Fintech Momentum Accelerates

According to the KPMG’s The Pulse of Fintech 2018, 2018 started with a bang for the fintech market, with overall investment across venture capital (VC), private equity (PE) and mergers and acquisitions (M&A) deals at mid-year already well above 2017’s total investment results. The sharp increase in activity was driven in part by two massive deals: the record-setting $14 billion raise by Ant Financial during Q2’18 and Vantiv’s acquisition of WorldPay in Q1’18 for $12.9 billion.

Across the Asia Pacific, momentum also accelerated, although Australia was at the back of the pack with just 7 deals in each of the first two quarters of 2018.

Notwithstanding the two outlier deals, fintech market activity worldwide gained momentum during the first half of the year as the geographic diversity and reach of fintech investment continued to expand. Brazil, for example, gained some prominence earlier this year as Nubank joined the fintech unicorn club. France, Switzerland, South Korea and Japan also saw significant fintech deals — extending investment well beyond traditional fintech leaders like the US, UK, China and India.

In the more mature fintech areas of payments and lending, dominant market players continued to emerge over the first 6 months of 2018, attracting larger and larger deal sizes. Meanwhile, a broader range of companies focused on newer areas of fintech innovation, such as artificial intelligence (AI) and data analytics, also attracted attention from fintech investors.

Regulatory issues have been a hot button topic for corporate and other fintech investors so far this year, particularly in Europe, as a result of the implementation of Payment Services Directive 2 (PSD2) and General Data Protection Regulation (GDPR). The increasing focus on managing regulatory requirements and compliance contributed to an increase in funding for regtech companies. In just 6 months, VC funding to regtech companies has already exceeded regtech funding raised during all of 2017.

2018 year-to-date funding has already exceeded total annual regtech funding in every year previous except 2016. The US and UK attracted the majority of this funding. At a technology level, regtech investments have been quite varied — from a $25 million raise by UK-based CloudPay — a payments processing platform compliant with specific regulations, to $38 million raised across two funding rounds by US-based Harbor — a blockchain-based compliance platform that tokenizes private securities for trading.

Regtech investment is still relatively immature, with approximately half of total funding raised by seed and early stage companies. In the most mature markets, there have also been a small number of mid-stage investments this year, including Series C raises by CloudPay and Tipalti.

Over the next 12 to 24 months, we expect to see investment in regtech to grow rapidly — particularly in areas like AI, Know your Customer (KYC) and Know your Data (KYD).

Blockchain continued to draw a significant amount of attention from investors in Q1 and Q2’18, although investments typically focused on more experienced companies and consortia looking to obtain additional rounds of funding rather than on new market entrants.

Investor interest in blockchain was not limited to one jurisdiction. Good sized funding rounds were seen during the first half of the year, including $100 million+ rounds to R3 and Circle Internet Finance in the US and $77 million to Ledger in France. The US was particularly active on the blockchain front, with total investment in the first half of the year already exceeding the total seen in 2017.

Asia Pacific.

Ant Financial’s record-shattering $14 billion Series C funding round in Q2’18 lifted Asia’s mid-year fintech investment to a massive $16.8 billion compared to $5.4 billion in all of 2017. The single deal accounted for over half of the $23 billion in VC fintech funding seen globally during the 6-month period.

Excluding this massive outlier deal, Asia still saw strong fintech investment, with quarter-over-quarter increases in overall fintech investment in India, Australia and Singapore from Q1’18 to Q2’18. The number of deals in Asia also rose at each deal stage during both Q1 and Q2’18.

Fintech investment in China strengthened in the first half of 2018 compared to the end of 2017. In addition to Ant Financial’s massive deal, China saw four other $100 million+ megarounds—including $290 million to Dianrong, $160 million to WeCash, $130 million to MeiliJinrong, and $100 million to TiantianPaiche. The majority of banks in China have been expanding their focus to digital and developing transformation strategies. This has led to an increase in B2B focused fintechsable to enable banking transformation. Banks have invested in myriad areas, including blockchain, big data and AI.

