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ISSUE 21
WHAT’S INSIDE 2-5
Op-Ed: What really needs to be done to address housing affordability
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Insights: Lending volumes high despite RBA rate rise
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Security: The payment redirection scams you must be aware of
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Industry: Why diversity is so important in LegalTech
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How we can truly tackle housing affordability By Glenn King, Group Managing Director and CEO, PEXA
You cannot have an election without a debate about housing affordability and how to fix it. Like clockwork, this year, Australians have been forced to weigh up the merit in allowing homebuyers to access their super to buy a house or, alternatively, inviting the government to coinvest with them in property.
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All the major parties, and most of the minors, have a housing affordability policy and some focus group-tested lines on why their plan is superior to their opponents’ and will definitely work this time. The problem is that, if history is any guide, none of these housing affordability plans will actually make housing more affordable for the masses. They might help a few first homebuyers, including disadvantaged Australians, get to the first rung on the property ladder.
Housing affordability – and the related issue of homelessness – have challenged federal and state governments for generations. Too often policy-making is not coordinated between the Commonwealth and the states, leaving each tier of government to tackle the issues independently and, in many cases, ineffectually.
On affordability, many of the measures put forward by the major parties are designed to help a cohort of homebuyers – particularly first homebuyers – but are almost always focused on the demand side of the But in the past three decades, as market. That is not surprising as well-meaning governments have most of the supply-side responses to championed countless housing housing affordability, like increasing affordability plans, the ratio of house the number of new houses being built prices to average household disposable by releasing or rezoning land, are in the income has, according to the Reserve hands of the states and local councils. Bank, more than doubled from about 2.5 times in the early 1990s to 6 times Commonwealth-sponsored measures today. are typically designed to help increase Australians’ buying power by making For those not on the property ladder home loans more accessible – and that – or without a line of credit from the has the effect of increasing demand ‘bank of mum and dad’ – your first for the limited housing stock available. home is as out of reach as ever. Basic market economics tells us that more demand without additional supply almost always results in upward pressure on prices. Notwithstanding this month’s modest increase in official interest rates, recent economic conditions have been fuelling housing demand, while supply constraints such as materials costs and labour shortages are pinching prices from the other side. The last thing the market needs is more demand in a
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good-intentioned but unsuccessful government attempt to ‘address’ housing affordability. There are measures the Commonwealth could consider that would not simply pump housing market demand. For example, it could create a template for long-term residential leases to improve tenant rights and make renting a more attractive alternative to home ownership – something we see in other countries, including across Europe. It could also reconsider competitionstyle payments to the states that undertake the difficult and initially expensive reform of replacing stamp duty with a broader and fairer land tax. We know that stamp duty is an enormous barrier to moving houses – upsizing and downsizing – into the most appropriate accommodation and opening up more housing options for other buyers. There are no easy answers to housing affordability and homelessness. These are wicked problems that need to be untangled thoughtfully, not simply by throwing more money at the market. We cannot keep trying the same solutions and coming up with same poor results. We believe that one of the reasons governments have struggled to design effective policy is the lack of accurate data. High-level unsophisticated data produces high-level unsophisticated policy. Timely and accurate data would help future governments better
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understand the problems and drivers, enabling them to formulate better policy responses and measure their effectiveness. We need research based on people, not property. The buying and selling behaviour of demographic segments – the young, families, the vulnerable, women, Indigenous Australians, immigrants and so on – will help determine the root causes of housing disadvantage and help governments to design more refined policies. Use of property data should be leading best practice but it’s not. In fact, it is lagging other public and private sectors. We know the data exists. PEXA has access to real-time data on nearly every property transaction in the biggest markets in Australia. From that, you can draw de-identified and aggregated data on the buying and selling of Australian houses, including sale volumes, house prices and mortgage and refinancing figures – all in real time. With that, we can map property trends to see where there is a need for government intervention and, when there is intervention, how effective it is by measuring behaviour and outcomes. When it works, programs can be deployed at scale; when it doesn’t, programs can be tweaked or terminated.
The problem is that the data is locked up by state-based land registrars and we are often unable to use it without registrar approval, even on a carefully anonymised and aggregated basis to protect privacy. On average, it takes PEXA more than 60 days to obtain either an approval or rejection from the registrars, with two recent instances of separate requests taking longer than 12 months to reach a definitive outcome.
