What are the costs of buying a house in Australia?
The majority of costs associated with buying a home are legal and government fees. Overall, expect to pay around 5% of the property’s value on these hidden costs on top of the purchase price. You will likely need to cover legal fees, stamp duties, loan origination fees, property inspection and FIRB approval fees, property tax fees and other minor fees such as insurance, consultancy fees, etc.
Hidden Costs of Buying a Home
The main expenses associated with buying a home are transfer fees and government taxes. Legal fees generally cost between $1,500 and $3,000, although the price can vary depending on the complexity of the contract negotiations. However, the main costs of buying a house in Australia – beyond the gross purchase costs of the house – are stamp duty. Stamp duty is also called transfer duty. This is an upfront cost payable to the state government within the first three months of home ownership (to avoid interest).
Stamp duty is calculated as a fraction of the value of the property. For example, in the first bracket of properties up to $200,000, stamp duty is calculated at $1.20 per $100. In the second tier of properties from $200,000 to $300,000, stamp duty is a minimum of $2,400 plus $2.20 for every $100 that exceeds $200,000. It sounds complicated, but there are plenty of resources to help you figure it all out. Try this handy stamp duty calculator to get an idea of how much stamp duty you can expect to pay.
Waiver of fees when buying a house
For first-time home buyers, stamp duty is often waived or significantly reduced. Depending on the value of the property and when the property was purchased, you may qualify for full stamp duty relief.
This primarily applies to first-time buyers in NSW who purchased properties between early August 2020 and late July 2021 worth up to $650,000 for an existing property or $800,000 for a new property . You are also likely to be exempt from stamp duty if the transfer is between spouses, or if you are the beneficiary of a deceased estate.
The NSW Government has also proposed the abolition of stamp duty in favor of an annual property tax. Owners will have the choice between the initial cost of stamp duty or a lower annual property tax.
Note that if you are not an Australian citizen, you will have to pay a variety of significant surcharges to purchase Australian property. This is usually around 8% of the value of the land, plus an additional 2% land surcharge. There are some exceptions for New Zealand citizens and permanent residents (who must have lived in Australia for more than 200 days in the year prior to the date of purchase).
How much does buying a house cost? All property purchase costs
Transfer fee ($1,000 to $2,000)
When it comes to buying a house, you can choose to hire a solicitor or notary. They will arrange and advise on property inspections (to determine the risk factors involved in the sale) as well as title searches, contract preparation/negotiation and exchange and settlement fee arrangements.
Transfer agents and attorneys perform similar functions in real estate matters. The main difference between the two is that lawyers generally practice other areas of law in addition to real estate, while transfer agents are only qualified to practice conveyancing.
When home sales are disputed or complicated to the point of requiring legal action, conveyances will have to rely on an attorney. If you think this is likely to happen with your sale, you should probably hire an attorney to handle your sale, as this will avoid double attorney and attorney fees.
- When do you pay the transfer fee?
Transfer fees are paid when settling the property. Ideally, you should have a transfer agent involved from the start of your property search. Transfer costs very from one state to another. NSW transfer fees average $700-$2000, Victorian fees around $600-$2000, Queensland around $500-$1300 and WA average around $750 at $1,100.
- Who pays the transfer fees?
Buyers and sellers must pay transfer fees. For the seller, this payment will generally take the form of a percentage of the funds paid in the sale. For the buyer, these costs will have to be paid in advance and generally out of his pocket.
Loan application fees
The loan application fee is the fee that accompanies the filing of a loan application. These are charged by the lender – usually the bank – and can vary widely. Some banks may not charge an application fee, although the norm is around $150. The loan application fee is an initial non-refundable fee that will be expected in full.
Mortgage registration fees
Mortgage registration fees are another charge incurred by the government. This tax must be paid in full upon settlement and notes the debt on the title deed. Thus, it guarantees that the lender has the right to repossess the property in the event of default on the mortgage payment. To legally transfer ownership, the debt must be paid in full.
Mortgage registration fees are usually around $100, but vary from state to state. Mortgage registration fees are also likely to vary based on land and real estate information, such as property size, value, and location.
Yet another charge by state governments, this tax serves to cover the cost of transferring the title deed. This varies greatly from state to state. The most expensive transfer fees are in South Australia at nearly $3,000 while the Northern Territory charges just $137 (for $400,000 worth of homes).
Remember that stamp duties change every year and vary widely from state to state. You can find the necessary information on your state government’s websites – it is particularly worth researching whether you are eligible for a stamp duty exemption or reduction and don’t forget to try a duty calculator stamp.
Additional costs related to the purchase of a property
There are a few other administrative costs that are likely to be included in your end-of-sale price. Here are the most common additional costs associated with buying a property. Note that some of these are only part of the ongoing costs of owning a home in Australia.
- Inspection fees
- Insurance costs (home, building and contents)
- Lender’s mortgage loan insurance
- Moving expenses
- Renovation costs
- Installation of facilities