Australia.

Australia appears to be a Fintech backwater, with none of the Asia Pacific top 10 deals being done in the country. That said, in the first half of 2018, Australia’s financial regulator provided its first restricted ADI license to a digital bank, Volt Bank14, although more are expected to be issued in the coming quarters. The purpose of the new license is to support digital banks entering the market and to encourage more competition.

 

UK Benchmark Rate Lifted by 0.25%

The Bank of England’s Monetary Policy Committee (MPC) sets monetary policy to meet the 2% inflation target, and in a way that helps to sustain growth and employment.

At its meeting ending on 1 August 2018, the MPC voted unanimously to increase Bank Rate by 0.25 percentage points, to 0.75%. The Committee voted unanimously to maintain the stock of sterling non-financial investment-grade corporate bond purchases, financed by the issuance of central bank reserves, at £10 billion. The Committee also voted unanimously to maintain the stock of UK government bond purchases, financed by the issuance of central bank reserves, at £435 billion.

Since the May Inflation Report, the near-term outlook has evolved broadly in line with the MPC’s expectations. Recent data appear to confirm that the dip in output in the first quarter was temporary, with momentum recovering in the second quarter. The labour market has continued to tighten and unit labour cost growth has firmed.

The MPC’s updated projections for inflation and activity are set out in the August Inflation Report and are broadly similar to its projections in May.

In the MPC’s central forecast, conditioned on the gently rising path of Bank Rate implied by current market yields, GDP is expected to grow by around 1¾% per year on average over the forecast period. Global demand grows above its estimated potential rate and financial conditions remain accommodative, although both are somewhat less supportive of UK activity over the forecast period. Net trade and business investment continue to support UK activity, while consumption grows in line with the subdued pace of real incomes.

Although modest by historical standards, the projected pace of GDP growth over the forecast is slightly faster than the diminished rate of supply growth, which averages around 1½% per year. The MPC continues to judge that the UK economy currently has a very limited degree of slack. Unemployment is low and is projected to fall a little further. In the MPC’s central projection, therefore, a small margin of excess demand emerges by late 2019 and builds thereafter, feeding through into higher growth in domestic costs than has been seen over recent years.

CPI inflation was 2.4% in June, pushed above the 2% target by external cost pressures resulting from the effects of sterling’s past depreciation and higher energy prices. The contribution of external pressures is projected to ease over the forecast period while the contribution of domestic cost pressures is expected to rise. Taking these influences together, and conditioned on the gently rising path of Bank Rate implied by current market yields, CPI inflation remains slightly above 2% through most of the forecast period, reaching the target in the third year.

The MPC continues to recognise that the economic outlook could be influenced significantly by the response of households, businesses and financial markets to developments related to the process of EU withdrawal.

The Committee judges that an increase in Bank Rate of 0.25 percentage points is warranted at this meeting.

The Committee also judges that, were the economy to continue to develop broadly in line with its Inflation Report projections, an ongoing tightening of monetary policy over the forecast period would be appropriate to return inflation sustainably to the 2% target at a conventional horizon. Any future increases in Bank Rate are likely to be at a gradual pace and to a limited extent.

ANZ Ups The Mortgage Rate Ante

From ABC Online.

ANZ has become the first big lender to cut its variable home loan rate for new customers, as the banks slug it out for business in a tightening market.

While banks including the CBA have cut fixed loan rates and offered “honeymoon deals” in recent weeks, the ANZ is the first to move on variable rates.

It comes at a time when there is upward pressure on interest rates as funding costs, particularly for smaller lenders, are rising.

The ANZ told mortgage brokers it was bringing down its basic principal and interest home rate for owner-occupiers by 0.34 percentage points to 3.65 per cent.

The ANZ offer only applies to new customers looking for a loan valued at 80 per cent or less than the value of their property.

Loan-to-value ratios above 80 per cent remain unchanged at 3.99 per cent.

