H O M E S TA R T F I N A N C E 2002-2003 annual report

OFFICE ADDRESS 117 King William Street ADELAIDE SA 5000 POSTAL ADDRESS GPO Box 1266 ADELAIDE SA 5001 ABN 82 829 169 885 TELEPHONE: 08 8210 0500 FACSIMILE:

08 8210 0445

H O M E S TA R T F I N A N C E 2 0 0 2 - 2 0 0 3 A n n u a l R e p o r t

H O M E S TA R T F I N A N C E

letter of transmittal

The Hon Stephanie Key MP Minister for Housing Parliament House North Terrace Adelaide SA 5000

Dear Minister, I am pleased to present the HomeStart Finance Annual Report for the year ended June 30 2003. This Report outlines the achievements and activities of HomeStart Finance over the past 12 months and on behalf of all HomeStart staff, I commend this report for presentation to Parliament. The Annual Report complies with the requirements of the Housing and Urban Development (Administrative Arrangements) Act 1995 (SA), the Public Finance and Audit Act 1987 (SA) and the Department of Premier and Cabinet Annual Reporting Requirements.

Gary Storkey Chief Executive Officer HomeStart Finance

H O M E S TA R T F I N A N C E 2 0 0 2 - 2 0 0 3 A n n u a l R e p o r t

contents our mission

1

our vision

1

2002-2003 highlights

2

year in review

4

our role in government

7

corporate governance

9

focus on strategy

13

our strategic themes

17

• providing housing solutions

17

• making contributions to

23

stakeholders, industry and sustainable communities • our people

26

• sustainable financial management

30

other statutory information

35

2002-2003 financial statements

40

notes to the financial statements

44

H O M E S TA R T F I N A N C E 2 0 0 2 - 2 0 0 3 A n n u a l R e p o r t

our

mission

HomeStart's mission within the framework of Government policy is to operate in a commercial manner to: Develop, market and manage home finance and housing initiatives Increase home ownership opportunities as a choice for low to moderate income households in South Australia

our

vision

HomeStart Finance’s Vision is: To create and maintain a long term financing vehicle to provide housing solutions for low and moderate income people and needs groups, in South Australia To continue our rich history of public and private sector participation to enable an expansion of funding options to target groups, whilst minimising risk to government To be recognised as a leader in providing financing and home ownership solutions to target groups To build on the foundation of social capital we have laid There is an emerging view that income support is not the only long-term answer to reducing the divide between rich and poor in Australia. Increasingly, a case is being made for society to consider asset accumulation strategies as viable policy. Home ownership is seen as the primary asset accumulation strategy for low to moderate income people and access to home purchase is likely to be seen as a high priority to governments over the next decade. HomeStart remains a market leader in Australia in the design, delivery and management of mortgage products to its target market, and is the only solution in South Australia for many households to enter home ownership.

We create opportunities for households to become less dependent on long term government assistance. Over the next year HomeStart will continue to lead the way in innovative home ownership strategies, through the State Housing Plan, and will identify and develop new products for customers currently unable to access home ownership. We will continue to provide access to our products and services in a variety of ways and the provision of ebusiness will help drive technology into the homes of our customers. Staff at HomeStart hold self-development and learning as their key strategic driver for success and re-employment. Our learning and performance management will again be recognised by other organisations in Australia, showing how employee development unlocks the potential of all staff. Public and business sector organisations see HomeStart as a leader. With our innovative approach and commercial focus, we will continue to set standards for others to follow. HomeStart, a leader with our customers in the community, a leader in innovation, a leader in people management and a leader in technology.

We know that low to moderate income households can be successful homebuyers and we know that low income does not always mean high risk.

