But don’t be discouraged. It’s not an impossible question to answer. It just means the key factors you need to consider – prices, rent, interest rates – are constantly shifting.

It’s worth diving into the data, however, because choosing between buying and renting can be a decision that saves or costs you thousands. In some suburbs, a recent study by PropTrack found mortgage repayments can be more than $1,000 a month cheaper than renting a similar-sized property.

PropTrack’s Buy or Rent Report, released in the second half of 2022, crunched the numbers and found that despite a dramatic rise in property prices, it was still cheaper to buy than rent in many regions outside of NSW and Victoria. And units were more likely to fall into the cheaper to buy than rent category than houses in all States except NSW.

We’ll get to the nitty gritty of which suburbs offer the best buying, but first, it’s important to look at the market trends that will weigh on the market in 2023.

Prices fall

There is no doubt the dial shifted away from buying in late 2022, but this year rocketing rents may see the needle swing back as house prices cool and migration puts more pressure on the rental market. So, it’s a good time to take stock.

Median home prices fell on average 5.3 per cent across the country last year according to CoreLogic’s 2022 market wrap, with the steepest declines in Sydney (down 12.1 per cent) and Melbourne (down 8.1 per cent). Despite this, capital city prices are still about 20 per cent up on pre-COVID levels.

But it is the largest calendar-year drop since the 2008 financial crisis, driven by the Reserve Bank’s relentless nine straight rate hikes. The RBA’s cash rate went from a record low of 0.1 per cent in April to a decade high of 3.1 per cent in December.

And while many expert predictions have come undone in recent years, property analysts agree prices will continue to come off the boil in 2023 and interest rates are expected to level out at 4 per cent or lower.

Many are waiting to see how the mortgage cliff will play out in mid-2023 – when thousands of loans fixed at record low rates in 2021 will expire – catapulting borrowers onto unexpected high variable rates.

Many buyers will see monthly repayments more than double if they can’t refinance at a better rate. While that’s not good news for homeowners, for potential buyers it puts more downward pressure on prices, making it a strong buyers’ market for the first time in years.

Rentals rocket

At the same time property is cooling, the rental market looks set to go into meltdown. Last year rents leapt 10.2 per cent on average on CoreLogic data, well above the trend increase of 2-5 per cent a year.

And PropTrack’s Overseas Search Report for November 2022 noted record numbers of rental searches originating from overseas, reflecting a return to higher migration and more competition. Rising rents may swing the balance of the buy/rent equation in line-ball suburbs.

Where buying stacks up

Around the country, it’s the lifestyle States where buying is still a better option in the majority of suburbs, according to the PropTrack data.

In Queensland and WA, it was considered cheaper to buy a home in more than half the suburbs in the State, while in the NT, it was cheaper to buy in a whopping 98 per cent of suburbs.

However, the number of suburbs where buying stacked up as the better option was down substantially on the previous year, particularly in Queensland, where more than 85 per cent of suburbs were considered cheaper to buy than rent in 2021, compared to just 50.5 per cent in 2022. In WA, it fell from 81 per cent in 2021 to 59.2 last year.

There was also a marked difference between units and houses, with units offering more buying opportunities.

State by State

The PropTrack data also looked at where buying rather than renting would put the most money back in the pockets of capital city consumers.

Interestingly, units offered some of the biggest opportunities, with calculations predicting residents in the Greater Melbourne suburb of Gowanbrae could save $3,223 a month (more than $38,000 a year) if they bought instead of rented a two-bedroom unit.

It wasn’t the only area throwing up dramatic cost differences. Multiple suburbs in other States – from Mt Ommaney in Brisbane to Wanneroo in Perth – indicated potential savings of more than $1,000 a month for buyers over renters.

It’s worth noting that when PropTrack makes these comparisons, it compares the cost of owning versus renting over the next 10 years based on current property and rental averages. The calculations factor in rent and interest rate rises along with additional ownership costs such as stamp duty, maintenance, council rates and body corporate fees. Mortgage repayments were based on a 30-year-loan term at 4.62 per cent, with properties achieving 3 per cent a year capital growth.

Perhaps most significantly though, it assumes buyers have a 20 per cent deposit, something many would-be buyers struggle to save, particularly while renting. While they may have the capacity to meet monthly repayments, raising a deposit can feel like chasing a runaway train.