Non-bank lenders growing market share rapidly

It comes at a time when small lenders have been eroding the market share of the Big Four banks.

While non-bank lenders hold less than 8 per cent of the mortgage market, their loan books have grown by about 14 per cent over the year, while growth at the Big Four is at a historically low level, a little over 1 per cent.

Ratecity research director Sally Tindall said it was a surprising move from ANZ to buck the rate-hike trend.

“It shows that the bank is competing hard to get new customers as non-banks threaten their market share,” Ms Tindall said.

“This comes at a time when the market was expecting ANZ to hike rates and not cut them and the [banking] royal commission has turned the playing field on its head.”

There are lower rates offered by the big banks in the market but they are generally so-called honeymoon deals that step up markedly after two or so years, or four years in the case of most fixed loan products.

Ms Tindall said the other three big banks were likely to come under pressure to follow ANZ’s lead or risk a further erosion of their market share.

Carefully targeted cut

Shaw and Partners bank analyst Brett Le Mesurier said ANZ’s move was carefully targeted.

“I was surprised by the extent of the reduction but ANZ has been courting the owner-occupier market for some time, and shunning the investment market relatively — most of their loan growth has been coming from Australian owner-occupier loans,” Mr Le Mesurier said.

He said there was little doubt that the differential between high-quality owner-occupier rates and investor loan rates was likely to increase.

“The banks are focusing on the below 80 per cent LVR [loan-to-value ratio] owner-occupier loans and that may well be because they expect the capital charges associated with those loans to reduce.

The bank is also cutting some of it fixed rate loans by up to 0.24 percentage points, following CBA’s move to cut fixed rates on various two and three-year fixed rate loans by 0.1 percentage points earlier this week.

ASIC’s review of exchange traded products identifies areas for improvement

ASIC has completed a review of the exchange traded products (ETP) market in Australia, including exchange traded funds, aimed at ensuring the market is delivering on promises to investors.

Exchange traded products (ETPs) are open-ended investment products that are traded on a securities exchange market. ETPs trade and settle like shares and give investors exposure to underlying assets without owning those assets directly.

ETPs differ from listed funds because they are open-ended. Tthis means that the number of units on issue may increase or decrease daily depending on investor demand. ETPs, especially exchange traded funds (ETFs), are increasingly popular with retail investors and self-managed  superannuation funds (SMSFs).This is because of their accessibility, perceived low cost, transparency, intraday liquidity, diversification benefits and ability to provide exposure to new asset classes. There has been steady growth in both funds under management and the number of ETP products available on the market in Australia

ACIS’s review focused on two types of ETPs:  a) passively managed ETFs with an investment objective to track an index or benchmark; and b) funds that are actively managed to outperform a benchmark or to achieve an absolute return objective (referred to as ‘active ETFs’ and ‘managed funds’).

The review found that the market is generally performing well, and ETPs are meeting the relatively low cost and liquidity expectations of investors. However, the review identified a range of risks that require monitoring by issuers and oversight by market operators.

The large and growing investment in ETPs in Australia by retail and SMSF investors prompted ASIC to look at a number of the key premises and functions of the ETP market. The key concern identified was the potential for the bid/offer spread to temporarily widen, leading to investors paying a spread that would be considered too high, and undermining the relatively low cost proposition of some ETPs.

Further, ASIC considers that market operators and issuers should play a more proactive role in monitoring the performance of ETPs, including liquidity in the market, and where they observe spreads widening unreasonably, they should take appropriate action.

ASIC is also recommending that ETP issuers publish the indicative net asset value (iNAV) with a frequency that enables investors and financial advisers to make more informed decisions.

ASIC Commissioner John Price said, ‘We encourage issuers to continue to educate investors and their advisers about how the ETP market operates and to provide them the tools, like an iNAV, to help them make informed investment decisions’.

Another area of concern identified in the report was market maker concentration, as although there are an increasing number of new entrants in Australia that serve a growing market, most liquidity is still provided by only two entities. ASIC expects issuers and market operators to be aware of this risk and incorporate a means of managing it into their risk management framework.

