Hill Wallan

Rank 1 2 3 4 5

LGA Melbourne Northern Grampians Greater Shepparton Monash Mitchell State WA WA WA WA WA Source: RP Data

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Suburb Claremont Brighton Hobart Montrose Glenorchy

Rank 1 2 3 4 5

LGA Glenorchy Brighton Hobart Glenorchy Glenorchy

Nightcliff, NT

Gross rental yield 6.20% 6.10% 5.90% 5.90% 5.60%

Gross rental yield 7.80% 7.00% 6.80% 6.60% 6.20%

Suburb Port Hedland Boulder Kalgoorlie Orelia Kelmscott

LGA Port Hedland Kalgoorlie/Boulder Kalgoorlie/Boulder Kwinana Armadale

Gross rental yield 7.30% 6.50% 6.40% 6.00% 5.80%

Photo: Ray White Real Estate

State QLD QLD QLD QLD QLD

STATISTICS

PROPERTY INVESTORS

Most expensive suburb by weekly median advertised rent: houses State ACT ACT ACT ACT ACT

Rank 1 2 3 4 5

Suburb Deakin Isaacs Red Hill Chapman Bruce

LGA Unincorporated ACT Unincorporated ACT Unincorporated ACT Unincorporated ACT Unincorporated ACT

Weekly rent $740 $720 $650 $645 $623

State NSW NSW NSW NSW NSW

Rank 1 2 3 4 5

Suburb Vaucluse Dover Heights Bellevue Hill Queens Park Clontarf

LGA Woollahra Woollahra Woollahra Waverley Manly

Weekly rent $2,150 $1,550 $1,475 $1,400 $1,350

State NT NT NT NT NT

Rank 1 2 3 4 5

Suburb Bayview Fannie Bay Parap Nightcliff Marrara

LGA Darwin Darwin Darwin Darwin Darwin

Weekly rent $940 $850 $670 $630 $623

State QLD QLD QLD QLD QLD

Rank 1 2 3 4 5

Suburb Dysart Pullenvale Moranbah Brookfield Clear Island Waters

LGA Isaac Brisbane Isaac Brisbane Gold Coast

Weekly rent $1,100 $825 $800 $720 $708

State SA SA SA SA SA

Rank 1 2 3 4 5

Suburb Carrickalinga Glenelg Unley Park Rose Park Toorak Gardens

LGA Yankalilla Holdfast Bay Unley Norwood Payneham St Peters Burnside

Weekly rent $900 $720 $650 $618 $600

State TAS TAS TAS TAS TAS

Photo: Woollahra Municipal Council

State VIC VIC VIC VIC VIC

Vaucluse, NSW

State WA WA WA WA WA

Rank 1 2 3 4 5 Rank 1 2 3 4 5 Rank 1 2 3 4 5

Suburb Battery Point Sandy Bay Tranmere Taroona Dynnyrne Suburb Toorak Brighton Canterbury St Kilda West Sandringham Suburb Peppermint Grove South Hedland Dampier Dalkeith Swanbourne

Median advertised rent The following tables list the top five suburbs per state in terms of the weekly median advertised rent, for houses and units. According to RP Data, capital city rental rates have increased by 2.9% over the 12 months to March 2011, below the usual average, but an increase of 4.8% over the last quarter hints at resurgence. This sentiment is echoed by the most recent CPI data from the ABS which reports that rents have increased by 1.3% during the first quarter of 2011. Rents for houses are up 3.3% over the year, outstripping unit growth which sits at 2%. Sydney is the capital city with the strongest rental growth (5.3%), ahead of Hobart (4.5%). Darwin has the least enviable statistic, recording a rental decrease of -3.7%. The capital city region with the greatest increase in advertised rental rates in the past year is Woollahra in Sydney’s Eastern Suburbs, where houses have recorded an increase in advertised rents of 22.2% over the year.

LGA Hobart Hobart Clarence Kingborough Hobart LGA Stonnington Bayside Boroondara Port Phillip Bayside LGA Cottesloe Port Hedland Roebourne Nedlands Claremont

Weekly rent $500 $480 $463 $420 $410 Weekly rent $1,000 $925 $900 $900 $800 Weekly rent $1,800 $1,700 $1,500 $950 $850

Source: RP Data BROKERNEWS.COM.AU

STATISTICS

PROPERTY INVESTORS

Most expensive suburb by weekly median advertised rent: Units State ACT ACT ACT ACT ACT

Rank 1 2 3 4 5

Suburb Forrest City Barton Isaacs Turner

Photo: Tourism NSW

Tamarama, NSW

LGA Unincorporated ACT Unincorporated ACT Unincorporated ACT Unincorporated ACT Unincorporated ACT

