Australian banks are offering a sweet deal to certain professions. If you’re a doctor or a lawyer,
perhaps in financial services, or even a pharmacist, Australia’s banks are revealed that they will
write you a mortgage without the need for mortgage insurance. Peta Tilse is head of funds management at NatGen. Peta, what is Lenders Mortgage Insurance or LMI? Morning, Steve. So, Lenders
Mortgage Insurance is what it says it is. So, it is actually insurance for the lender. So,
when you’re buying a property or a house, there’s a certain amount you can borrow
before this Lenders Mortgage Insurance kicks in. So, if we’re talking like a $500,000 house or
property, you might only have a certain amount of deposit. So, let’s say you only had $50,000,
which is 10%, which is a really nice deposit. That means that you’d be borrowing 90% of the
remainder from the bank to purchase the property. So, what actually happens in that instance is
the bank says, well, we would prefer that you had a 20% deposit. So, and then therefore lend you
80%. Because there’s that kind of 10% difference, they want you to take out Lenders Mortgage
Insurance, i.e., insure the bank against your own personal risk. So, protect themselves, basically.
Protect themselves. So, in that instance, like if we’re talking about that $50,000 deposit on the
$500,000 loan, for that $450,000 that the bank’s going to lend you, you get the pleasure of paying
about $9,000 in Lenders Mortgage Insurance to protect the bank. So, that’s what it costs,
roughly, in that circumstance, right, about $9,000. That’s a lot of money.
It sure is on that sort of size line. So, I mean, and don’t forget you’ve got all those other costs
too, like stamp duty and building pest inspections and transfer duties and all sorts of loan
application fees. I never miss you there. But there’s all those other kinds of fees too. So,
when you’re buying that $500,000 property, all of a sudden you’re now up to about $525,000
all these other little bits and pieces of costs. The reason I asked this, Peta, is because the
Commonwealth Bank has just started waiving Lenders Mortgage Insurance for some specific
professions and they stand out in my mind. Which ones? It’s certainly not a journalist, is it, Steve? No. No. Okay. So, when you’re thinking about why banks would be doing something like
this, there’s a business aspect, of course, because the more they can lend, the more money they make.
But there’s also the risk aspect because they don’t want to be giving away money and losing money.
So, they obviously view various professions in a risk light. And if you think about
doctors and dentists, you can’t avoid them, right? So, those guys, because of who they are,
they can borrow up to 95% of a property without having to pay for Lenders Mortgage Insurance.
So, basically, with a 5% deposit, so back on that $500,000 property, they only need to
muster up $25,000. They don’t have to pay the Lenders Mortgage Insurance. So, Australian banks like CBA,
NAB, Westpac, ANZ as well? Yeah. So, and then even last year, apparently, ANZ went a step further and
was waiving Lenders Mortgage Insurance on 145 suburbs around the country. And it’s not
the ones that you think. It’s ones like Hamilton in Brisbane or Turac in Melbourne,
those sorts of suburbs. So, they were happy to double down, I guess, and let people have
smaller deposits there for those homes. So, these are the major, the big four banks saying,
well, if you’re a studied medicine or you’re a lawyer or you’re in financial services,
we think you are no risk to us and therefore you won’t have to, or less risk, and you won’t have
to pay this exorbitant mortgage insurance that all the rest of us, players, have to pay.
That’s it. And they’ve just added, apparently, pharmacists. So, pharmacists are now added to
that list. And apparently, a pharmacist can earn $100,000 instead of $150,000 a year
and still qualify for this exemption. Does this sort of thing happen often in the area of finance,
Peta Tilse? Privileged professions is how I describe it. Well, I don’t know about privileged
professions per se, but it’s, again, it comes down to risk. So, I guess, at the end of the day,
if there’s a recession, a doctor and a dentist will still have a job. Barristers and solicitors
always take care of themselves. Do you know what I mean? So, it’s kind of like, it’s all to do with
the risk aspect of things. And, you know, like a judge and a magistrate, well, they’re still going
to be employed. And it’s really like, if you’re a contractor or something like that, well, you
mightn’t have a job next week. So, they’re really just looking at it from a risk lens.