This approach needs to be applied to property data if the country is truly going to tackle the intractable issues of housing affordability and homelessness. Otherwise, we will be here in another 10 years, with house prices higher again, bemoaning the ineffectiveness of the same failed solutions.
There’s been commitment at a federal level to reform laws ‘to improve the flow of information in the economy, encouraging the development of new products and applications’, such as through the Consumer Data Right, first applied to Open Banking.
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Property lending activity remains at record highs as interest rates rise New loans and refinance activity remained at record highs across mainland Australia in the first quarter of 2022, with Victoria recording the most new loans of any state between January and March – a huge 38,619, according to analysis released by PEXA Insights, the research arm of PEXA – Australia’s leading digital property settlement platform.
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PEXA’s Mortgage Insights report found that all mainland states experienced a seasonal decline in new loans when compared to the previous quarter. However, Victoria, Queensland (36,814 new loans), New South Wales (35,303 new loans) and Western Australia (17,689 new loans) all recorded similar numbers to the record highs we saw in the first quarter of 2021. This dip was expected, given the quarter is adversely impacted by the traditionally quieter January holiday period, where sales settlements volumes generally trend downwards. However, the absence of growth does suggest that the market is reaching its peak amidst current headwinds, including the uncertainty of the upcoming federal election and the effect of the recent interest rates rise announced by the RBA. Despite this, refinance volumes were well up on the prior year with Western Australia (54% up year-on-year) and Queensland (43% up yearon-year) the market leaders to kick start 2022, experiencing the highest quarterly year-on-year growth across the nation.
PEXA Insights’ Head of Research, Mike Gill believes a number of factors have contributed to consumer behavioural trends within the market. “Record low interest rates, combined with buyers having anticipated the recent rate rises, have driven property owners to refinance right across the country. “The major banks ceded ground to the non-majors in the first quarter of 2022 in both new loans and refinances. This was driven by the major banks increasing fixed loan rates in expectation of interest rate rises, together with non-majors competing strongly on variable loans. “We suspect borrowers were also attracted to non-major lenders, with many, as widely reported, offering quicker approval times and increased likelihood of loan approval,” Gill said.
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The scam targeting buyers and sellers – and how you can stay safe Buying or selling a home is one of the most significant financial decisions a person will ever make. Today, residential property is Australia’s most valuable asset class, worth close to $10 trillion.
Recent frauds across the country
A WA woman made headlines this month, losing $732,000 after scammers intercepted email As part of every settlement, sensitive communications between her and her information, such as bank account details, as well as large sums of money, settlement agent. are required to be exchanged. As confirmed by the Consumer And it’s this reason that cybercriminals Protection WA, the victim received are targeting the sector in droves – the an email with authentic-looking documents attached from whom nature of the communications and she thought was her settlement the finances involved are placing a agent asking that the money be sizeable target on the industry. deposited into a bank account prior to The most common form of attack settlement. being seen currently are “payment The message came redirections”, part of a broader via a generic Hotmail technique known as “business email email address that compromise”. used the agency’s In a typical payment redirection scam, name. scammers impersonate a business or its employees via email and request an Before carrying out upcoming payment be redirected to a a final inspection of the property, the real fraudulent account. settlement agent But what does this look like in reminded the buyer practice? 8
about making the payment and it was then that the scam was uncovered. The scammers had sent the buyer a fake email pretending to be the settlement agent, substituting the bank account details to one that they control. And losses of this magnitude are not uncommon. In September last year, a Sydney couple were swindled out of close to $1 million in a similar incident. How to stay safe PEXA’s Chief Information Security Officer, David Willett, has one clear message to buyers, sellers and industry alike. “Do not use email as a channel for exchanging bank account details as part of settlement. This is simply not a secure way to communicate this incredibly sensitive information – and places you at a greatly heightened risk of a cyber-attack. “The inherently safer method is to verbally confirm bank account details over the phone or in-person. “Additionally, I highly recommend you make use of PEXA Key. This free app has been specifically built for industry to eliminate the risk of email phishing and enables clients to provide their bank account details to their legal representative safely. All data is encrypted and automatically transferred into the PEXA platform where settlements are facilitated, mitigating any risk of interception. “This service is also guaranteed to protect consumers – if the communication of bank account