Many lenders now offer formal family guarantee loans that allow parents to use equity to help their children buy.

When renting makes sense

Of course, there are times renting is a sensible option – perhaps you think prices will fall, don’t plan to stay in an area, want to get a feel for a suburb, or want to live in an area you can’t afford.

The top suburbs where researchers found it was dramatically cheaper to rent were, as expected, some of the country’s most affluent areas, such as Watsons Bay in Sydney (where renting is a whopping $25,117 a month cheaper than buying), Teneriffe in Brisbane, Portsea in Melbourne and Peppermint Grove in Perth.

Run the numbers

The property market can move fast. If you would like to see how the numbers stack up in your dream location right now, get in touch.

^{Property Data: PropTrack Buy or Rent Report 2022 www.realestate.com.au/insights/proptrack-buy-or-rent-report-2022/}

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NATIONAL

Help to Buy

The Albanese Government’s flagship housing policy Help to Buy is expected to launch in July this year.

But legislation has yet to be approved by Parliament, so keep an eye out for more information and key dates shortly. (An easy way to stay in the loop is to contact me).

Under the proposal, the Government will help 10,000 lower-income Australians buy a home by chipping in up to 40 per cent of the purchase price for new builds, and 30 per cent for existing homes.

Buyers can have as little as a 2 per cent deposit and will not have to pay Lenders Mortgage Insurance (LMI), which normally kicks in for deposits of less than 20 per cent.

Help to Buy not only reduces upfront costs, but slashes ongoing mortgage payments. Homeowners have the option to buy out the Government’s stake when they can afford to. Alternately, they can repay the loan, including pro-rata gains, when they sell.

The program is open to singles earning less than $90,000 and couples earning less than $120,000. The federal program is similar to shared-equity schemes already running in Victoria (Victorian Home Buyer Fund) and Tasmania (MyHome).

Regional First Home Buyers Guarantee

The Federal Government was quick off the mark and delivered early on this promise to support 10,000 regional buyers to get on to the property ladder with a smaller deposit than normal.

Originally slated to be introduced from January 1, the Regional First-Home Buyers Guarantee was brought forward and launched on October 1 last year because of extraordinary pressure on regional housing markets. One study estimated it took workers in regional centres more than 11 years to save a deposit.

The scheme runs until June 30 and will help 10,000 regional buyers avoid LMI, with the Government guaranteeing up to 15 per cent of the deposit.

This program is in addition to funding guarantees for 35,000 eligible first-home buyers nation-wide, and 5,000 exclusively for single parents.

The National Housing Finance and Investment Corporation website has a tool to help buyers find out if they’re eligible for any of the support schemes.

Building code changes

Those planning a home build should be aware of changes to boost the sustainability and accessibility of new homes across the country later this year. Changes to the National Construction Code have been contentious, with NSW, WA and SA opting out of reforms which will be introduced in other States in May and take legal effect from October.

In Queensland, the Master Builders Association has claimed new requirements for greater energy efficiency and access (including at least one step-free entry to every home) could add tens of thousands to already rising build costs.

NEW SOUTH WALES

Stamp duty

There are big changes afoot in NSW this year, but not quite as big as Premier Dominic Perrottet may have wanted.

Premier Perrottet had previously signalled he was keen to move from a one-off stamp duty payment to a broad-based annual land tax for most NSW residents. But changes introduced from January this year are optional and only apply to first-home buyers.

They do, however, slash upfront costs.

From January 16, first-time buyers purchasing a house for less than $1.5million have the option of paying an ongoing annual land tax, rather than the traditional lump sum stamp duty.

Avoiding hefty entry fees can help buyers get into homes years earlier. On the flipside, analysts say those who choose to stay put longer than 10–15 years may end up paying more in the long run under an annual tax.

The economics vary according to the value of the property and tenure. As always, it’s worth running the numbers with me to see how the options stack up.

WESTERN AUSTRALIA

Keystart boost

Just before Christmas the Government announced it had raised the threshold on homes eligible for State-backed Keystart low-deposit loans, lifting the cap from $480,000 to $560,000.

