Buying Property in Australia: A Complete Guide

Whether you are taking your first steps onto the property ladder or considering upgrading to your next home, buying real estate is an exciting milestone. But finding property in the right location and staying on budget can be challenging, especially in a competitive market.

While it may seem overwhelming, the good news is that research and guidance can streamline the process. To help you on your way, we’ve compiled the complete guide to buying property in Australia with manageable steps, practical advice and tools.

While global trends suggest a shift towards long-term renting, Australians remain steadfast in the belief that home ownership is a good investment.

Buying property is an important aspiration, representing independence, financial security and a sense of belonging.

It all starts with saving a deposit, getting a loan pre-approval, finding a property, making an offer and completing settlement. If it is your first home, there are also several government incentives to help you get there quicker.

Sounds simple, right?

This complete guide to buying a property will take you through each step, including costs, risks and what to keep an eye out for along the way.

What is the process of buying property?

Being across the entire property buying journey will give you the ability to plan and move forward with confidence. Let’s take a look at the step ahead leading to home ownership. 

1. Understand your budget

Before you start house hunting, work out what you can realistically afford. Also consider your lifestyle, future goals and borrowing capacity.

2. Get preapproval

Speak with a mortgage broker or lender. Preapproval strengthens your position to make an offer when you find the right property.

3. Start your property search

Online portals have made it easier than ever to browse listings, view photos and compare floor plans. Your local LJ Hooker agent may be able to alert you to listings not yet officially on the market, so add your details to their database.

4. Inspect and evaluate properties

Access the location and consider future growth potential to ensure the home meets both your needs and budget.

5. Make a bid or offer

There are three main ways of buying property through auction, private treaty or an Expressions of Interest campaign. Each has different requirements and conditions.

6. Legal checks

After contracts are exchanged, there may be a cooling-off period before settlement. This allows for due diligence, such as pest and building inspections. This is not offered in every state or territory, so check with your agent. 

What to look for when buying a property

Finding a home that ticks every box can be challenging. Compromise is necessary in nearly every property purchase, so it is important to highlight must-have features and those you can live without.

Start by thoroughly researching the areas you’re considering. Are there good schools nearby? Is the neighbourhood safe? What amenities are close at hand?

Buying into your ideal neighbourhood may mean an older-style kitchen or even fewer bedrooms but perhaps there is potential to change this down the track. For instance, lack of natural light could be addressed with sheer curtains, bigger windows or skylights. Quirky layouts can be altered to be more free-flowing - even if this is down the track.

There are some compromises you shouldn’t be prepared to make. A serious building defect is a no-no for the average buyer, unless you work in construction or are ready for a knock-down-rebuild project (if it is permitted). If the location makes your commute a nightmare, then it may be best to buy elsewhere.

So how do you know if you have found ‘the one’? Before you let your emotions take over, we’ve identified 6 signs that confirm you are about to make the right move.  You can read here.

Remember, a love affair with a home that stretches your budget too thin is also likely to be doomed. Once you know what you find attractive in a property, try widening your search area and find something similar but at a more affordable price.

What to consider before buying a house

Knowing when to leap into home ownership is not always clear. It may coincide with a major life change, such as getting married or starting a family. Or perhaps your current home is feeling a little cramped, and it’s time for an upgrade to something more spacious.

A home loan typically lasts up to 30 years, so if you are feeling ready for a long-term commitment, that is a positive sign. Other indicators include good savings, disciplined spending habits and a positive credit rating. We’ve broken it down into two categories:

1. Financial considerations: 

• Borrowing capacity – If a bank or lender can give you pre-approval for a home loan, then you know you are ready to buy a property.

• Ongoing repayments – It is not just the mortgage you’ll be paying each month, but also groceries, Council rates, insurance and utilities. Be sure to factor this into your budget.

• Job stability – Typically, you need to be in your current job for three to six months to qualify for a home loan. It may be shorter if you are in a full-time role without a probationary period or have stayed within the same industry.

• Emergency buffer – You need to be prepared for an unexpected repair, like a burst hot water system. Putting away funds also provides a financial safety net in case of job loss or illness.

   

2. Lifestyle considerations:

• Long-term plans – If you are ready to put down some roots, then that is a sign you are ready for home ownership. To qualify for the first-home buyer grants in some states, you will need to reside at the property for at least 12 months.

• Commute – The property is located within easy access to public transport.

• Lifestyle needs – The property meets your needs in terms of space and storage or has potential for expansion in the future.

• Property type suitability – The type of dwelling meets your current needs, in terms of bedrooms and outdoor access.

Taking time to consider these factors that can make you feel confident to take the next step forward to home ownership. You can find more information here.

