Credit demand is expected to remain flat for the rest of the year, so how can brokers go about growing their businesses?
Credit demand is expected to remain flat for the rest of the year, so how can brokers go about growing their businesses?
Brokers may be sick and tired of hearing that consumer confidence is the missing ingredient that’s keeping property market growth and credit demand in check, but this is a situation that’s unlikely to change this year.
According to NAB Broker general manager of distribution John Flavell, the economic fundamentals that sit behind the property market suggest that capital growth should be forthcoming: Housing starts are at historical lows, population growth is strong, residential vacancy rates in the capitals are low and credit is available.
However, it’s the demand for this credit that appears to be steadfastly refusing to budge, and Flavell describes NAB’s projections for the property market’s performance this year to be “sideways at best”.
“Our models suggest there might be capital appreciation in property somewhere around the three,
four or 5% range,” he explains.
“Expansion is fuelled by people being willing to leverage themselves up and borrow – whether it’s consumer or corporate. And you can see that, as a nation, we’re still transfixed with stocking it away, which means that we’re not quite over the fear that the world may implode.”
With the proportion of discretionary household saving sitting at record highs and deleveraging continuing to be the trend across most sectors, Flavell expects credit growth in the housing sector to sit at around 5% this year, which he describes as being well off historical averages.
Broker channel to grow
But it’s not all doom and gloom for brokers. With the broker channel already accounting for 40% of all mortgages written, Flavell sees this figure increasing despite the overarching low credit growth environment.
“The [economic] conditions are uncertain, but uncertainty creates opportunity. The system is still growing, and we believe brokers can continue to aggressively grow their share. That’s certainly our plan. We’re not going to back off at all. We think that there’s a real change afoot in terms of the channels that consumers will access to gain access to retail banking products.”
So how can brokers make the most of this trend? Flavell suggests that there’s an opportunity for brokers to engage digital marketing and embed it as part of the way that they attract, retain and service customers.
“Don’t see it as competition, see it as something that you can use to complement your business – and continue to disproportionately grow your business,” he says.
He adds that, while the store network, brokers and digital channels will all “compete for every customer they can get”, the theme of collaboration is one that would be well worth pursuing.
“If you’re a large lending institution as we are then you can turn around and say that there’s a degree to which I can shape the market and there’s a degree to which I’m going to need to embrace the market,” he says.
“As far as the strength of the [broker] market, it’s absolutely irrefutable. So you can swim against the tide and exhaust yourself or you can get on it and just do it.
“People are voting, and it’s not surprising why: They’re voting for brokers, they’re voting for digital, and that’s how you link it all together to get the best outcome for the group.”
Sophisticated targeting
RP Data head of corporate affairs Craig Mackenzie agrees that the demand for credit is going to be fairly flat over the course of 2013, but suggests that brokers can still use the data available to target those parts of the market where there is mortgage demand in their area.
“People have been saving more than they have for a long time,” he says. “And so I think it’s about brokers becoming smarter and more sophisticated in terms of understanding where the demand is and where the hot spots are in terms of market activity – and where they need to be focusing their efforts.”
“I would really want to understand where the activity is stirring up at a more granular level – so it’s
understanding where property is being listed and who needs loans to buy that property.
“It’s just understanding at a more macro level how much is for sale, what the rental yields are like, how long is it taking to sell and what sort of buyers are attracted to that market – and therefore what kind of demand for finance is there?”
Using the information at hand, such as vendor discounting, listing numbers and rental yields, Mackenzie suggests that brokers can get a feel for the type of buyer who is going to be active in any given suburb, and target real estate referral arrangements accordingly.