While not many ETPs have closed in Australia to date, ASIC encourages issuers and market operators to develop policies for reviewing, and where necessary remove from quotation with an orderly wind down, ETPs that may not meet ongoing suitability for quotation, such as very small ETPs that may be uneconomical to operate.

Number of Australians becoming homeowners plummets: HILDA survey

From The Real Estate Conversation

Renters are quickly becoming a growing demographic in Australia, as fresh research reveals the proportion of Australian renters becoming homeowners has nosedived.

In news that will hardly come as a surprise to most millennials, the number of Australian renters eventually becoming homeowners has plummeted over the last 15 years – particularly for those between the ages of 18 and 24.

The latest Household, Income and Labour Dynamics in Australia (HILDA) survey found the overall proportion of people living in rental accomodation has increased by 23 per cent since 2001 to 31.3 per cent in 2016.

Undoubtedly as a result of this, the survey correspondingly found people aged between 15 and 24 are choosing to live with their parents longer.

Melbourne Institute deputy director and report co-author Roger Wilkins told WLLIAMS MEDIA the findings from the survey highlights the plight of renters.

“Renters, particularly younger ones, are finding it increasingly harder to achieve home ownership,” Wilkins said.

According to the HILDA survey, renters were far more likely to be under housing or financial stress than homeowners.

Source: HILDA Survey

Findings from the survey show renting has declined since 2011 for the 25 to 34 age group.

“But this is not because they are more likely to be home owners, however. Rather, as with the trend for the 15 to 24 age group, it reflects the trend towards remaining in the parental home, which is often owner-occupied, until older ages,” the report said.

Over the survey period, which began in 2001 and tracks over 17,500 people across 9,500 households, the number of renters aged between 18 and 24 transitioning into home ownership has dropped massively, from 13.5 per cent down to just 7.5 per cent.

The declining rates of home ownership demonstrate the growing evidence of ‘intergenerational inequality’.

Source: HILDA survey

“There has been a growth in inequality across the generations, and this is very much tied to home ownership,” Wilkins said.

Despite this, research from Westpac shows more millennials than ever are saving up for their first property.

The data, released earlier this year, shows the highest number of first home buyer loans in March and April 2018, compared to the same period in the previous two years.

Kathryn Carpenter, Westpac’s Head of Savings, told WILLIAMS MEDIA that first home buyers are being diligent with their savings and digging deep to save for a home.

Related reading: Advice for first home buyers after new research shows most are clueless about buying property: ME Bank

“Millennials are often depicted as a generation more focused on life experiences and living in the ‘now’. However, our research shows that many are in fact taking saving for a home deposit seriously and prioritising it above other goals including travel or lifestyle,” Carpenter said.

“It is great to see our millennial customers making the most of their savings plans, and the timing could not be better with the current cooling of the property market.”

Source: HILDA survey

The research also revealed the younger end of the millennial spectrum (18-24) are already starting to save for a home.

“Our data shows reaching 25 appears to be a key tipping point for customers moving from thinking about saving for a home, to seriously saving for one”, commented Carpenter.

Dion Tolley, a real estate agent from Place Bulimba, told WILLIAMS MEDIA he has started to see more first home buyers entering the market.

“The investor market has pretty much left in the last year, given the investor squeeze from the banks, and the pressure they are putting on with lending requirements. Also with the changes to stamp duty concession at $499,000, we are definitely seeing more first home buyers entering the market along with those interest rates. As the concession has been extended for 12 months, more first home buyers are moving into the market instead of renting,” Tolley said.

“I think most people are sick of paying off investors mortgages and want to own their own homes.

“Most first home buyers typically purchase between the $350,000 to $499,000 threshold, and will typically go for the two-bedroom, two-bathroom, one car apartments. Established properties are more consistently snapped up than off the plan apartments.

