The Hidden Costs of Homeownership in Australia

Home ownership is the great Australian dream for many. However, whilst owning your own home can fill you with an immense amount of accomplishment and pride, it’s also important to remember that being ready to buy involves more than just putting together a 20% deposit.

From finding the right home insurance policies to budgeting for bills, body corp, and unexpected repairs, these costs can quickly add up and catch your off-guard. Here’s a closer look at some of the less obvious expenses associated with homeownership in australia.

Home Insurance Premiums

Home insurance premiums are the first of many out-of-pocket expenses that come with owning a home.  It’s important to mention that home insurance is not an option — it’s an absolute necessity for protecting your property and belongings. However there are hundreds of policies and providers to choose from, some much better than others. And if you have the wrong policy in place, you may end up being either overinsured or underinsured. Inadequate insurance policies come with their own unique financial risks.

To ensure you get the most bang for your buck, be sure to shop around. Make sure you compare policies and providers properly to guarantee the most out of your coverage. Look beyond the initial premium and consider the extent of coverage each policy offers. A cheaper policy might seem appealing, but if it doesn’t cover key risks like natural disasters or valuable possessions, you could end up facing hefty costs later on.

Also, keep in mind the policy exclusions and limits as well any deductibles if/when you file a claim. Although it may seem expensive at first, signing up for a comprehensive overage plan upfront can offer comfort and save you the headache of large bills down the line.

Body Corporate or Strata Fees

Living in an apartment complex with amenities like a luxury pool and gym can feel like a dream come true. But it’s important to remember that  these perks come with their own set of costs. Strata or body corporate fees are those ongoing costs associated with the management and upkeep of things like amenities, public spaces, buildings insurance and other administrative services essential to maintain your property.

These fees can vary depending on the property’s amenities and services provided. On one hand, they guarantee the proper maintenance of common areas and ensure the property’s value is preserved. However, at the same time they can also contribute significantly towards your monthly expenditure. Before committing to a purchase, it’s crucial to find out exactly how much you are expected to pay for body corporate fees — the last thing you want is to be hit with an unexpected bill that turns your budget upside down.

It’s also important to remember that strata or body corporate fees apply not only to apartment complexes with luxury amenities but also to townhouses and other shared complexes, even those without additional features. These fees are still necessary for managing common areas and covering property upkeep, so don’t overlook them when budgeting for your new home.

Additionally, the fees can also change at a moment's notice, especially if major repairs or upgrades are required. To avoid any unexpected surprises, it’s important to review the buildings’ financial statements to get a sense of future fee increases/special levies etc.

Council Rates

Council rates are another inescapable cost of owning a home in Australia. These rates are set by your local council to provide vital community services and infrastructure (e.g. waste collection, street maintenance, public parks). Admittedly, not the most glamorous of expenses — but one that is an absolute necessity to ensuring your community operates effectively.

Council rates can differ greatly depending on where you live, so always check how much they amount to and whether you will have to pay them before buying a property. Generally, the amount you pay will be based on your property valuation multiplied by the rate in the dollar set by the council. In other words, the greater the value of your property, the more you will be charged in council rates.

Note: While council rates might not increase often, they can go up from time to time, so it's a good idea to budget for possible future increases. Keeping an eye on this expense can help keep surprises at bay and allow you to be ready for the total picture of homeownership.

Unexpected Maintenance Costs

Maintenance and repairs — this is one of the biggest changes when you make a transition from renting to home ownership. Unlike renting, where you can rely on a landlord or property manager to handle issues, as a homeowner, all problems fall under your hands. That could be a roof leak or plumbing problems — unanticipated maintenance expenses are yours to pay.

As you might guess, these costs will quickly add up and start firing some pretty heavy blows at your piggy bank. So, be sure to set some funds aside for maintenance costs. As a general rule of thumb, budget 1–2% of your home's value each year for regular maintenance and the unexpected. There is also some evidence to suggest that this figure is increasing due to ongoing impacts of inflation. As home maintenance service providers like electricians and plumbers are forced to up their own prices, we’ve naturally seen more Aussie home buyers opting for lower maintenance properties, with more buyers articulating that maintenance costs are becoming a more prominent factor in their buying process.

It’s also important to keep in mind that the costs of unexpected maintenance greatly outweigh the costs of routine repairs. Regularly maintaining your home can help prevent smaller issues from becoming major problems. For instance, a small leak may be easily fixable today and save you from the large expenditure of a water damage repair in future. And the best bit is that all of these proactive measures will not only preserve your investment, but also keep your newly purchased home safe and comfortable year-round.

Hidden Utility Costs

Whether you rent or own, utility expenses are unavoidable. However, home ownership comes with a few other costs which a renter would not need to deal with. For instance, in addition to your normal water usage costs, you usually are also required to pay a set charge that offsets the expense of maintaining and repairing municipal-wide water/sewerage facilities. In Victoria, homeowners can expect to pay up to $600 a year for this.

There are also costs for homeowners, such as a $300 NBN connection fee on new properties. It’s a one-time-fee, but still, something that renters don’t have to worry about. Additionally, utility bills — such as electricity and gas — can sneak up on you. These may be higher than anticipated in larger homes or homes with older systems that are not energy-efficient. Monitoring your energy usage and purchasing high-efficiency appliances, as well taking other energy-efficient measures will help with these continual costs.

Gardening and Landscaping 

Finally, maintaining the exterior of your home requires  upkeep on a regular basis.

While it might not seem like a significant expense at first, ongoing costs for lawn care, tree maintenance, and garden upkeep can add up over time.

To save in the long run, we recommend investing in low-maintenance plants and landscaping solutions to reduce ongoing costs. Succulents and cacti are great choices, as they require minimal tending to and look good all year round, without you having to lift a finger or spend a dime. Additionally, don’t forget to factor in the cost of tools and equipment (lawnmowers, whipper snippers etc) for DIY garden maintenance or budget for professional gardening services if you prefer to leave it to the experts.

Owning a home is definitely a major win, but it’s also a bit of a financial adventure. With all the hidden costs — from insurance premiums and strata fees to unexpected repairs and extra utility bills — it’s easy for expenses to sneak up on you. Staying on top of these costs and budgeting wisely can help you enjoy your home without any unwelcome surprises.

So, embrace the journey, keep your finances in check, and enjoy every moment of your home sweet home!

About Guest Expert Apart from our regular team of experts, we frequently publish commentary from guest contributors who are authorities in their field.