The change came into effect on December 12 and backs a move earlier in the year to permanently lift income thresholds on eligibility to $105,000 a year for singles and $155,000 for families. Thresholds are higher in regional and remote areas.

Build-to-rent

From July this year, WA will slash land tax by 50 per cent on eligible build-to-rent developments to support the industry in providing more affordable rentals.

Under the build-to-rent model, developers build apartments with a view to retaining ownership and deriving an income from renting units, rather than on-selling.

While this concession is aimed squarely at business, rather than home buyers, it’s hoped the benefit will flow on to consumers by increasing the stock of rentals.

QUEENSLAND

Rental reform

Major changes looming in Queensland this year relate to owners and tenants in the rental market, with ongoing reforms aimed at providing more rights for tenants.

Landlords have been put on notice that from September 2023 all new rent arrangements will be subject to Minimum Housing Standards that require premises to be structurally sound, weatherproof, free from pests and mould, with fittings in good repair. From 2024, the standard will apply to all rental properties across the State.

TASMANIA

Strategy for the future

The Apple Isle has undergone an unprecedented property boom, with prices more than doubling in some regions in the past five years, and rental stress soaring.

Recognising affordable housing as a priority, the Government is set to release a 20-year policy plan – the Tasmanian Housing Strategy – in July.

The strategy is expected to contain key announcements around social housing, build-to-rent and further shared equity support for home buyers to enter the market with Government help. The State currently has a First Homeowner Grant of $30,000 for new homes with no price cap.

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As if Aussie home buyers didn’t have enough to contend with, now the soaring price of real estate has drawn the attention of international cyber criminals who have stolen deposit and sales payments totalling millions.

Hackers are targeting loose security around the transfer of cash for property settlements, intercepting emails and changing bank account details.

In one incident detailed by WA’s ScamNet, a 102-year-old Perth woman lost $375,000 intended to pay for aged care accommodation. Criminals hacked an email exchange between the woman’s granddaughter and an aged care facility, sending a bogus notification that account details had changed.

The relatively high price of Aussie property – along with the recent buying frenzy – has made the industry a lucrative focus for African and Russian crime syndicates. And the Australian Cyber Security Agency has warned it isn’t just buyers being targeted, but all parties involved in sales, particularly conveyancing lawyers because of their key role.

There have been about 10 property-related payment redirection scams reported every month this year, according to the Australian Competition and Consumer Commission’s Scamwatch, with more than $2.7 million in payments vanishing overseas since January.

The ACCC has called for banks to introduce a confirmation of payee system that verifies account names and account numbers match – a simple step that could stop many scammers in their tracks. The UK recently introduced this check, perhaps another reason criminals have turned their sights on Australia.

In the meantime, there are things buyers can do to prevent falling victim:

• When responding to emails, use the forward button instead of reply, and manually type or select the address from your address book. Scammers often impersonate others by changing an email address by one letter, or leaving off the .au. Using forward instead of reply will help ensure you’re communicating with the right person.
• Always phone to verify account details before making payments.
• Use an email service that includes quality filtering to block dangerous emails, spam, phishing and malicious content or attachments.
• If an attachment comes in an unusual format such as .zip or the email asks you to follow a link to a file hosting site, this should be a red flag. Also, be wary of emails that aim to create a sense of urgency about payment. Don’t rush, and check addresses carefully.

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Apparently not many people, including the Victorian homeowners who have found themselves at the centre of an insurance nightmare that should prompt everyone with a side hustle to check their coverage.

It seems having an Australian Business Number (ABN) registered to your home address may render your home and contents insurance invalid if you have not declared the business to your insurer. And that applies even if the business is unrelated to any cause of property damage or loss.

Victorian homeowners Justin Uebergang and Verity Metcalfe found out the hard way when an electrical fault sparked a blaze that burned their home to the ground last year. They were stunned when their claim was rejected because their insurer found there was an ABN registered to their address. The company said the couple had not declared they were operating a business from home when they took out insurance, and they would not have offered them cover had they known of this additional risk.

For their part, the couple said they didn’t consider it relevant as no part of the business took place in the house and the fire was not related to the business.

The case has been picked up by a no-win, no-fee law firm, and recent reports on the ABC about the dispute have sparked waves of concern, particularly from the many people who have started side gigs during the pandemic.