“It has usually taken most of my clients who are first home buyers a couple of years to save up a decent deposit. Their parents will use the equity from their own home to tip them over that 20 per cent threshold to avoid lenders mortgage insurance because that does add on a fair whack to the weekly mortgage repayments,” he said.

Homeowners face refi challenges as home values fall

From Australian Broker

As many as 15% of surveyed homeowners have faced challenges when trying to refinance, due to falling property prices.

Research conducted by mortgage lender State Custodians, quizzed 1,022 home owners on their ability to refinance in the current climate, as national average home values continues to fall.

According to CoreLogic market data for the month of July, capital city home prices declined by 0.6% and now stand 2.4% lower over the year; it is the largest monthly decline in six and a half years. The national home price index also declined by 0.6% to average a 1.6% decline over the year.

The figures published by State Custodians also revealed that young people were the most affected, with around 34% of those under the age of 34 saying they’ve been unsuccessful in re-financing because of declining property values.

“Property prices have been stagnating and falling across much of Australia for some time now – especially in the major capital markets of Sydney and Melbourne – which has made refinancing tougher for some,” State Custodian general manager Joanna Pretty said in a statement.

“Anyone who has not yet built up a substantial amount of equity in property or whose property has fallen in value is more likely to be unsuccessful in seeking refinancing,” she added.

However, there is some good news as 29% of respondents said they are confident their property’s value has improved since purchase. Further, 41% of people with mortgages have successfully refinanced their home and experienced no problem getting a better rate as their property’s value increased.

Pretty said that when refinancing, homeowners and investors are often overly confident that their property increased in value.

“Declines in property value are influenced by what is happening in the market and the land value of the area,” she said. She explained that valuation of homes even in good areas can still come back below expectation due to poor property maintenance and upkeep.

Pretty suggested that “it may also be helpful to be present when a valuer visits to point out improvements that may not be immediately apparent, such as solar panels.”

Elsewhere, AB says brokers can help the thousands of people labelled ‘mortgage prisoners’ by directing them to non-bank lenders, is the call from an industry association.

Mortgage prisoners are borrowers unable to refinance to a lower interest rate due to changed lending criteria by the banks.

The Finance Brokers Association of Australia (FBAA) has said that going to non-banks is the way to overcome this.

FBAA executive director Peter White said the government should also step in and push banks to be realistic with their modelling.

He revealed he personally brought up the issue with federal treasurer Scott Morrison when the two caught up at a recent lunch.

White said banks have recently increased the interest rate ‘buffer’ they add onto a loan to ensure the borrower has capacity to pay if rates rise, but the extent of the increase has led to a situation where borrowers who are already paying a mortgage are being rejected for loans that actually reduce their repayments.

He said, “It’s madness. Someone wants to refinance to pay a lower rate yet the bank adds an extra 4% to the interest rate and decides the borrower can’t afford to pay less.”

He said while he understands the need for a lender to add a safety net to the prevailing interest rate, they are now effectively doubling the rate to a level where the borrower can’t meet the new lending criteria.

He added, “This doesn’t affect the wealthy, it affects those who can least afford it and it has almost stalled the home loan refinance market.”

The assessment change is a knee-jerk reaction by the banks to recent inquiries and the royal commission, according to White, who predicts the banks may start to set an even higher rate.

He said the situation only reinforces the value of the expert advice that finance brokers provide and has urged brokers to be proactive in the space.

He said, “Many Australians are not even aware of non-bank lenders, let alone the difference or that they are not under some of the same regulatory oversight, so we must educate and help them. We know the banks won’t!”

ASIC approves the Banking Code of Practice

ASIC has approved the Australian Banking Association’s (ABA’s) new Banking Code of Practice (the Code).

ASIC’s approval of the Code follows extensive engagement with the ABA, following a comprehensive independent review and extensive stakeholder consultation. The ABA made additional significant changes to the Code in order to satisfy ASIC that it met our criteria for approval.

This is the first comprehensive broad-based industry code ASIC has approved under its relevant powers.