Peta Tilse is the head of funds management at NatGen. This is 612 ABC, Brisbane, Steve Austin’s
my name. Peta, I have to ask, like, you’re a, you are, you work at the coal face here in Brisbane,
you raise your own kids, you know, you’ve gone through all of the struggles that every other
family has gone through, yet you’re a professional. Is this sort of thing reasonable, Peta Tilse?
Is someone who works in the area of money and property, is this sort of thing reasonable?
Well, look, I mean, it’s commercial, sadly, and, you know, it comes down to risk. And
that’s just the way it’s viewed. And I guess they’ve got data to back certain professions,
certain roles in society, as being sort of, you know, less risk, I guess, in terms of lending.
Peta Tilse is head of funds management at NatGen.

But the Reserve Bank Governor, as you’ve heard, says it was a consensus decision by the Reserve Bank to cut the interest rates.
The banks of Australia rapidly followed suit.
It’s the second cut this year.
Australia’s Treasurer Jim Chalmers says it reflects the substantial progress in the fight against inflation.
But as you’ll hear, it also means that there’s going to be further pressure on an already-inflated housing market.
Peta Tilse is Head of Funds Management at NatGen.
I asked her, first of all, today, her reaction to the rate cut decision.
Morning, Steve.
So, as expected, markets had fully priced in a 25 basis point interest rate cut.
So that brought the cash rate down from 4.1% down to 3.8%.
So what it means for an everyday borrower on, say, a $500,000 loan, that’s about $80 a month of saving.
So it’s not, you know, castles or things like that, but, you know, $80 in your pockets better than the banks.
Now, what was interesting out of yesterday is they’ve turned what’s called dovish,
instead of being hawkish, where they stomp on anything that looks like inflation, which means they increase interest rates.
They’ve turned dovish, which means, okay, we’ll let things kind of fly.
So essentially, we had data at the end of last month’s CPI data or inflation data,
which showed the inflation rate come down to 2.4%.
And the trimmed mean, which is the preferred measure that the RBA uses.
There it is. That’s what you all talk about at the pubs.
That’s the one. That’s the one.
Yep, yep.
So the trimmed mean, which basically looks at the middle chunk of things in the survey,
that’s under 3%. So remember, the reserve bank’s always looking at that sort of 2% to 3% band.
Yep.
And so now we’re just under, just.
Now, interesting things out of the CPI was one of the biggest contributors to it was housing.
And within the housing part of that electricity contributed 16.3%, like had a 16.3% rise, but, you know.
So the price of electricity is going up massively still.
Massively. And especially for Brisbaneites, because if you recall, we previously had the $1,000 Queensland Government rebate.
And so basically that got washed out of last quarter’s data.
Yep.
I mean, I can vouch for that. I mean, my electricity bill is nasty and it’s $1,800 a quarter.
So I’ve got to work at my sons and their air conditioning use.
Good luck.
Yeah. Anyway, the other things though that that’s going well for the economy at the moment is still we’ve got unemployment.
Well, it’s good for us in general because we’re employed.
So 4.1%. But that means there’s not a lot of give if things accelerate.
And growth is still sort of a bit over 2%, which is which is good.
My guest is Peta Tilce, Head of Funds Management at NatGen.
This is ABC Radio Brisbane. Steve Austin is my name.
I want to ask you about housing.
I still think this is the major issue for Australians.
Interestingly, Ray White’s Chief Economist, Narita Konsebi has pointed out that the combination of interest rate cuts, the re-elected federal government’s policies to, you know, have a 5% deposit scheme,
you know, lower mortgage insurance situation and global economic uncertainty creates a what she says is a perfect environment for accelerated price growth across Australia’s property markets.
In other words, this all puts increased pressure on the housing market.
How can it not put forced prices up already massively overinflated even further?
Yes.
So let’s go back to basic economics. What affects price?
It’s your various supply and demand dynamics, right?
So and also there’s kind of like other things like, for instance, with if you if you go to borrow money to buy a house, APRA, which is the is the other potential sort of regulator for banks.
So this is just to make sure banks just don’t go out there and land willingly and get us into a whole heap, get people into a whole heap of trouble.
So they’ve got this thing called a line serviceability buffer, essentially.
So basically, irrespective of what that variable rate looks like, like, you know, say at 6%.