Ducking for cover

Before long, stories emerged of people who had called insurers to check their status only to find policies withdrawn, including a man who operated a mobile bike repair business registered to his house, a couple who parked a food truck in their yard but did not cook any food on the premises, and a pensioner selling eggs from home.

With inflation spiking, the number of Aussies trying to make a bit of money on the side is only going to increase. In the past financial year, more than 165,000 new businesses were registered in Australia, according to the Australian Bureau of Statistics, with the overwhelming majority – 84 per cent – non-employing businesses, often people monetising a hobby.

And what about the millions of Australians who have been working from home on and off during the past two years? Legal eagles say that WFH is regarded differently to operating your own business. And while some consumers may be scrambling to see the difference – particularly for sole traders working on a laptop – it only matters what your insurance company thinks. So, it’s always best to check.

Know the risks

Consumer law advisers have said home office-based businesses that take up less than 20 per cent of the home’s floor space, with no clients coming and going, may not be considered as high risk as operations that:

• Produce goods.
• Use specific or specialised machinery.
• Engage in activities that may increase the risk of incidents such as property damage, fire, theft etc.
• Are visited by customers.

The Insurance Council of Australia has underlined the importance of declaring any business or commercial activity no matter the size or type, as each insurer assesses risk differently.

Another issue is garden-variety ignorance. People may have taken out home insurance years before starting a microbusiness, and have forgotten the terms. To address this, some insurers have begun proactively flagging the issue in home and contents renewal documents.

It’s also worth remembering that people operating a business from home may also need additional small business insurance protection including public liability, product liability and professional indemnity insurance.

In the meantime, as the case makes its way through the legal system, former Wallaby and new independent senator David Pocock has taken up the issue, writing to Financial Services Minister Stephen Jones to ask for the issue to be examined. Stay tuned.

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It’s time to get prepared to manage the bill shock of coming off a fixed rate.

Don’t panic but start planning

Until recently, many Australian mortgage holders have only ever experienced interest rates heading in one direction: down. No wonder it was a culture shock when the Reserve Bank began ratcheting up the cash rates for the first time in more than a decade this year.

And it looks like the only way is up. Economists predict the official cash rate will have jumped about 1.75 per cent by the end of the year.

Buyers who locked in fixed rates when they hit rock bottom in mid-2021 are sitting pretty, for now. But when their fixed-terms expire, they’ll face an overnight leap, rather than a gradual increase. Interest rates locked in for two years at 2.2 per cent in 2021 could revert to above 5 per cent in 2023. It can be a rude awakening.

But there’s no need to panic. If you’ve fixed wisely, you’ve already made savings. Look at an approaching expiry date not as a cliff but as an opportunity to track down the next great deal.

It’s never too early to start weighing up options. This is where a long-term relationship with a broker can pay off to run the numbers, stay across the market and talk through scenarios.

Refinance, re-fix or split?

When the term of a fixed-rate loan ends, borrowers move on to what’s known as a ‘revert rate’ of interest.

The bad news is that this variable rate is often higher than others offered by the same lender. The good news is you don’t have to stick with it.

Because the fixed-term has ended, borrowers are free to shop around without incurring a penalty. The options are wide open: a lower variable rate with the same lender or a competitor; another fixed rate, or a split loan with part fixed and part variable. These days loans can even be structured as split fixed loans, with part fixed for two years, and the remainder for five, for example.

Overseas, where inflation has hit much harder, some borrowers are jumping early and paying exit fees to end fixed-term loans so they can lock in new fixed mortgages. In the UK, Yorkshire Building Society has reported a spike of more than 88 per cent in the number of consumers paying these break fees to refinance.

This can stack up if borrowers expect rates to rise significantly in coming years.

As of July, average variable rates were around 3.85 per cent while two-year fixed rates were closer to 4.8 per cent, according to financial comparison site Mozo.

Australia has also seen a rush to refinance according to ABS data released in July, which shows a 20 per cent jump in owner-occupiers negotiating mortgages.

Practice makes perfect

Borrowers concerned about reverting to a higher rate of interest can run a stress test on their budgets by calculating approximately what repayments will jump to when the fixed-term ends, then start paying it.