The Code will commence operation from 1 July 2019.

Significant new protections for small businesses

The new Code provides for improved protections for small business borrowers and expands the reach and impact of legal protections against unfair contract terms. For small businesses who borrow up to $3 million, the Code provides that lending contracts should not contain a range of potentially unfair and one-sided terms. Unfair contract terms protections in the law apply to businesses who borrow up to $1 million.

At its current setting of applying to small businesses who borrow up to $3 million, the Code will cover the considerable majority – between 92-97% – of businesses in Australia.

To ensure the settings in the Code provide a high level of coverage of the small business sector, ASIC’s approval is conditional on an independent review of the definition of small business within 18 months of the Code’s commencement. This targeted review will test the adequacy and application of the Code’s small business coverage in practice, and will occur well before the Code’s comprehensive review, due three years after its commencement.

At the same time, ASIC will collect quarterly data from banks and the Australian Financial Complaints Authority to monitor the extent of the Code’s coverage of small business. ASIC will ensure that this data is made public every six months. This will provide the public with ongoing transparency about the coverage of the Code.

Expanded protections for consumers

The Code has built on and enhanced the existing protections for consumers in the 2013 Code.

The new Code includes:

  • provisions for inclusive and accessible banking, including for vulnerable customers, customers on low incomes and Indigenous customers;
  • protections relating to the sale of consumer credit insurance (CCI) including a deferred sales period of four days for CCI for credit cards and personal loans sold in branches and over the phone;
  • protections for guarantors of loans, for instance, giving prospective guarantors generally three days to consider information about a guarantee and requiring banks to only enforce a guarantee once they have taken action against the borrower;
  • rules requiring credit card customers to receive reminders about balance transfer promotional periods ending, as well as more consistent treatment about how repayments are applied; and
  • enhanced processes for assisting customers in financial difficulty and processes for resolving complaints.

Monitoring and enforceability

All ABA member banks will be required to subscribe to the Code as a condition of their ABA membership and the relevant protections in the Code will form part of the banks’ contractual relationships with their banking customers.

The Code will be administered and enforced by an independent monitoring body, the Banking Code Compliance Committee (BCCC). Any person will be able to report a breach of the Code to the BCCC, and consumers and small businesses with disputes about the Code protections will be able to have those disputes heard by the new Australian Financial Complaints Authority.

ASIC notes the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry may make findings relevant to the Code. ASIC may review its approval of the Code in light of the Royal Commission findings.

Background

ASIC has provided guidance on its approach to approving codes, including how to obtain and retain approval in Regulatory Guide 183 Approval of financial services sector codes of conduct (RG 183).

In approving the Code, ASIC considered that:

  • the rules in the Code are binding on the ABA’s members and form part of the contracts between banks and their customers;
  • the Code was developed and reviewed in a transparent way, which involved significant consultation with relevant stakeholders including consumer and small business groups; and
  • the Code is supported by effective administration and compliance mechanisms. The BCCC will have oversight on banks’ Code compliance, tools to require banks’ cooperation with their monitoring and investigations, and a range of sanctions for non-compliance with Code provisions.

Changing demographics to alter dwelling demand

From The Adviser

As Generation Y begins to enter the housing market, there could be a change in the types of dwellings sought after, a new report has suggested.

According to industry analyst and economic forecasters BIS Oxford Economics, changes to the age profile of the population over the next decade will likely result in a shift in the type of demand for dwellings, as Generation Y – those currently aged around 20 to 34 years old – begin to have their own families and move onto the property ladder.

According to BIS’s Emerging Trends in Residential Market Demand report, which examines trends revealed by a detailed analysis of Census data from the past 25 years, there will be “solid demand for units and apartments over the next decade” driven by an overall increase in “the propensity to be living in higher density dwellings across all age groups”.

The report outlines that while there will be continued demand for units and apartments over the next decade, the growth in demand will eventually slow.

