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The Real Costs Of Home Ownership Explained

By Laura Anderson

We’re often so focused on the price we’re paying for a property, and any likely movements in the interest rates that will make the mortgage more expensive, we often completely forget to factor in the costs of actually being a home owner.

Yet, those bills all still have to be paid, so it’s best to be prepared so they don’t become the worst kind of surprise.

“Those other costs can add up to a lot, but they’re often completely disregarded,” says financial advisor Marisa Broome, the principal of Wealth Advice and chair of the Financial Planning Association of Australia. “And that’s especially when interest rates rise.”

Moving in

New home buyers regularly underestimate the cost of moving into their property, says Andrew Zbik, senior financial advisor of Creation Wealth. They might start out thinking they’ll hire a van with a few friends helping but, more often than not, they’ll end up with professional removalists and their full-size truck.

“Then it’s very expensive to fit out a home,” he says. “You might need new furniture or some of your old furniture won’t fit and you might need to fix up a few things that weren’t in the purchase contract. For an upsizer, for example, the fit-out cost could easily be as high as $20,000 or $30,000.”

Energy bills

The price of electricity and gas can come as an enormous shock, especially if this is the first time you’ve moved out of your parents’ home. A new report from Sweltering Cities found that 61.8 per cent of people don’t turn on their airconditioning because of cost concerns. One family in western Sydney discovered their summer airconditioning bill was higher than one weekly wage.

Water charges

All home owners generally pay a fixed charge for being connected to the water supply, wastewater and stormwater systems, as well as a charge for the water they use. These are usually billed every quarter. For houses, water usage is measured by a meter installed in each property, but for units that don’t have individual meters, it’s generally charged on an estimate according to how much the whole building uses.


It’s an unpopular way of spending money, but insurance bills are there for a reason, says Murray Katz of Logix Financial. “It’s critical to pay for home insurance, even though it does tend to be expensive,” he says. “It’s all risk-based and, while no one likes spending money on insurance, when something does happen, like floods or bushfires or electrical accidents, it can be absolutely priceless.”

If your home is actually in a bushfire zone or flame zone or is in a flood zone, that insurance might be very expensive, Zbik says. “You might be 60 metres away from the nearest trees but flames can jump 100 metres from the bush.”

Council rates

All home owners have to pay annual local council rates to contribute towards the services they provide, like collecting garbage and maintaining local roads, swimming pools, parks and gardens. These are based on a property’s value but can vary hugely between different councils in different states, and can be paid yearly or quarterly. Generally, rates on houses are a lot higher than those on units.

Land tax

Land tax is an annual tax that land owners pay to state and territory governments, everywhere but in the Northern Territory. You don’t usually have to pay land tax on your main home or permanent residence; it’s generally only on investment properties, but the rules are different depending on where in Australia you are. Land Tax in NSW is calculated at $100 + 1.6 per cent of land value in excess of $549,000, but for properties worth over $3.357 million, the tax rate is two per cent.

Strata levies

These are quarterly payments that have to be paid to the owners corporation of an apartment building by all unit-owners for the maintenance of the common property, the updating of the facilities and the administration costs of a scheme.

They are calculated on an apartment’s unit entitlements which are, in turn, based on the general value of the property. “Some people are so intent on buying an apartment, they forget the bigger picture and the costs of keeping it,” says Katz. “But the costs can be quite substantial in the short and medium-term.”

General maintenance costs

“I would estimate these to be about $10,000 a year,” says Broome. “That might mean plantings outside, replacing a roof every 10 years, getting an electrician in to fix a problem, calling a plumber … It can all add up.” Then there are additional items like phone and internet charges and TV streaming services.

The mortgage

Servicing a large mortgage can be among the biggest ongoing costs of home ownership, particularly when interest rates rise. But people can consider refinancing to a better rate at various points in their home-ownership journey, or can fix rates.

“The main reason you’d fix a rate is to give you cash-flow certainty,” says Zbik. “But we recommend fixing it in tranches, like having a third of your home loan fixed and in a year’s time fix the next third and keep the final third variable. You just never know if you might get a bonus at work or come into an inheritance so you can then put more money into your mortgage.”

The environmental costs

More and more home owners are now considering the broader costs of home ownership and how to cut them, says Anil Sagaram, chief executive of Acacia Money. “It’s not just financial cost they’re thinking of, it’s about the environmental cost. That might mean getting their mortgage from financial institutions who don’t support fossil fuel industries, for instance, but do support renewable industries.”


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