Be aware, fixed-term loans have repayment ceilings you can’t exceed without incurring penalties, so check this carefully. If you are unable to pay extra into your loan, put additional payments into a savings account that can be used to pay down the loan principal when you revert to a variable rate.

Going with more flexibility

With interest rates rising, borrowers may want to go with a variable rate to access more flexible options to pay down principal.

• Pay fortnightly: It’s a classic tip, but one not many put into practise. Switching to this payment method can help absorb increased repayments. Making two fortnightly payments instead of one monthly payment has a small impact on your day-to-day budgeting, but a big impact over years. If you pay in two fortnights what you would normally pay each month, you will end up knocking off an extra month of repayments each year. Over the lifetime of an average 30-year loan, this can stack up to more than $100,000 in interest savings.
• Use an offset account: An offset account is a transaction account linked to a variable rate home loan. Interest is calculated only on the loan balance minus the balance of the offset account. Keeping cash in this account helps keep interest payments down without locking your money away.

Beware the mortgage prison

Some borrowers may find their refinancing options restricted by tighter lending requirements and falling equity, as housing markets come off the boil.

From November last year, banking regulator Australian Prudential Regulation Authority (APRA) has required banks to use a 3 per cent buffer to assess whether borrowers can service loans. Previously this was 2.5 per cent. Those who borrowed under the previous regulations and have not paid down principal may find it difficult to meet the higher serviceability bar to refinance.

Similarly, falling equity in areas where prices have dropped may leave some in a situation where the loan to value ratio goes above 80 per cent and Lender’s Mortgage Insurance is required to refinance. Their only option may be to negotiate with their current lender.

Your personal circumstances are unique and approaching a fixed-term expiry is a key time to get in touch so we can reassess. It’s a rapidly changing environment and I’m happy to meet to discuss the most up-to-date options so you can plan ahead to make the best decision.

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Rental properties and holiday homes are once again in the sights of the Australian Tax Office, which has had growing success identifying erroneous claims.

Last year about 70 per cent of returns related to investment properties audited by the ATO had to be amended, most often because of incorrect expenses or earnings claims.

Regulators have ramped up digital data matching from online platforms such as Airbnb to keep a closer eye on the booming sector. But be careful not to short-change yourself either. There are some claim areas investors regularly overlook too.

So, as we run down to the end of the financial year, it’s a good time to brush up on the dos and don’ts of claiming for a rental property.

Money in vs money out

Property investors can claim costs associated with leasing and maintaining an investment property. This includes borrowing expenses and interest, but not principal on loans.

However, investors must also declare all income earned renting the property out, and expenses can only be claimed for the period it was leased or genuinely available for rent. If you earned more than you spent in any given financial year, your property is positively geared. If you earned less, it is negatively geared, and your losses can be offset against other income streams.

What can you claim and when?

Most ongoing expenses can be claimed in the year they’re incurred including:

• Mortgage interest.
• Council rates and water charges.
• Cleaning, gardening and pest control.
• Insurance.
• Body corporate fees.
• Advertising and property agent charges (including photography for rental listings).
• Banking and bookkeeping fees for accounts used for rent and upkeep payments.
• Repairs and maintenance including appliances to keep the property in a tenantable condition, such as replacing a damaged fence.
• Security costs (new keys cut).
• Depreciating assets under $300.

Some major, or one-off, expenses can only be claimed over several years and they include:

• Depreciation on construction costs (if a home is post-1985), or depreciation on more recent major structural improvements.
• A specialist quantity surveyor can help with this.
• Borrowing costs of more than $100 (such as loan establishment fees, lenders mortgage insurance, search fees, solicitor and mortgage broker fees).
• Depreciating assets over $300 such as new (but not second-hand) fridges, washing machines, dryers and carpeting.

Initial repairs. If you bought a property that had defects or damage, addressing this is classed as capital work and must be deducted over several years. This is unlike repairs due to wear and tear of ongoing rental that can be claimed in the year the expense is incurred.

What you can’t claim

A lot of investors get caught out not separating private versus rental use in claims for holiday homes. You cannot claim expenses for the time a rental property is used privately. If a holiday home is used privately for six weeks each year, then expenses such as rates can only be claimed proportionally for the 46 weeks the house is available to rent.