And basically they get the lender to add 3% to that.
So now we’re looking at a lending rate of 9%.
And they and if you can meet the grade for that, you’ll get the loan.
And mind you, after this race, recent cut, the best I could see at the minute was about 5.49%.
But anyway, so we’re still talking about 8.5% to 9%, right?
So that’s a lot of money to prove you can serve us.
So that’s just one thing.
So that’s going to hamper things.
But, you know, as interest rates come lower, that test will mean more people can actually apply to get a loan, etc.
So again, that’s sort of increasing the demand side of things.
Secondly, when we look at property and look, I look at it from a commercial property perspective, because that’s what we do at NAC Gen.
But it’s the same with residential.
It’s about population growth.
And for instance, in Australia, our population is growing about 2%.
In the southeast Queensland corner, we’re 2.3%.
That’s massively high by global standards.
Massively high.
Correct.
And even on the Queensland government’s own kind of trackings, like we’ve got a population of about 3.8 million people in the southeast Queensland corner.
And they’ve got this regional plan that goes out to 2046 and they’re expecting it to get to 6 million people.
So we need to find another 900,000 new homes to house all these people.
And don’t forget, we’ve got net overseas migration.
So that’s a combination of temporary people that are that might be students coming to land English and whatnot versus, you know, the people that are moving here to actually work on mines or wherever they’re going.
So when you’re looking at those kind of demand characteristics, it’s really strong.
Yet, is supply actually keeping up with that?
No, supply is slowing down.
Correct.
And the federal government’s increasing demand.
Correct.
And not tinkering with the things that they can tinker, which is, which literally is, you know, maybe we don’t bring in so many students, for instance, on those visas and sort of let a bit of absorption occur and the economy sort of settle a bit.
But, you know, that’s government policy and they have to figure those things out.
It all comes down to supply and demand and what price we have to pay for things.
And don’t forget, we have got, Brisbane has got an incredible next few years of infrastructure spend coming with obviously with the Olympics, but it’s all the other things like, you know, the Kumara connector, the Kumara hospital, you know, the various upgrades to other hospitals, the Cross River Rail, etc.
Like there’s so much infrastructure being built at the moment that there’s high demand for labour, which means you’re paying more for tradies.
But can you afford to pay them to build you a new house?
Probably not.
You know, so it’s, it’s, we’re coming up to a difficult period in my opinion.
I’ll talk to you again about this.
Peta Tilse, thank you very much for your time.
Pleasure, Steve.
Peta Tilse is head of funds management at Natgen.

NatGen in 2025, busy times.
As we pass the quarter post of 2025, the NatGen team is intensely focused and fully occupied.
It is now five years since the beginning of the COVID-19 pandemic.
And it is fair to say that this one event has dominated the economic landscape ever since,
perhaps at least until a certain inauguration ceremony
in Washington DC in January this year.
In this five year period,
we have become familiar with almost constant economic change.
Quarter one of 2025 has been no exception.
Whilst this can be challenging at times, the good news is that we at NatGen are accustomed
to constant change within our markets and portfolio.
The outlook suddenly darkens.
With the recent announcement of a broad terrorist regime being implemented by the United States, the general outlook for global economies has been dominated by gloomy  commentary.
Debt markets have responded to this
by factoring in reduced interest rates in the medium term,
consistent with the expectation of reduced global growth.
A comprehensive analysis of the impact of the US tariffs regime is well beyond the scope of this paper.
We can all consume copious analyses over the days and weeks ahead from a broad range of analysts.
My initial reaction, however,
is to feel affirmed that we have stuck to the basics
when it comes to asset allocation
and a concentration on defensive property assets, where the provision of basic goods and services is the focus of our tenants.
I believe that this has shielded us
from some of the price variability
in certain markets over the past five years and is likely to continue to do so in the future.
Of course, anyone invested in the share market currently is familiar with price variability.
The current times provide a salutary contrast between share price variability and the relative stability of property assets
and income production.
We see this as a major benefit
of commercial property  investment.
Debt capital management and interest rate management.
Even prior to the recent tariffs revelations, medium-term market interest rates have been moderating.
