Property Holding Costs in Australia: Complete Breakdown

Property holding costs are the ongoing expenses you incur from owning a property, regardless of whether it is occupied or generating income. For investors, these costs directly affect cash flow and net yield. For owner-occupiers, they are an essential part of your household budget that many buyers underestimate before purchasing. Understanding and calculating your total holding costs is critical to making sound property decisions.

What Are Property Holding Costs?

Holding costs are all the recurring expenses associated with owning a property. They include government charges, insurance, maintenance, and — for investment properties — management fees and loan interest. These costs apply whether the property is tenanted, vacant, or owner-occupied. The key distinction is between holding costs and transaction costs: transaction costs (stamp duty, conveyancing, inspections) are one-off expenses at purchase or sale, while holding costs are ongoing for as long as you own the property.

Comprehensive List of Holding Costs

1. Council Rates

Council rates are levied by your local government authority to fund services such as waste collection, road maintenance, parks, libraries, and community facilities. Rates are calculated based on the property's land value (or capital improved value, depending on the state) and the council's rate in the dollar.

• Typical range: $1,200 - $3,500 per year for residential properties
• Payment: Usually quarterly, with some councils offering annual payment discounts
• Variation: Rates vary enormously between councils — inner-city properties often have higher rates due to higher land values, even though the services may be similar

2. Water and Sewerage Rates

Water rates typically include a fixed service charge (for water supply and sewerage connection) plus a usage-based charge per kilolitre consumed. For investment properties, the landlord generally pays the fixed charges while the tenant pays for usage.

• Fixed charges: $600 - $1,200 per year
• Usage charges: Variable, typically $200 - $800 per year depending on consumption
• Total typical range: $800 - $2,000 per year

3. Building and Landlord Insurance

Building insurance covers the structure of the property against damage from events like fire, storm, flood, and other defined perils. Landlord insurance (for investment properties) extends coverage to include tenant-related risks such as loss of rent, malicious damage, and legal liability.

• Building insurance (house): $1,000 - $2,500 per year
• Landlord insurance: $1,200 - $3,000 per year (includes building insurance)
• High-risk areas: Properties in flood, cyclone, or bushfire zones can have premiums of $5,000 - $15,000+ per year
• Strata properties: Building insurance is included in strata levies; you only need contents and landlord cover

4. Strata Levies (Units, Apartments, Townhouses)

If your property is part of a strata scheme, you will pay quarterly levies to the owners corporation (body corporate). These cover building insurance, common area maintenance, building management, and contributions to the capital works fund (sinking fund) for future major repairs.

• Basic apartment: $600 - $1,500 per quarter
• Apartment with pool, gym, concierge: $1,500 - $4,000+ per quarter
• Older buildings: May have higher levies due to increased maintenance needs
• Special levies: One-off charges for major works (roof replacement, facade repair) can cost $5,000 - $50,000+ per owner

5. Land Tax

Land tax is a state government charge on the value of land you own. It applies primarily to investment properties — your principal place of residence is generally exempt. Land tax is calculated on the total taxable value of all land you own in a state (excluding your home), with thresholds and rates varying by state.

• NSW: Threshold $1,075,000 (2026), rate starts at 1.6% + $100
• VIC: Threshold $300,000 (2026), rate starts at 0.2% with surcharges applying at higher values
• QLD: Threshold $600,000 (2026), rate starts at 1.0%
• Other states: Similar threshold-and-rate structures with varying amounts

Land tax can be a significant holding cost for investors, especially in Victoria where thresholds are lower. For detailed state-by-state information, see our land tax guide.

6. Maintenance and Repairs

All properties require ongoing maintenance. For houses, you are responsible for everything from plumbing and electrical work to garden maintenance and structural upkeep. A common rule of thumb is to budget 1-2% of the property value per year for maintenance.

• New property (under 10 years): Typically 0.5-1% of property value per year
• Established property (10-30 years): Typically 1-1.5% per year
• Older property (30+ years): Typically 1.5-2.5% per year, with potential for larger one-off costs (roof replacement, restumping, rewiring)

On a $600,000 property, this means budgeting $3,000 - $12,000 per year for maintenance. This is an average over time — some years you may spend very little, while in other years a major repair could cost $10,000 or more.

7. Property Management Fees (Investment Properties)

If you use a property manager to handle your rental property (most investors do), they will charge a percentage of the rental income plus additional fees for specific services:

• Management fee: 5-10% of gross rent (varies by location — lower in metro areas, higher in regional)
• Letting fee: 1-2 weeks rent each time a new tenant is placed
• Lease renewal fee: $100 - $300 per renewal
• Tribunal/court attendance: $200 - $500+ per appearance

8. Loan Interest

For most property owners, loan interest is the single largest holding cost. Interest costs depend on your loan amount, interest rate, and loan structure (interest-only vs. principal and interest).

• Example: A $500,000 loan at 6.0% costs approximately $30,000 per year in interest alone
• Interest-only vs. P&I: Interest-only loans have lower repayments but do not reduce the principal. P&I loans cost more per month but build equity over time
• Fixed vs. variable: Fixed rates provide certainty; variable rates fluctuate with market conditions

Typical Annual Holding Costs by Property Type

The following estimates are based on a $600,000 property with a $480,000 loan (80% LVR) at 6.0% interest:

• House (investment): Council rates ($2,000) + water ($1,000) + insurance ($1,800) + maintenance ($6,000) + management fees ($2,500) + land tax ($1,500) + loan interest ($28,800) = ~$43,600 per year
• Apartment (investment): Council rates ($1,500) + water ($800) + landlord insurance ($800) + strata levies ($4,000) + management fees ($2,500) + land tax ($1,000) + loan interest ($28,800) = ~$39,400 per year
• House (owner-occupied): Council rates ($2,000) + water ($1,200) + insurance ($1,800) + maintenance ($6,000) + loan repayments P&I ($37,200) = ~$48,200 per year (no land tax or management fees)

Tax Deductibility of Holding Costs

For investment properties, most holding costs are tax-deductible against your rental income (and potentially against other income through negative gearing). Deductible holding costs typically include:

• Council rates
• Water rates
• Insurance premiums
• Strata levies
• Land tax
• Property management fees
• Loan interest
• Repairs and maintenance (immediate deduction for repairs; depreciation for improvements)

Owner-occupiers cannot claim deductions for holding costs on their principal residence. Always consult a qualified tax professional for advice specific to your situation.

Strategies to Reduce Holding Costs

1. Shop around for insurance: Compare quotes annually. Premiums can vary by 30-50% between providers for the same property.
2. Negotiate management fees: If you have multiple properties or a long-standing relationship with your property manager, negotiate a lower management percentage.
3. Review your loan regularly: Refinancing to a lower rate can save thousands per year. Even a 0.25% reduction on a $500,000 loan saves $1,250 annually.
4. Preventative maintenance: Regular maintenance prevents small issues from becoming expensive repairs. An annual plumbing and electrical check is much cheaper than emergency repairs.
5. Minimise vacancy: Keep your property well-maintained and competitively priced to reduce vacancy periods. Each week of vacancy costs you one week's rent in lost income.
6. Review strata expenditure: If you own a strata property, attend AGMs and review financial statements. Challenge unnecessary spending that inflates levies.

Related Resources

• Property Investing Guide — Complete guide to investing in Australian property
• Land Tax Guide — State-by-state land tax thresholds and rates
• Property Insurance Guide — Types of insurance and how to choose cover

Note: The figures in this article are indicative estimates based on typical Australian property costs. Actual costs vary by location, property type, and individual circumstances. Tax deductibility rules are general in nature — consult a qualified tax professional for advice specific to your situation.