Common mistakes

1. Not declaring all income: The ATO has expanded the data it receives from online rental platforms, along with rental bond authorities and insurers. Investors must declare all income earned, which includes things such as letting and booking fees, bonds and deposits that are kept, insurance payouts and any contributions from tenants.
2. Not splitting claims on jointly owned properties: People who jointly own an investment property must split the deductions evenly against both parties’ incomes.
3. Property not genuinely available for rent: Expenses associated with running a rental property are not deductable if the property owner doesn’t genuinely intend to earn an income from it. Red flags may go up if you have a negatively geared property that has multiple restrictions on availability such as:
   • • It is reserved for private use during holiday periods and is unlikely to rent outside of these times.
     • References are required for shorts stays and the property doesn’t allow children.
     • It is not widely advertised.
     • Rental rates are considerably higher than market value.
4. Muddling repairs and renovations: Repairs are works considered strictly necessary to keep your home in a tenantable state, for example if a shower screen breaks or carpet is flooded. Renovations to update a kitchen or bathroom are not repairs but capital works and therefore not immediately claimable as an expense, although you may claim depreciation over several years.

Top tips

1. Pre-pay to claim ahead: Property investors can pre-pay expenses up to 12 months in advance to claim an immediate deduction in the current tax year. For example, payment of an insurance premium paid on January 1 that provides cover for the calendar year can be claimed entirely in the financial year ending in June. Owners can generally claim immediate deductions for prepaying:
   • • Expenses of less than $1,000.
     • Expenses of $1,000 or more where the service period is 12 months or less.
2. Look for depreciation potential on previous owners’ construction and renovations. Buyers may be able to continue to depreciate capital works on homes built after 1985, or major structural renovations completed by a previous owner. Also, if a previous owner has installed new appliances expressly to sell a property and they have not been used, you may be able to claim depreciation on these. A quantity surveyor and tax specialist can provide more detailed advice.

The range of deductions available will no doubt factor into choosing an investment property. If you’re considering entering the market contact me any time to consider your options.

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1. Not having a plan

This obvious but common error is responsible for a host of renovating sins, from paying too much in the first place to under-estimating costs, over-capitalising and ignoring target markets.

Renovating for profit means most of your research should be done before you even put in an offer to buy a property. Understanding the ceiling price for fully renovated homes in your chosen suburb will give you a budget to buy and renovate. And understanding the suburb demographics will inform renovation priorities.

While markets have been running hot, renovators can rarely rely on rising markets to dig them out of a hole.

As a rule of thumb, experts recommend spending no more than 10 per cent of your property’s current value on a cosmetic renovation. That’s anything that doesn’t involve moving load-bearing walls or extending the roofline. So, updating kitchens with new cabinetry or benchtops, retiling bathrooms, painting, replacing flooring and landscaping.

For a structural renovation, owners looking to turn a profit should keep it to 40 per cent of the property’s value.

2. Not sweating the small stuff

Decision fatigue can set in early, but planning is essential to get the finish you want. Small things can have a big impact on the result, so research and source fixtures and fittings early.

Don’t leave it up to builders to choose your cornicing or tilers to choose your grout colour. If you’re unsure of design choices, consult a specialist or look online at the hundreds of renovation advice sites.

Top tip: If you go with white interiors, make sure the wall and ceiling paints are the same shade, or one will throw undertones. Ensuring they match gives a seamless finish that makes walls appear taller and the room larger.

3. Getting it back to front

Landscaping a backyard is generally not going to deliver a return on investment. Professional renovators always advise focusing time and money on the front of a house, primarily the facade. Street appeal is everything and, as the saying goes, you only get one chance to create a first impression. Rear yards should be neat and tidy but save the wow factor for the front.

Apart from street appeal, the other areas of a home that will give you maximum return on investment are kitchens and bathrooms. Spending on renovations should be guided by this.

4. Doing all the work yourself

It can really save money to DIY but know your limits. Sometimes it can be a false economy if a professional can do the job significantly better or faster. Weigh up how much your time is worth, particularly if you are taking time off from a regular job to complete renovation tasks. Also, keep a close eye on your schedule. If doing something yourself is going to delay professionals starting on another task, it may end up costing you more.