Rent $543 $540 $500 $500 $495

State NSW NSW NSW NSW NSW

Rank 1 2 3 4 5

Suburb Point Piper Tamarama Cabarita Darling Point Milsons Point

LGA Woollahra Waverley Canada Bay Woollahra North Sydney

Rent $995 $825 $780 $750 $680

State NT NT NT NT NT

Rank 1 2 3 4 5

Suburb Woolner Larrakeyah Fannie Bay Stuart Park Tiwi

LGA Darwin Darwin Darwin Darwin Darwin

Rent $488 $480 $460 $460 $458

State QLD QLD QLD QLD QLD

Rank 1 2 3 4 5

Suburb Sumner Tennyson Hollywell Windaroo Hope Island

LGA Brisbane Brisbane Gold Coast Logan Gold Coast

Rent $2,000 $750 $675 $590 $550

State SA SA SA SA SA

Rank 1 2 3 4 5

Suburb Eastwood Adelaide Glenelg New Port Seacombe Gardens

LGA Unley Adelaide Holdfast Bay Port Adelaide Enfield Marion

Rent $558 $410 $400 $400 $380

State TAS TAS TAS TAS TAS

Rank 1 2 3 4 5

Suburb Hobart Battery Point Dynnyrne North Hobart Sandy Bay

LGA Hobart Hobart Hobart Hobart Hobart

Rent $530 $410 $330 $330 $315

State VIC VIC VIC VIC VIC

Rank 1 2 3 4 5

Suburb Docklands Southbank Port Melbourne South Melbourne West Melbourne

LGA Melbourne Melbourne Port Phillip Port Phillip Melbourne

Rent $550 $530 $510 $490 $470

State WA WA WA WA WA

Rank 1 2 3 4 5

Suburb Port Hedland North Fremantle Djugun Cottesloe West Perth

LGA Port Hedland Fremantle Broome Cottesloe Perth

Rent $1,450 $700 $500 $500 $500

Source: RP Data

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Docklands, Vic

LIFESTYLE

A DAY IN THE LIFE OF...

A day in the life of… Gerald Foley, managing director of National Mortgage Brokers, talks getting fit and coffee catch-ups

6am

I wake up and jump on the walking machine for 40 minutes while watching the morning news. I want to get fitter and lose a few kilos.

8am

Gerald Foley

“ We have definitely seen a change in lenders’ appetite to grow business and appear more open to broadening accreditation capabilities ”

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Hit the office and have a look through emails, read online newspapers and check the loan numbers. Following a record month in December, like the rest of the market, we’ve seen a decline in flows, but there are certainly positive signs emerging now.

9am

Step out for a coffee catch-up with my fellow executive directors Kon Avramidis and Sal Cinque and talk through a number of issues.

10am

Have a meeting with Aaron Dunn of The SMSF Academy and Anthony D’Alessandro. SMSF lending is going to become a large new market for lenders and brokers and we’re keen to get in front. As Anthony operates a successful, combined financial planning and mortgage business, I’m keen to get his insights into this area. We hope to have Aaron present at our next round of PD days to highlight the SMSF market and how brokers can identify opportunities and tap into this space.

11am

Catch up with my old mate Kym Dalton on the phone. Kym is launching a great new consumer-based web service that will be an education tool for borrowers – first timers and seasoned – and will provide a great vehicle for brokers and lenders to ensure borrower comprehension around debt. This is more important than ever given all the new NCCP and responsible lending requirements.

appropriate commission model and the business will follow. Why do they complicate things so much? In the past month we have definitely seen a change in lenders’ appetite to grow business and appear more open to broadening accreditation capabilities. The four majors seem particularly focused on grabbing the last bit of share they don’t seem to have at the moment.

2pm

Meeting with our compliance manager Tracy Williams and Kon our director of operations to discuss progress and feedback on recent broker file and office audits. We are really happy with the overall results but can see there is more work required in a few areas.

3pm

Spend some time checking through and responding to emails and phone messages and reading through the online papers to see what’s happened through the day.

3.30pm

Weekly phone hook-up with Warren Darnill from The Rock Building Society. The Rock is the funder behind our nMB direct loan product which is going well and has been well received by our brokers.

4pm

Coffee catch-up with one of the brokers, Scott Porter. Scott has built a great business over the past few years and it is always good to catch up with him as he’ll have a good story to tell.

5pm

Telephone call with John Bignell of The Mortgage Gallery. We provide platform services to The Mortgage Gallery and have a great relationship with them.

11.30am

5.30pm

12.30pm

6.30pm

I return phone messages and emails that have come in through the morning.

Sit and type up my ‘A day in the life’ contribution while the day is still fresh in my memory.

Head off to lunch with a panel lender to discuss volumes, conversions and how they can get more business from nMB brokers. I tell them things haven’t changed – a good product, service and support, with an

Check tomorrow’s diary – looks pretty good. One meeting in the morning and a game of golf in the afternoon with some brokers so it’s a nice way to ease into the weekend.

LIFESTYLE FAVOURITES

FOOD Japanese

VACATION SPOT I’m going back to Namotu Island soon for a surfing holiday. It’s a tiny island in Fiji not much bigger than a football field

Chris Acret

HOBBY Gardening

Chris Acret + Managing director, Smartline

Favourite things CELEBRITY Joe Sirianni or Charlie Sheen – I can’t split them BOOK I’m really enjoying reading a Roald Dahl book, Danny the Champion of the World, to my eight-year-old each night. I think I’m more into it than he is

PLACE TO BE Hanging around at home or bumping into people in Manly

DRINK Water, coffee and beer

MOVIE The Social Network was the last good movie I saw

SPORT Surfing

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MUSIC We just bought a turntable and it is great fun to listen to vinyls again. The only problem is that my wife keeps buying Barbra Streisand records on eBay…