The real cost of buying your first home in 2026

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Most Australians know that buying their first home will be the most expensive purchase they have ever made. However, many aren't quite aware of how dear it will be. The listing price is just the start of the equation. There are plenty of other associated costs with completing the sale.

According to a recent Westpac media release, 35% of Gen Z plans to buy their first home within 5 years. But, with the average house price in Australia being over one million dollars, many will have their work cut out to find something they can afford.

For this reason, it is important to fully understand all the costs involved. This guide will attempt to break it down for you.

Why is it so expensive to buy a first home in Australia?

The cost of a home in Australia is very different now from what it used to be. Startling figures from Michael Yardney's Property Update revealed that in 1975, the average cost of a home in Sydney was around $28,000. This compares with $26,850 in Canberra, $19,800 in Melbourne, and $15,200 in Hobart.

The main reason why buying a home in Australia is now much more expensive is that every part of the process has increased in cost. This can be categorised as follows:

1. Property prices have risen across the country and especially in state capital cities.

2. Higher construction costs have flowed through to newer homes and renovated properties.

3. Interest rates also shape borrowing power and monthly repayments, which affect how far a budget can stretch.

4. Upfront expenses like stamp duty, inspections, conveyancing, and lender fees have all gone up.

5. Ongoing costs such as insurance, utilities, and maintenance also contribute to the overall financial commitment.

All this means that the relative cost of entering the property market for the first time is much higher than it has ever been.

At the same time, buyers are also facing stricter lending assessments, which means they have to have bigger savings buffers and more stable finances. That is why many first home buyers now choose to speak with a mortgage broker in Sydney, Brisbane, Melbourne, or anywhere else in Australia to better understand their borrowing limits and try to secure the best deal possible.

Upfront costs you need to budget for before buying

Unfortunately, while a house might be listed at a certain price, you'll have to fork out a lot more in other upfront costs if you want to purchase your first home.

Here is an overview of some of the expenditures you might not have accounted for:

1. Your deposit and savings requirements

The deposit is often the largest upfront expense you'll incur. That is because most banks and lenders will require you to have a deposit of 20% of the purchase price. This means that if you want to buy a home listed at $1 million, you will need to have a deposit of $200,000 in order to be approved for a mortgage.

That said, it is possible to purchase a property with a minimum of a 5% to 10% deposit. However, you will need to pay for lender's mortgage insurance if you do. (More about that later). This does differ from home insurance, which are commonly confused.

2. Stamp duty and government charges

Stamp duty remains one of the highest costs first-home-buyers might be hit with. This is a tax that state and territory governments impose on the transfer of residential property. How much you will have to pay depends on the value of your property and where you live. Typically, it must be paid within 30 days of settlement.

Most state and territory governments incentivise first home buyers by waiving stamp duty up to a certain value (which varies). However, if the value of your property exceeds that figure, you could end up being forced to pay tens of thousands of dollars.

3. Legal and conveyancing fees

When you purchase a home, it needs to be legally ratified and with this comes extra costs. Conveyancing fees typically cover things like contract reviews, settlement coordination, and title transfers.

These services usually cost a few thousand dollars. But they are essential if you want the purchase to be protected by law.

4. Building and pest inspection costs

For any property you want to purchase, conducting building and pest inspections should be a standard part of your due diligence.

These inspections help identify any structural issues, moisture damage, or pest activity before settlement. While the cost is relatively small in comparison to others, they are important to fund, given that they can expose any underlying risks in buying the home.

Hidden costs most first home buyers don't expect

Along with the above, there are some "hidden" costs that can often surprise first-time buyers. So, it is worth making yourself aware of them. They include:

1. Lenders mortgage insurance (LMI)

As previously mentioned, lender's mortgage insurance applies when your deposit is below 20%. This is a cost that protects the lender, and not the borrower. It can add a significant amount to your loan over a significant period of time.

As a first-time home buyer, understanding how LMI can impact your repayments is very important if you don't have a big enough deposit.

2. Loan application and bank fees

Loan establishment fees, valuation costs, and ongoing account fees often appear throughout the loan process. These expenses vary by lender and loan product. They do add up, so they should be factored into your upfront costs of buying a house.

3. Settlement and registration fees

Many first-time home buyers often overlook government registration fees, transfer costs, and settlement adjustments. These charges apply close to settlement and can affect your cash position if you do not plan for them in advance.

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