The Property Imperative  11.

Results from our 2018 Household Survey focussing on property ownership trends by customer segment.

This Property Imperative Report is a distillation of our research in the finance and property market, using data from our household surveys and other public data. We provide weekly updates via our blog – the Property Imperative Weekly, and our YouTube Channel, but twice a year publish this report.  This is volume 11.

The past six months has seen a significant shift in momentum as home prices have moved lower across many of the main centres, auction clearance rates have eased, and more property stock is added to the market, thanks to more new builds and as more owners try (or are forced) to sell.

Many of the “experts” have changed their tune and are expecting to see further falls in home prices ahead, although the extent and speed of these falls remains uncertain. Meantime more households are in financial stress, as incomes remain constrained, costs of living rise, and returns from investments look shaky. No surprise to see mortgage delinquencies are rising, though they are still in an absolute sense very low.

At its heart, home price growth is fundamentally linked to credit availability and thanks to belated tightening from APRA, the fallout from the Royal Commission into Financial Services Misconduct, and the Productivity Commission and ACCC work, lending standards continue to tighten.

Whilst some still spruik future growth thanks to migration, government intervention, or first time buyer appetite, these factors pale into insignificance against the global backcloth of rising interest rates, slowing global growth and broader political and economic uncertainty.

The Quiet Revolution.

Results from our  Household Survey focussing on banking channel preferences

From the introduction:

This report contains the latest results from our household surveys with a focus on their use of banking channels, preferred devices and social media trends.

Our research shows that consumers have largely migrated into the digital world and have a strong expectation that existing banking services will be delivered via mobile devices and new enhanced services will be extended to them. Even “Digital Luddites”, the least willing to migrate are nevertheless finally moving into the digital domain. Now the gap between expectation and reality is larger than ever.

Looking across the transaction life cycle, from search, apply, transact and service; universally the desire by households to engage digitally is now so compelling that banks have no choice but to respond more completely.

We also identified a number of compelling new services which consumers indicated they were expecting to see, and players need to develop plans to move into these next generation banking offerings. Many centre around bots, smart agents and “Siri-Like” capabilities.

We are now at a critical inflection point in the development of banking as digital now takes the lead.  Players must move from omni-channel towards digital first strategies, where the deployment of existing services via mobile is just the first stage in the development of new services, designed from the customers point of view and offering real value added capabilities. These must be delivered via mobile devices, and leverage the capabilities of social media, big data and advanced analytics.

This is certainly not a cost reduction exercise, although the reduction in branch footprint, which we already see as 10% of outlets have closed in the past 2 years, does offer the opportunity to reduce the running costs of the physical infrastructure. Significant investment will need to be made in new core capabilities, as well as the reengineering of existing back-end systems and processes. At the same time banks must deal with their “stranded costs”.