H O M E S TA R T F I N A N C E 2 0 0 2 - 2 0 0 3 A n n u a l R e p o r t

Page 1

2002-2003 highlights F I N A N C I A L I N D I C AT O R S

Return on Equity

Operating Profit

6.3%

$8.6million

Net Interest Margin

Subsidy Provided

2.0%

$1.7million

Payments to the Government

Risk Transfer Vehicle (RTV) Performance

$12.6million

+ 7.9%

BALANCE SHEET STRENGTH

Page 2

Provisions

Capital

$14.9million

$138.4 million

RTV Net Assets

Net Loan Losses

$21.5million

$0.1million

Loan Assets

Capital Adequacy Ratio

$726.9million

29.7%

H O M E S TA R T F I N A N C E 2 0 0 2 - 2 0 0 3 A n n u a l R e p o r t

OUR PRODUCT AND SERVICE

A quality, widely available product Accessing HomeStart

Product Features

✔ ✔ ✔ ✔ ✔ ✔ ✔

www.homestart.com.au ehomestart site Online loan applications 2003-2004 Adelaide call centre 128 loan manager locations in SA* Website and brochures in 8 languages Extended opening hours *

HomeStart Loan (maximum)

$200 000

HomeStart Loan rate (30/6/03) Advantage Loan (maximum)

6.72% $25 000

Advantage Loan rate (30/6/03)

2.76%

Mortgage loss insurance

✘ ✘

Redraw

✔

Ongoing account fees

Through any of the 110 BankSA branches as well as the offices of Bernie Lewis Home Loans, The Home Loan Centre, HomeLoans Plus and HomeStart Finance. F I N A N C I A L C O N T R I B U T I O N S T O T H E S TAT E G O V E R N M E N T

$153.2 million paid to the State Government since inception

1 2

Payment Type

19951 ($m)

1996 ($m)

1997 ($m)

1998 ($m)

1999 ($m)

2000 ($m)

2001 ($m)

2002 ($m)

2003 ($m)

Total ($m)

Guarantee Fee

6.1

9.5

8.6

7.5

6.5

5.5

5.0

5.0

4.6

58.3

SAFA2 Admin Fee

–

–

–

–

0.7

0.6

0.6

0.5

0.5

2.9

Income Tax

–

1.5

6.3

4.2

3.0

2.4

3.0

2.1

2.5

25.0

Dividends

–

5.0

7.0

5.0

5.0

5.0

1.7

2.2

2.0

32.9

Capital Repatriation

–

–

–

–

25.0

0.0

3.3

2.8

3.0

34.1

TOTAL PAID

6.1

16.0

21.9

16.7

40.2

13.5

13.6

12.6

12.6

153.2

No payments made prior to 1995 South Australian Government Financing Authority COMMUNITY AND INDUSTRY ACHIEVEMENTS Financed property purchases of $203 million in 2002-2003 including construction of 113 homes in SA Sponsored 20 community organisations and events Three new products launched including the City Loan to encourage moderate income earners into the city, Low Deposit Loan to improve access to home ownership, and a Graduate Loan to help young South Australian graduates purchase a home 2466 new customers assisted into home ownership Financed 46 new aged care bed licences in three not-for-profit community aged care centres

H O M E S TA R T F I N A N C E 2 0 0 2 - 2 0 0 3 A n n u a l R e p o r t

Page 3

year in review By Sam Walters (Chair) and Gary Storkey (CEO) HomeStart Finance was established by the South Australian Government with the mission to ensure that home ownership remains an attainable choice for low to moderate income households.

H O M E S TA R T F I N A N C E C h a i r, S a m Wa l t e r s ( l e f t ) a n d C E O , G a r y S t o r k e y

That was in 1989 – a time of rapidly escalating house prices, when the dream of home ownership was diminishing for many people. Since then, HomeStart has helped more than 40 000 households into home ownership, and continues to focus its efforts on helping lower income South Australians.

Page 4

Once again, we find ourselves in a period of rapid increases in house prices. In 2002-2003, median house prices in Adelaide rose by 30.3%, compounding the rise of 18.5% seen in the previous year. These price rises have impacted on the home ownership aspirations of many South Australians and again HomeStart has been at the forefront of developing solutions to assist this group achieve that goal. In 2002-2003, HomeStart settled 2466 new loans, totalling $194 million. In keeping with our mission, these loans were targeted at borrowers with lower incomes – the average income of new borrowers during the year was $23 502, or 54% of the average weekly earnings for South Australia. Importantly, some 54% of new borrowers earned less than $22 000 p.a.

new lending 2002-2003: borrower weekly income

30%

20%

10%

0%