5. Neutral doesn’t mean boring

Just as you can go too bold, it’s also easy to go too bland. Buyers should have an emotional reaction to your property. You want it to be aspirational and on trend. The décor should strike the warm tones of a home, rather than a showroom. From a design perspective, keeping it warm means ensuring wood is part of your palette – particularly in bathrooms.

And it’s okay to inject personality as long as you know where to put the flair.

If you are confident your styling hits the target buyers’ tastes, it’s okay to make bold choices for non-permanent fixtures – tapware, lighting and window furnishings – but keep an eye on the budget. Statement fixtures can give a house a luxurious contemporary feel, but are simple to change. Steer clear of bold choices on more permanent décor, like cabinetry and carpets.

6. Wasting space

Before you consider extending a property, ensure the existing space is working as hard as it can. Try to work with what you have. Removing non-loadbearing walls or replacing windows with doors can open up cramped spaces. Look for space-saving design tricks, such as stealing cupboard space from an adjoining room. Converting an internal garage and adding a carport is also a cost-effective way to add internal space.

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If you’re on the hunt for a new property, it’s worth checking your budget still covers the extras that can add tens of thousands to your costs.

In the past two years, the average house price in Australia has leapt more than 30 per cent.

That can have a major impact on extras, particularly fees that vary based on the value of the property.

• Among the charges to take into account so you don’t get caught short are:
• Stamp duty (sometimes called transfer duty).
• Transfer fees.
• Building and pest inspection.
• Mortgage registration and transfer fees.
• Conveyancing and legal fees.
• Loan application or establishment fee.
• Lenders mortgage insurance.
• Council rates.

Do your homework, as different State and Territory Governments levy different amounts and have varied exemptions for first-time, lower-income or off-the-plan buyers. The cost of your home will often determine whether you are eligible for discounted fees, so going over budget in a hot market can have a knock-on effect. Contact me if you’re unsure how different charges apply to your situation, and we can run a quick check on your current budget.

Stamp duty

Let’s tackle the largest fee first. What is stamp duty anyway?

In Australia, it dates back to the 1800s when governments stamped transfers of title deeds to track ownership and ensure people were buying from the rightful owner.

It’s now a significant source of revenue collected by State and Territory governments and can vary widely.

The median price of a home in Australia is $920,100 and, depending what State you’re in, stamp duty can range from $27,255 in Queensland to $50,276 in Victoria.

Many States offer exemptions or discounts for first home buyers, or owner-occupiers buying off-the-plan, but it’s usually restricted to properties priced significantly below the market average. Check what exemptions your State or Territory currently has in place, as there are substantial savings if you can make it work.

There’s always talk about doing away with stamp duty, but don’t get too excited. Taxes rarely vanish, they’re just levied in new and exciting ways. Most economists argue an annual property tax would be more stable, efficient and fair, saying stamp duty disproportionately taxes those who move house more often. The ACT is half-way through a 20-year plan to transition from stamp duty to property tax. NSW is proposing reforms on an opt-in basis with buyers able to choose between paying stamp duty or an annual land tax when they purchase a property.

Building and pest

It’s becoming more common for sellers to have their own building and pest report commissioned and made available to prospective buyers which can cut this cost. However, some buyers may still be more comfortable seeking their own.

Building and pest inspections aim to identify structural defects, damage, drainage issues and signs of infestation by problem insects such as termites.
Depending on the property, you may also consider a pool inspection (about $200) or a plumbing inspection (about $300) to run a camera down stormwater and sewerage.

Mortgage registration and transfer fee

This charge covers administrative costs to link mortgages to land titles. The aim is to prevent homeowners selling up without repaying lenders. The title transfer for a property can’t go ahead if it is still linked to a mortgage. This means the seller needs to own it outright, or have had the mortgage discharged (and, of course, paid the Government’s mortgage discharge fee).

Conveyancing and legal fees

Conveyancing is the process of preparing all legal documents involved in the purchase of a property. Conveyancing can be done by a conveyancer, solicitor or even the buyer or seller themselves if they’re looking to save money. They dot the i’s and cross the t’s to ensure the exchange of money and titles runs smoothly. The solicitor or conveyancer represents your interests, and their duties include conducting land title searches and checking details on the contract of sale to organising when payments need to be made to settle the sale.

