Hello, good evening, and welcome to Inspire and Inform live. I think we’re now on episode 27. My name is Colin Lee, and I’m the founder of Inspire Realty helping our clients to build a better future together. Well, I just wanted to let you know that I’ve been reading the news lately and officially, Australia now is out of the recession. So I think that’s a really good news. And also, there’s a couple of other announcements as well, which particularly relates to the Home Builders scheme. So there’s some really good changes for what’s happening in the new year. But I’d love to share that with you today. It’s also weeks towards Christmas. So this is going to be my last post before the Christmas holidays. And then I’ll be back again in the new year. So welcome to the last post, well, you never know I’m going to Brisbane. And if I feel up to it, I may post something, particularly if there’s something that’s of breaking news, or if there’s an important announcement. I’d like to, once again, remind everybody that these sessions are live, and we do go live on Wednesday. Today, it’s a little bit different. I’ve decided to go live on a Thursday. Yesterday, there was some things that were happening. So I had no choice but to go live today.
Anyway, so the the the key is that we are no longer in recession. And and what we’re really seeing is the economic activity that’s rose about 3.3%. This is really quite great news. In really the September quarter, the growth means that you know, we’re actually out of recession, I’m not sure if you knew there was a recession that was happening in the June quarter. But certainly now in the September quarter, we’re literally out of it. And the head of national accounts of ABS, said that the record is a 7% decline in the June quarter. But Australia has experienced a partial recovery in the September quarter. And as a result, we are out of the recession. So that’s really, really good news. There’s also a couple of things that happened.
Obviously, the Reserve Bank has held on to the cash rate and has left it unchanged at 0.1%. I guess if you dig a little bit deeper, there is also quite a little bit of what was said, For its part, the board will not increase the rate until actual inflation is sustainable between two to 3%, which I don’t think is going to happen anytime soon, with the current climate of the the economy. And what they also said is that the board is not expecting to increase the cash rate, and will hold that for at least three years. So that’s really good news just means that our mortgage rates will be held for certainly quite a little bit of time. So it really means that you know, you can get a good deal now, I highly encourage you to do one of two things.
One is to ring your banks have a look at how much mortgage you are paying, how much mortgage rates you’re paying or interest rates you’re paying, and and have a look at what is on the market at the moment, it may be easier for you to ring the bank to say hey, you know, let’s get a better rate. Most banks may not come to the party with going and giving you the lowest rates, in which case, then you may want to consider refinancing. So feel free to talk to myself or my team about that. But it’s really good news, it just means that point 1% cash rate could be in is as is predicted to be held on for three years.
Also just wanting to show you what the correlation is between the RBA cash rate, and also the change in terms of the capital growth of properties in Australia, traditionally speaking since 2010 to 2020. So we look at a 10 year, I guess, timeframe. And if you look at 2010, we were sitting at about 4.8 I think it was the peak of the interest rates back in 2010. And you can tell that, you know the growth of the properties was still going up. But as soon as the interest rate dove, you know, started to drop to four 4% and three, you know sup high, high 3%, mid 3%. As good as it went down to about two and a half percent, you can see that the property prices have steadily also increased. So you can see that there is some sort of a correlation between mortgage rates and also the growth of the capital growth of properties a little bit outside a bit of an outlier in November of 19 and 20. Obviously, in the last year, you can see that even though the mortgage rates have dropped, property values have also dropped this is predominantly because of COVID. But you can see now that property prices and dwelling values are starting to increase with a indication that the cash rate will continue to plateau for quite a little while before anything happens to it. So I think it’s really good news.
So the low cost debt really is the one that’s really influencing the property value. Over 2020, that’s just this year alone, there has been a change of about 65 basis points. So that’s a huge difference for a year for the cash rate to have that much of a change. So as I said, you know, that hundred basis points reduction does lead to about 8% increase in property value. So that’s a really good correlation, which means we can start to see a stability of property prices over the next few years.
One final announcement, I mean, we are now you know, literally about 30, or less than that about 29 days before Christmas. And that’s when the current homebuilders scheme for $25,000 actually ends. But the good news is that the federal government is going to extend it until the 31st of March 2021. But the value of that will be down to $15,000. So instead of 25,000, you’re going to be getting 15,000 of the key challenges I’m finding with some of my first home buyers, is that you actually have to, when you sign the contract, you technically have to have the property commence construction, within three months, that’s been tight, unless the developers got their act together, and have put in the DA and all the applications necessary to get the construction started, it’s very hard to get it started within three months. So the good news is that they’ve also they’ve extended that by six months. So from the time that you sign the contract to when construction commences, you’ve got that six month gap. So that’s also one of the key changes with the home builder scheme.
The other key change also is predominantly for New South Wales and Victoria, all the other states are capped at $750,000. But for New South Wales, there is an increase in the property value that would that would get the home builder scheme up to the tune of 950,000 for New South Wales. And then for Victoria, it’s $850,000. So the existing 750 applies to all other states. So it is, you know, very close. But if you are ready, and you’re willing to look at some options for property now and do a couple of inquiries before the year end, you may still qualify for the $25,000. So feel free to get in touch with me if you still want to look at that as an option for you.
It is going to be a relatively quick one today. But something I was reading in the in REA today. This is just what and this is kind of really shows, I guess, the culture and the trend of what’s really happening within Australia, you can see that the rolling three month changing rents of houses versus units, and then the combined capitals as well. So this is all combined in around Australia, what’s really, really interesting is that the houses have really significantly picked up in terms of the change in rent. So it’s positive change, which is really good. And what that really means is people are flocking into more regional areas, they’re looking to rent houses, or townhouses with a little bit more space, as opposed to just units, which is what’s been really popular. So I can start to see a little bit of a mind shift, getting a lot more inquiries from clients looking, and really keeping an open mind about properties a little bit further away from the central business district. So that’s something that I would encourage you to consider. As an investor, you want to see what the future holds for you. And that’s why it’s important to have a diversified property portfolio. Because of instances like that, at some point units are better from a vacancy perspective. Now we are starting to see that houses are a little bit better from an occupancy perspective. So it is a bit of a shift in trend in culture. And I certainly see that holding up for the next few years, I certainly see that most people more and more companies will start to adopt the idea of working from home. My wife is an architect and she her ear is on the ground all the time. And we’re hearing that people want space and gone other days where you know, a little study nook is all that’s needed. Now you want to really have a proper study corner or a study room with natural lighting. So that’s kind of like a bit of a shift in terms of what’s the demand out there. And I encourage you as a property investor to really look at the bigger picture and build a diversified property portfolio.
Hey, I thank you so much for your time. If I didn’t get to see you all before Christmas have Have a Happy Christmas and a joyous New Year. Keep safe and be kind to each other. Have a good one and see you later. Bye bye. Good night.