Senior manager for residential property at BIS Oxford Economics, Angie Zigomanis, has suggested that, over the past 15 years, there has been rapid population growth among 20-to 34-year olds, as well as strong net overseas migration inflows, which have helped support the boom in apartment construction in the past decade by supplying a steady stream of new tenants to the market.

Mr Zigomanis also noted that there is evidence that people are staying in apartments and townhouses longer.

The analyst highlighted that, in Sydney, more than half (53 per cent) of households aged 35-to 39-years old, and nearly half (49 per cent) of households with children at a pre-school age, now live in these smaller dwellings.

While households have typically favoured townhouses over apartments, in Sydney and Melbourne, there has been an acceleration in the take-up of apartments by both groups since the 2011 Census. The trend has also been similar, although less pronounced in Brisbane, Adelaide and Perth, the report added.

Looking to the future, BIS notes that rising demand for smaller dwellings by Generation Y over the next decade would be apparent across all capital cities, although will be most pronounced in Sydney, and to a lesser extent Melbourne, where separate houses are least affordable.

In Brisbane, Adelaide and Perth, it argued, householders would be much more likely to be in a detached house once they enter their late 30s and 40s, and strong demand for new separate houses is therefore likely to continue.

However, BIS argues that it is likely that rising house prices and decreasing housing affordability in the most desirable locations in the capital cities are causing “an increasing trade-off” for some couples and family buyers between price, size of dwelling, and location, with many seeking smaller and more affordable dwellings to remain close to their desired location.

The analysts argued that, should this trade-off activity increase as Generation Y gets older, then this provides an opportunity for developers in all capital cities to meet this demand, especially given the fact that the boom in multi-unit dwelling construction has up until now been investment-driven “with design being geared toward Generation Y renters living as singles, couples without children, and in share households,” BIS said.

“To meet the potential growing number of Generation Y families in established areas, multi-unit dwellings will need to be designed to be more appropriate to family life, offering more space, both indoor and some outdoor, or located adjacent to public outdoor spaces,” said Mr Zigomanis.

“In particular, new apartment designs will need to change to provide more appropriate product for Generation Y families.”

However, should Generation Y follow the trend of the previous generations and eschew renting for owning their own, larger dwellings as they age, then this would “support a decade-long boom in demand for new houses and land in the new housing estates on the outskirts of Australia’s major cities and affordable major regional centres,” said Mr Zigomanis.

“Pressure is also likely to be maintained on house prices in established areas, as competition remains strong for Generation Y families looking to remain in the established areas where they have already been living and renting in smaller apartments,” he said.

HILDA Data Confirms Household Financial Pressure

From Nine.com.au.

Single-parent families are experiencing a near-unprecedented level of housing stress as soaring house prices force many into unaffordable rental properties.

Analysis conducted by the Melbourne Institute as part of its annual HILDA survey revealed over 20 percent of single-parent families are stretching their budgets further than ever to keep up with annual rent rises or changes in their mortgage.

Amongst all Australians, household stress peaked at an all-time high in 2012, when 11.2 percent of all Australians were classified as having to make “unduly burdensome” mortgage repayments.

In economic terms, housing stress is technically defined as spending more than 30 percent of a household’s disposable income on housing costs, not including council rates.

In 2016, where the HILDA survey data ends, 9.6 percent of the population were experiencing housing stress.

Although single-parent families were found to be under the most dire levels of housing stress, the survey found that single elderly Australians and renters are also suffering under the weight of paying rent or covering their mortgage.

Couples without children were found to have the lowest levels of housing stress.

“Among those with housing costs, private renters have the highest rate of housing stress and owners with mortgages have the lowest rate,” wrote HILDA survey researchers.

“Moreover, over the HILDA Survey period, housing stress has increased considerably among renters—particularly renters of social housing—whereas it has decreased slightly for home owners with a mortgage.”

The survey also found that the type of home you owned or rented was directly correlated to the likelihood of having difficulty in making rent or mortgage repayments.

Australians living in apartments were found to have the highest rates of housing stress, followed by those living in semi-detached houses.

