What costs are involved with buying a house in Australia?
The majority of costs associated with buying a house are legal and government fees. Overall, expect to pay approximately 5% of the property value on these hidden costs in addition to the purchase price. You will likely have to cover legal fees, stamp duty tax, loan establishment fees, property inspection and FIRB approval fees, land tax fees, and other minor costs such as insurance, council rates, etc.
Hidden costs of buying a house
The primary expenses for buying a house are conveyancing fees and government taxes. The legal fees usually cost between $1,500 to $3,000, though the price may vary depending on the complexity of the contract negotiations. However, the main costs involved with buying a house in Australia – beyond the raw house purchase costs – is stamp duty taxes. Stamp duty is also known as transfer duty. It is an up-front cost payable to the state government within the first three months of home ownership (to avoid interest).
Stamp duty tax is calculable as a fraction of the property value. For example, in the first bracket of properties up to $200,000, stamp duty is calculated as $1.20 per $100. In the second tier of properties from $200,000 - $300,000, stamp duty is a minimum of $2,400 plus $2.20 per every $100 that exceeds $200,000. It sounds complicated, but there are plenty of resources to help work everything out for you. Try this handy stamp duty calculator to get a sense of what stamp duty you can expect to pay.
Relief from fees when buying a house
For first home buyers, stamp duty tax is often waived or significantly reduced. Depending on the value of the property and the time that the property was purchased, you may be eligible for a full exemption from stamp duty.
This mostly applies to first time buyers in NSW who purchased properties between early August 2020 and late July 2021 valued at 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 favour of an annual property tax. Homeowners will have the choice between the upfront cost of stamp duty or a smaller annual property tax.
Note that if you are not a citizen of Australia, you will have to pay a variety of hefty surcharges in order to buy an Australian property. This is usually around 8% of the land’s value, as well as a further 2% land tax 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 before the purchase date).
How much does it cost to buy a house? All of the property purchase costs
Conveyancing Fees ($1,000-$2,000)
When it comes to buying a house, you can choose to hire either a conveyancer or a solicitor. 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 organising settlement costs.
Conveyancers and solicitors perform similar functions when it comes to real estate. The main difference between the two is that solicitors usually practice other areas of law in addition to real estate, while conveyancers are only qualified to practice conveyancing.
When home sales are disputed or complicated to the point of requiring legal action, conveyancers will need to defer to a solicitor. If you think that this is likely to happen with your sale, you should probably hire a solicitor to handle your sale as it will avoid doubling up on conveyancer and solicitor fees.
- When do you pay conveyancing fees?
Conveyancing fees are paid at the settlement of the property. Ideally, you should have a conveyancer involved from the beginning of your search for a property. Conveyancing fees very from state to state. NSW conveyancing fees are on average $700-$2,000, Victorian fees around $600-$2,000, Queensland about $500-$1,300 and WA averaging around $750-$1,100.
- Who pays conveyancing fees?
Both buyers and sellers must pay conveyancing costs. For the seller, this payment will usually take the form of a percentage of the funds made during the sale. For the buyer, these fees will need to be paid up front and usually out of pocket.
Loan application fee
Loan application fees are the accompanying charges for submitting a request for a loan. These are charged by the lender – usually the bank – and can vary drastically. Certain banks may not charge application fees at all, though the standard is around $150. Loan application fees are non-refundable up-front charges that will be expected in full.
Mortgage registration fee
The mortgage registration fee is another charge incurred by the government. This fee is to be paid in full at settlement and notes the debt on the title of the property. Thus it ensures that the lender has the right to repossess the property if the mortgage goes into default. To legally transfer the property, 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 suspect to variation in relation to the land and property information, such as the size, value and location of the property.
Transfer / dorm fee
Yet another charge by state governments, this fee is to cover the cost of transferring the property title. It varies greatly from state to state. The most expensive transfer fees are in South Australia at nearly $3,000 while the Northern Territory charges only $137 (for $400,000 homes).
Stamp duty
Remember that stamp duty fees change yearly and vary greatly from state to state. You can find necessary information on your state government websites – it is especially worth researching if you are eligible for an exemption or reduced stamp duty tax and don’t forget to try out a Stamp Duty Calculator.
Additional costs of buying a property
There are a few other administrative fees that are likely to feature in your end-of-sale price tag. Here are the most common extra costs of buying a property. Note that some of these are just a part of the ongoing costs of owning a home in Australia.
- Inspection fees
- Insurance fees (home, building and contents)
- Lender’s mortgage insurance
- Moving charges
- Renovation expenses
- Installing facilities
