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Supply-demand imbalances and a multi-trillion-dollar intergenerational wealth transfer are set to impact brokers in the future, according to NAB.
Big four lender National Australia Bank (NAB) has revealed what it sees as the biggest challenges and opportunities facing the broking industry in its Market Megatrends 2024: Navigating the Future report.
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In the report – which includes insights from NAB group economics and industry leaders, including Tim Lawless, executive research director at CoreLogic, and Laura Hartley-Quinn, NAB’s head of security culture and advisory – the shifting housing market and rapidly evolving technologies have been flagged as growing challenges for brokers.
However, the report also includes insights into how to turn these into “valuable opportunities”.
The report, released on Friday (6 December), explores six “megatrends”, or “long-term themes, shaping Australia’s property markets and business environment”.
Housing supply challenges
Housing supply and accessibility to home ownership have dominated headlines this past year and hampered many home buyers, with the issue expected to be a megatrend for next year, too.
Speaking at the report’s launch, CoreLogic’s head of Australian research, Eliza Owen, stressed that “high cost of living pressures” and unaffordable housing were a growing problem.
“National home values rose five and a half per cent over the past 12 months, which might not sound like a lot, but it’s the equivalent of a $43,000 increase in the median growing value across Australia, which is sitting at about $816,000, so we clearly have ongoing affordability challenges,” she said.
The affordability issue has been exacerbated by limited new supply coupled with demand-boosting policies, creating challenges for home ownership, according to NAB.
However, NAB’s executive of broker distribution, Adam Brown, stressed that there would still be opportunities for brokers.
“While the cost of living and housing accessibility is a concern for many, the property market is still active, and consumer sentiment is improving,” he said.
Property investors eye opportunities
Another megatrend identified would be an increase in property investors, with NAB telling brokers to expect an increase in the number of potential buyers looking at investment properties rather than owner-occupied properties as a cheaper way to enter the market.
“Even as rent growth slows, we do expect the investor piece to remain relatively sustained as a good opportunity for 2025,” Owen said.
Generational wealth transfer wave
An estimated $5.4 trillion wealth transfer between generations is expected over the next two decades, according to statistics from financial consultant JBWere, which may see more buyers seeking to purchase with cash rather than through a broker.
However, NAB said brokers will be important credit advisers to these beneficiaries.
The report said: “Brokers have the skills and expertise to guide families through the financing options that could facilitate the transfer of these properties as the estate is distributed.
“On the home lending front, this might include explaining the different property investment options, or ways to reduce or restructure their existing home lending arrangements. In other instances, recipients of inheritances might seek support from brokers on ways to assist younger generations getting into the housing market – potentially enabling wealth to be transferred during the parents’ lifetimes.”
Smaller businesses investing for growth
The wealth transfer may also see more businesses seeking support with financing succession planning. Indeed, growing business finance demand has been identified as a megatrend.
While businesses have been under pressure this year, around 40 per cent intend to grow organically by investing in new products or services.
Almost six in 10 SMEs plan to invest and expand in the next 12 months, NAB said.
Technology changing the way brokers do business
While open banking, Consumer Data Right, and artificial intelligence-led technologies have been facing some issues recently, improvements will result in benefits for brokers, enabling them to offer more personalised and data-driven services.
“As the industry continues to evolve, the integration of these technologies will undoubtedly play a crucial role in shaping the future of broker-client relationships and the broader financial landscape,” the report said.
Cyber security is critical
Cyber crime reports and losses are rising and will continue to be a challenge for the finance market into the future.
NAB is urging brokers to be aware of and protect against the risk of cyber crime and scams.
“The key for brokers is to stick to the basics. Just like going to the gym regularly can help people have a longer, healthier lifestyle, maintaining good security practices can go a long way towards safeguarding businesses and customers over the long term,” it said.
Brown said: “In this environment, there are opportunities for brokers across a wide range of customer types. Investors are looking to capture capital gains in the property market; families are seeking assistance in transferring wealth between generations; and first home buyers are looking for guidance and support.”
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