People living in separate, free-standing homes were found to have the lowest rates of housing stress – most likely because they live away from heavily-populated urban centres.

“Housing stress is generally more prevalent in the mainland capital cities, with Sydney in particular standing out,” wrote the researchers.

“However, differences across regions are perhaps not as large as one might expect given the differences in housing costs across the regions.

“Also notable is that housing stress is very high in other urban Queensland. It is only in the last sub-period (2013 to 2016) that it is not the region with the highest rate of housing stress, and even in that period only Sydney has a higher rate.”

The HILDA survey follows the lives of more than 17,000 Australians over the course of their lifetimes and published information on an annual basis on many aspects of their lives including relationships, income, employment, health and education.

The latest findings back up analysis from Digital Finance Analytics (DFA), which estimates that more than 970,000 Australian households are now believed to be suffering housing stress.

That equates to 30.3 percent of home owners currently paying off a mortgage.

Of the 970,000 households, DFA estimates more than 57,100 families risk 30-day default on their loans in the next 12 months.

“We continue to see households having to cope with rising living costs – notably child care, school fees and fuel – whilst real incomes continue to fall and underemployment remains high,” wrote DFA principal Martin North.

“Households have larger mortgages, thanks to the strong rise in home prices, especially in the main eastern state centres, and now prices are slipping.

“While mortgage interest rates remain quite low for owner occupied borrowers, those with interest only loans or investment loans have seen significant rises.”

IOOF warned for failing to produce documents

From Investor Daily.

Kenneth Hayne has delivered a sharp rebuke to IOOF for failing to produce documents ahead of the royal commission’s public hearings into superannuation, which commence next week.

In a ruling published by the royal commission yesterday, commissioner Kenneth Hayne laid out a timeline of correspondence with IOOF subsidiary Questor Financial Services.

Questor was issued with Notice to Produce NP-962 on Wednesday 11 July 2018, which required the company to produce documents prepared for Questor board meetings (‘board packs’) for each meeting of the board held since 1 July 2011.

The notice required the production of the documents by 4pm Tuesday 17 July.

At 3:30pm on Tuesday 17 July, IOOF solicitors King and Wood Mallesons produced documents in response to the notice, stating: “IOOF believes that the documents being produced constitute complete production in response to the Notice to Produce.”

On examining the documents, solicitors assisting the commission noted that while complete board packs had been produced for the years between 2011 and 2014, for subsequent years only agendas had been produced.

In response to an urgent request from solicitors assisting, Questor’s solicitors said the absence of the files was “inadvertent” and “a result of a technical error”.

Questor continued to fail to produce the documents until 9:48pm Sunday 22 July, with its solicitors noting that Questor “makes privilege claims in relation to parts of the documents produced”.

An affidavit in support of the claims for privilege was eventually supplied by Questor’s solicitors at 1:11am on Wednesday 25 July.

Commissioner Hayne has examined un-redacted versions of the documents, noting that “the claims for privilege appeared large”.

“I reject many of the claims that were made. Many of the documents in respect of which privilege is claimed are not documents that record or refer to communications made for the dominant purpose of IOOF or Questor obtaining legal advice; they do not record or refer to communications of that kind; and, they are not documents created for the dominant purpose of obtaining legal advice,” Mr Hayne said.

He noted that the claims made in respect of board packs dated after 2015 were in “sharp contrast” with the fact that no claims were made about the board packs for 2011–2014.

“Prompt and proper compliance with Notices to Produce is required by law and is essential to the proper execution of the commission’s work. Delays of the kind that have occurred in this case impede the proper work of the commission. Ill-based claims for privilege further impede its work,” Mr Hayne said.

Questor was the subject of parliamentary and senate committee scrutiny in mid-2015 after a number of allegations were aired in the Fairfax press against then IOOF head of research Peter Hilton.

IOOF will be one of the topics discussed at the royal commission public hearings into superannuation which commence on Monday 6 August.