Loan application and establishment fees

This one-off fee covers the cost of processing documents to set up a new mortgage. It may include a valuation fee for the property. Lenders will sometimes waive establishment fees.
Lenders mortgage insurance

LMI is generally applied when borrowers have less than a 20 per cent deposit. This insurance protects lenders, not borrowers, even though borrowers pay the premiums. In the event a mortgage holder defaults on a loan and the property is sold, if the sale price doesn’t cover the outstanding loan, LMI pays out the balance to lenders. Borrowers, however, may not be off the hook, as insurers can pursue them for the cash.

Single parents, first home buyers and regional buyers can by-pass LMI through the Federal Government’s Home Guarantee Scheme, but places are limited. Under the scheme – set to expand to 50,000 positions in 2022/23 – the Government acts as guarantor for borrowers with as little as five per cent deposit or, in the case of single parents, two per cent. Applications can be made through mortgage brokers, so get in touch to find out more.

Council rates

You will need to pay council rates pro-rata to cover the quarter in which you bought the home. There will also be fees for connecting utilities.

Hidden costs of home buying, using WA as an example:

*Transfer Duty exemptions: First-home-owner exemptions are available in WA on properties less than $430,000. A concessional rate of about 20 per cent ($19.19/$100) applies from $430,000- $530,000 and above that, normal residential rates apply. A 50 per cent discount (capped at $50,000) is also available for off-the-plan properties purchased before 24 October 2024.

**LMI generally only applies to loans where borrowers have less than a 20 per cent deposit.

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Sticking with the same loan longer than three years can cost borrowers thousands, with competition to win business resulting in new customers paying lower rates than existing ones.

This so-called loyalty tax has become such a hot topic, the Australian Competition and Consumer Commission has recommended mortgage holders review their options regularly and consider switching to secure better terms. Now is a great time to follow that advice and get in touch.

Rush to reset

Homeowner refinancing has hit an all-time record in the past six months, and it’s easy to see why, with interest rates at long-term lows. But it’s not just fixed rates borrowers should have their eye on. Homeowners with variable rates need to check they aren’t unwittingly paying a loyalty tax too.

Reserve Bank figures show owner-occupiers who took out new variable loans in October 2021 paid, on average, 2.63 per cent interest, while those with existing variable loans paid rates around 0.37 per cent higher rates at 3 per cent.¹ On a loan around $350,000, that’s potentially adding an extra $1,295 in interest each year.

As a customer there’s few things more galling than finding out someone who came to the party late has been given a bigger slice of cake than you. That’s why the most empowering thing you can do is to simply shop around, which is what I can do for you.

Annual review

Being financially savvy is about developing good habits, and one of the best for homeowners is to book an annual appointment to review your home loan arrangements.

The start of a new year is the perfect time to dive in. People usually have a little more headspace before the year really ramps up and finding savings can be a great cure for that summer spending hangover.

Speak to me to check how current variable rates compare, or perhaps it’s a good time to consider locking in a deal. Fixed rates have increased recently and speculation is mounting about a possible official interest rate rise in late 2022 or early in 2023.

More than interest only

Of course, refinancing isn’t always about interest rates alone, although they are a big part of the equation. It may be about building more flexibility into your loan with offset and redraw facilities, the ability to make additional repayments, or unlock equity for a renovation, a major purchase or holiday.

Some borrowers may even want to consider options such as splitting a home loan between both fixed and variable options.

It’s all about what your goals and priorities are right now, and we all know that can change unexpectedly year on year.

Broker insight

The home loan market has never been more competitive and we’re adding more lenders to our panel each year, with more loan products and features. It can be daunting, but it’s also where I can offer you an advantage in guiding you through what’s out there to meet your needs.

I can also help calculate how any potential savings stack up in the short and long term against any search and switch costs. It’s important to stay on top of rates and offerings in a fast-moving market. So, get in touch to arrange a quick check-up for your home loan.

¹ Lenders’ Interest Rates, Reserve Bank of Australia (published monthly online: rba.gov.au/statistics/interest-rates/#lenders-rates-table)

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