Australians dishing out $40,000 in extra costs when buying property

With three rate cuts behind us, many Australians who’ve been eyeing the property market for the past few years have finally decided to take the plunge. But even among those who’ve successfully saved up a deposit, plenty more hurdles await. 

Stamp duty, buyers registration, building inspections, conveyancing — all these things add up pretty quickly. In fact, we found that the costs associated with buying a home set back the average Australian a hefty $40,000.

“The market is certainly heating up after a two-year slump, so if you’re looking to buy, it’s best to be aware of the costs that come with purchasing a property so you don’t end up getting stung,” said Mozo property expert, Steve Jovcevski.

Which cities are most expensive?

Sydney topped the list of most expensive cities, with Sydneysiders dishing out an average of $50,343 in additional fees when purchasing a house or unit. Melbourne was a close second, with associated costs running up $49,138 on average. Among metropolitan cities, Perth proved to be the most affordable, with fees tallying an average of $29,857.

Costs associated with buying a home across major cities

Naturally, stamp duty accounts for a big chunk of these costs, and since it’s priced according to a property’s sale price or current market value it makes sense that Sydney and Melbourne would sit atop the list. On average, stamp duty in those two major cities will set back homebuyers around $30,000.

Many Australians also opt for a buyers agent to help them navigate the market, negotiate prices, and even bid for them come auction time. Though not a necessity, they can help give you an edge over other buyers — and their fees reflect that.

Beyond that, there are all the little costs that will spring up once you’ve found a house and secured your home loan. For example, in NSW the conveyancer or solicitor that’s required to handle all the paperwork and make sure that the property is adequately transferred will cost between $500 and $1,200.

Ways to minimise the costs of buying a home

1. Negotiate for the lowest possible rate

While banks don’t necessarily advertise the fact, it is possible to negotiate a lower rate on your home loan. Competition between banks is pretty fierce right now and many will go to great lengths to retain customers, so make sure you push hard for a good deal.

“While interest rates are at an all-time low, that doesn’t mean that it’s time to relax and opt for convenience. Shop around, haggle and push lenders for the best possible rate. It may not feel like a big saving now, over the course of 20-30 years it will certainly add up,” said Jovcevski.

2. Plan ahead to avoid getting stung

When buying a property, you’ll need to have a good idea of all the costs that are likely to jump out at you throughout the process, so a little forward thinking is necessary.

For example, if you’re planning on selling your current property and buying another, Jovcevski recommends talking with your lender and real estate agent early on so they can help you draw up a plan. 

It’s important to get the timing right, and if you’re able to sell and buy with minimal time in between, you’ll be able to save thousands on a potential bridging loan or rental costs.

3. Watch out for the small costs

There’s a lot that goes on behind the scenes when buying a home. Along with things like stamp duty and Lenders Mortgage Insurance, you’ll also have to spring for legal fees, building and pest inspections, and mortgage registration fees, so it pays to be mindful of minor fees that add up. For example, it might cost only around $500 to conduct a building inspection, but that number will be much greater if you’ve been looking at multiple properties.

So if you’re just taking the first few steps on your property journey, you should familiarise yourself with all the costs associated with buying a house so you’re not blindsided by any unexpected charges. And if you’re on the lookout for a home loan that won’t strain your budget, check out what’s available at our home loan comparison page.