As I have mentioned previously to you, NATGEN keeps a constant watch on interest rate projections and market pricing over the terms of our trusts.
This is the basis upon which we formulate a view on the average five-year interest rate over the term of a NATGEN investment trust, as stated in our information memoranda.
As the medium-term rates have modified, we have taken the opportunity to hedge our interest rate positions on a number of trusts, including CO24, QC24,
SP24 and CA25, and also to seek reduced margin arrangements with banks on other trust debt, including GD21, IR22 and GL22.
This activity has produced  meaningful reductions in interest rate costs of virtually all of the trusts mentioned above. The aim of interest rate hedging is to limit the risk posed by interest rate variability on the performance of the trust by fixing the interest cost for a certain term.
In the case of our recent hedging,
we have been focusing on three-year fixed terms, as this provides the best rates along the forward interest rate curve.
Consistent with our current defensive positioning, we will be proposing to maintain current distribution levels and bank any savings for the maintenance
of appropriate capital buffers for the trusts.
Of course, any surplus not distributed now will add to the capital base of the trust when it comes to an end, and trust assets are distributed to unit holders.
The NATGEN response.
Consistent with the NATGEN investment philosophy, we continue to seek assets which provide long-term defensive income and to acquire at prices which reflect solid value in the medium term.
We seek to take advantage of the inefficiencies in the property  market
to target mispriced assets.
Within this context, we continue to set target sectors based on our assessment of value.
The following synopsis of our target areas outlines the value propositions we seek.
Regional convenience retailing.
Well-placed assets within solid regional locations provide steady income consistent with our aims,
but generally at more favorable prices than metropolitan assets.
Historical data indicates that approximately 30% of the nation’s GDP is derived in regional Australia.
This figure underscores the significant economic role of regional Australia, whilst also producing the majority of the nation’s merchandise exports.
Recently, the secret appears to be out, and competition to acquire these assets is increasing.
Examples of NATGEN trusts relying on regional convenience retail include KT-21, GD-21, IR-22, CO-24, and CA-25.
Non-CBD Office.
The CBD office sector was slammed during the pandemic
due to stay-at-home mandates and the like.
Work-from-home protocols emptied city office buildings.
The whole sector has  experienced downward value pressure, leading to value purchasing opportunities.
Concurrently, steep rises in construction costs have made replacement of office stock unviable at current rental levels,
providing existing buildings with a significant competitive rental advantage, especially in tightly held precincts.
NATGEN examples of non-CBD Office assets include GL-22 and QC-24, with another coming soon.
Value-add industrial. Industrial property across the globe has benefited from the stampede to internet shopping during the pandemic and thereafter.
This has focused principally on logistics and fulfillment.
However, much of the traditional industrial stock is focused on manufacturing and its supply chain.
This traditional industrial stock is transitioning to more modern industrial forms, with the attendant uplift in values as the repositioning occurs.
NATGEN remains aware of this trend and vigilant for  opportunities in this market.
We hope to provide you with an example of this type of  investment later in 2025.
Specialist assets.
Specialist assets are identified by their strong income generation attributes and sustainability of these income streams.
Again, we look to certain sectors that offer certainty in times of volatility, such as medical and logistics support.
Tenants in these fields tend to have strong income generation linked to government spend,
essential services, or blue-chip clientele.
And NATGEN example of this is SP24.
NATGEN developments in 2025.
NATGEN is set to deliver five development projects in 2025,
with a total value in excess of $110 million.
In all cases, the developments are being delivered within the initially assessed cost envelopes for each project.
This has been an amazing effort by the NATGEN development team.
The pipeline will continue to grow in 2025, with a NATGEN Development Trust release imminent.
Whilst the sector focus of our development projects will broaden in 2025,
the fundamentals which we seek will remain unchanged.
These include a proven market, good value sales expectations, and strong cost control.
Focusing on the basics.
Beyond acquisition strategy and development delivery,
we at NATGEN remain focused on delivery of the basic fund management and property management services,
upon which our unit holders rely.
Words which we aspire to embrace are care, dependability, innovation, and transparency.
We look forward to providing you with new opportunities in both NATGEN Development Trusts and NATGEN Investment Trusts in the coming weeks.
Thank you for your time, Steven Goakes.