Costs of buying property: Financial breakdown

Every dollar can count when buying a property, so make sure you understand the full range of costs and avoid any nasty financial surprises. Let’s break it down:

• Deposit - Many lenders prefer a 20 per cent deposit. First home buyers can secure a property on much less when utilising the Australian Government’s 5 per cent Deposit Scheme. It is important to discuss the benefits and risks with your accountant or financial adviser.
• Stamp duty - This government tax is charged on the transfer of property or land ownership. The amount varies depending on its value, location and whether you qualify for any concessions, such as first home buyer incentives.
• Legal and conveyancing fees - A solicitor or a conveyancer will manage the legal aspect of the purchase. This includes reviewing contracts, conducting searches and overseeing settlement.
• Building and pest inspections - This is essential to identify any potential structural issues, pest damage or maintenance concerns which may be costly to repair in the future.
• Loan fees - Your home loan may include an application fee, valuation fee, settlement costs and ongoing account-keeping charges. Compare lenders and understand any extra charges beyond repayments and interest rates.

Once you’ve set up a budget, it is important to set extra aside to cover surprise expenses. You can find more details of what to include in your budget here.

Pros and cons of buying property

Buying a home can be a financially and personally rewarding long-term investment. But it is important to know that while there are significant advantages, there can also be some potential drawbacks. Let’s look at the pros and cons of property ownership:

Advantages

• Long term asset growth - Property has historically delivered capital growth making it a popular way to build wealth when held over time.
• Stability and ownership - When you own a property, you don’t have to worry about your lease being terminated or having to find a new home. This provides greater certainty over living conditions.
• Ability to customise - You have the freedom to renovate, decorate or make improvements to your home to suit your lifestyle. This is another potential way to add to its value.

Negatives

• High upfront costs - It requires a significant financial outlay to buy a home. You’ll need to save a deposit as well as budgeting for stamp duty, legal fees and other purchasing costs.
• Long-term debt commitment - Paying off a mortgage can take decades, so you have to be ready for an ongoing financial responsibility.
• Market risk - property values can rise and fall depending on economic conditions, interest rates and demand. There is no guarantee that the property’s value will increase in the short term.

Risks and how to avoid them

When you are preparing to buy a property it can feel like everyone has advice to offer from friends, family and work colleagues. This may be a little overwhelming, but you can navigate the process with confidence when you know what common pitfalls to avoid.

These include:

• Overpaying for a property - This often happens when it is a competitive market and emotions can sway decisions.

• Not getting the best deal on interest rates - The variable rate you sign up for may fluctuate with inflation. Always budget for some increases so you aren’t caught unaware and stretched to your limit. It is always good to maintain a financial buffer for unexpected costs.

• Hidden property issues - Not every problem in a property is visible to the naked eye. Protect yourself by getting a professional pest and building report. This will alert you to any structural issues, electrical wiring, plumbing, any leaks, water or termite damage.

• Borrowing beyond your means - You don’t need to borrow the maximum amount offered by your lender unless you can service the loan. Make sure you can still manage everyday bills and a few unexpected ones, while enjoying your life, too.

• Choosing a poor location - The old saying of ‘location, location, location’ is popular in real estate for a reason. If a property is too far away from transport, schools and shopping, future resale could be difficult, and it is also likely to appreciate at a slower rate.

Buying a home is likely to be the most expensive purchase of your life, so don’t feel pressured into signing anything without proper legal advice.

Take the attitude that if you miss out on one property, it is because there is a better listing coming your way. Take a look at our guide on common mistakes first homebuyers make and how to avoid them here.

First home buyers guide

Buying real estate for the first time differs throughout Australia, with a range of federal and state-based incentives to help young people own property sooner.

It is now possible to secure a home with a deposit as low as 5 per cent without paying Lenders Mortgage Insurance. In addition, there are stamp duty concessions, first home buyer grants, and the First Home Super Saver Scheme (FHSSS). You can find what is available in your state or territory here.

Buying a new vs. an existing property

The decision to buy an existing property or a new home ultimately comes down to budget and location.

There are two ways you can buy house-and-land packages. The first option, buyers get to choose from a set of specific designs. The purchase is secured with a 10 per cent deposit, with the balance payable on completion.

House-and-land packages are a little different. The purchaser secures the block and then decides on the type of home to be built. This allows for some personalisation of the finished home.

If a house and land package sounds appealing, check out our guide to all of the benefits here.

Property buying checklist

With so many important decisions and considerations to navigate when buying a home, it is easy to feel a little swamped.

Staying organised can make the process smoother, less stressful and far more manageable. It starts by setting a clear budget and obtaining pre-approval, so you have a clear vision of what you can afford.

Keep track of inspections, agents’ contacts and properties you have viewed in a folder or by creating a spreadsheet. Be sure to keep all financial details in one place, including identification and contact details for a solicitor or conveyancer, so you are ready to act quickly when the right property comes to market.

Speak with your local property expert

There are many stages to buying a home, and the good news is you don’t have to do it alone.

Your local LJ Hooker agent will be able to alert you to any suitable new listings coming up for sale. This can give you a head start before other buyers, so be sure to add your contact details to their database. In addition to providing market insights, they can also assist with understanding pricing and negotiation processes.

If you are looking to sell an existing home before buying, your LJ Hooker agent is an expert in property appraisals. They will be able to tell you the expected value of your property and how it compares to others in your suburb.

Our iconic real estate network has been in business for almost 100 years, with offices across Australia. LJ Hooker agents also have access to the very best of technology and marketing, which has made it one of the country’s most trusted real estate brands.