3.2.5 Property Purchase Costs

Of all the costs associated with property, stamp duty - a tax based on the value of the purchase price of the property that is levied by state and territory governments - is the most significant.

The cost of stamp duty varies widely across the country. Victorian property owners, for example, pay $11,810 in duty for a $300,000 property, 40 per cent more than property owners in NSW.

The following table outlines the stamp duty payable on a $300,000 property and a $500,000 property in each State:

Land Transfer Registration Fee
This fee is for recording a change of owner at the Land Titles Office and is payable each time a property is sold. The cost to register varies in each State/Territory.

Title Search Fee
Whenever a property changes ownership or is refinanced, a search of the Certificate of Title is obtained from the Titles Office. This is to check if there are any encumbrances on the title and to check that the details are correct. The cost of the search varies in each State/Territory and is usually paid on your behalf by your solicitor/conveyancer or your lender.

Solicitor’s or Conveyancer’s Fees
These are the fees for the documentation necessary for a property purchase. Fees for solicitors and conveyancers vary from state to state, and depend on the amount of time and work that is required.

Land tax
Unlike stamp duty, which is a one-off charge, land tax is a state or ACT Government tax that must be paid every year, on all properties that are not your principal place of residence. The amount of the bill depends on the underlying land value of the property and in which State it is located.

Building and pest inspections
When making an offer on a property, consider adding a clause to the contract making the sale subject to satisfactory building and pest reports. This allows you to enlist the services of building and pest inspectors to assess the condition of the property and inform you of any structural defects or termite damage. Depending on what the inspectors find, you may be able to use their reports to negotiate contract conditions as well as the price.

Although these reports generally cost a few hundred dollars, they can potentially save you thousands on unforeseen repairs.

Mortgage stamp duty
Mortgage documents taken in Australia attract stamp duty to make them legal documents. This stamp duty is usually paid to the applicable state authority on your behalf by your lender. In some states this duty does not apply if you are refinancing. The amount payable is determined by the size of the loan and varies in each state.

Loan establishment fees
Usually a once off fee paid to the lender upon getting unconditional approval for the loan to cover the cost of setting up the home loan.

Legal Fees and Disbursements: These fees are charged by the borrower's solicitor to the borrower to finalise the mortgage contract. They are to check the vendor has the right to sell the property and if so, change the ownership of the property to the borrower's name

Property valuation fees
Lending institutions will have their accredited property valuers conduct a valuation of the property they are lending the money for. This cost is usually passed onto the borrower.

Lenders mortgage insurance (if borrowing more than 80% of property’s value)
Lenders Mortgage Insurance (LMI) is a payment made by the borrower that protects the lender if a borrower defaults and a loss is evident after the mortgaged property is sold. Lenders Mortgage Insurance is usually required to be paid when the loan amount is greater than 80% of the property’s value. LMI is payable once only at the commencement of the loan.

Other costs
And don’t forget the costs you incur once you officially own the property - building and contents insurance, property management fees, ongoing maintenance and repairs and council and water rates.