details between the client and their practitioner’s PEXA workspace is corrupted within PEXA or compromised due to fraud, buyers and sellers can be reimbursed up to $2 million.” Tips and tricks The Australian Cyber Security Centre encourages consumers to follow the below guidance to help avoid being victim to a payment redirection scam: • Check details such as the spelling of a sender’s domain name to verify if a communication is legitimate. Double-check by comparing it to previous correspondence. • Exercise critical thinking and vigilance when receiving phone calls, messages and emails. • Exercise caution opening messages or attachments and clicking on links from unknown senders. • Do not provide personal information (such as usernames, PINs, passwords, passphrases or secret/security questions and answers) to unverified sources. And most importantly: to provide bank account details, use verbal communication instead of email. PEXA has a dedicated, expert security team on hand to support buyers, sellers and industry. Visit pexa.com.au/security to learn more. 9
Why diversity in LegalTech is key to driving success While filling the ‘diversity quota’ is a priority for the sake of reputation, diversity is increasingly recognised as a legitimate and integral part of a successful revenue-generating business. Research by the Boston Consulting Group (BCG) identified companies with diverse management experience 19% higher revenue. As someone who has spent most of their career in tech, I have witnessed and experienced the benefits of a diverse workforce and the importance of women in leadership positions. In a fast-changing business environment, diversity in ideas and perspective help to drive innovative solutions.
so we need to start empowering, encouraging and supporting women who deserve a seat at the table. Diverse companies are successful companies
More and more the data is telling us diverse companies are successful companies. The McKinsey 2020 report on Diversity predicted that companies that engage with and support a diverse workforce were more likely to emerge stronger post-pandemic. Companies Like most industries, female in the top quartile for gender diversity entrepreneurs in the LegalTech space in their executive were found to be are far in between – which is interesting 25% more likely to have above because jobs in tech are plentiful and average profitability than those in the typically in high demand. The boom in lowest quartile. tech is an opportunity for women to work for leading companies in wellpaid positions. We know a diverse workforce is what defines success,
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Within the legal field we have seen promising trends towards promoting female lawyers over 2021. Women now account for more than 30% of partners across firms in Australia, and the trend is here to stay. These women help pave the way for other future female leaders to shatter the glass ceiling and stand where they belong. I’m proud to work for a company that supports the rise of women in leadership overall, including the legal industry. We believe in the value a diverse workforce offers, especially when it comes to driving growth and innovative change. Empower women to reach their potential While more organisations are recognising the benefit in establishing internal networks and programs to create safe environments for women, we need to make sure we don’t limit a woman’s comfort in her role to only these networks.
Support networks help give women the confidence to pursue their dream Everyone deserves to live their dream, and it is often our support networks that help us get there. Allies and support networks are fundamental in anyone’s success, acting as a backbone for many and a source of encouragement for others. With emerging industries like LegalTech a steep hill to climb for all – let alone for women – building support networks around female entrepreneurs and women who are striving to lead the next generation is a first step we all need to take. These networks should also be a source for women to discuss, share ideas and actively help one another achieve their dream. Something as simple as backing another’s point of view is a major confidence booster. Looking ahead
Although the tech sector is still underperforming when it comes Empowering women is more than to gender diversity, the strides just establishing networks, but about being made in adjacent industries is adapting firm wide attitudes – including promising and encouraging. those not involved in these networks – to cement change from the top down. With the launch of the Tech Council of Women seek the same opportunities Australia’s commitment to delivering as everyone else, so it’s about time one million tech jobs by 2025, vast we build environments that give the opportunity exists for women to confidence these women deserve in engage and become leaders in the pursuing their dream. space. But we need to start building a culture that supports anyone and With the emergence of LegalTech, it’s everyone with an idea or passion. The important these companies get their facts are clear – a diverse company is DNA right from the beginning and avoid a successful company, and emerging building a culture that doesn’t support sectors like LegalTech are no different. or engage in diverse hiring. Establishing a diverse, supportive environment is the best method to empower all employees. 11
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Do you have feedback, a question or a story pitch? Get in touch with us at industry@pexa.com.au
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