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Making informed housing choices

Have you considered the holistic and long-term costs associated with buying a home?

If you’re interested in making a financially and environmentally considered choice for your first home or even a new property, it’s helpful to understand the total ongoing costs of your purchase.

The deposit amount, purchase price and mortgage repayments are the most obvious and substantial up-front costs of home ownership. But there are several other costs and ongoing expenses that are often overlooked, or even forgotten, during the home buying process. It pays to know and weigh up the long-term financial, environmental1 and social costs of living in an inner-city location (established suburbs with existing infrastructure) versus a suburb on the urban fringe (greenfield housing estates or new homes) or somewhere in between.

Research we commissioned shows that while new homes in the outer suburbs are often more affordable than inner-city locations when looking at the initial purchase price, the holistic long-term costs may be considerably higher. While the research focused on Melbourne, the insights are relevant to other major Australian capital cities.

Our research partner

SGS Economics and Planning (SGS) is an independent B-Corp certified research and urban public policy consultancy who are serious about shaping more sustainable places, communities and economies. We engaged their team of specialists to research the financial, environmental and social costs of housing, to help us understand the holistic costs of buying and owning a home, beyond the upfront purchase price. The modelling reflects costs and interest rates as at March 2023.

Overall costs to consider

There are many factors to consider when buying a home. Upfront financial costs such as mortgage payments may be top-of-mind in the home buying journey, but have you thought about the ongoing running and maintenance costs for a larger home compared to a smaller one? Or the travel costs you’ll incur each week depending on where you buy? The overall costs summary table below lists some of the often-overlooked costs of home ownership, including social and environmental costs.

From a financial point of view, the research found that 2- and 3-bedroom houses in growth areas (outer suburbs) can cost up to 54% and 63% more than inner city apartments, respectively. This includes the costs to the homebuyer – like running costs (energy, water) and transport costs (petrol or public transport fares) and also costs borne by government like infrastructure and services.

These additional costs for a 3-bedroom house in a growth area can be an extra 146% above the cost of mortgage repayments.

Every home buyer has different needs and priorities when it comes to housing. Our research highlights how important it is to consider the combination of financial, environmental and social costs of different types of homes, to make more informed choices that align to both budget and lifestyle preferences.

What are the overall costs to consider?

Table: Overall costs summary

  Inner Middle Growth
Factors 2 bdr apartment 2 bdr apartment 2 bdr house 3 bdr house
Financial costs
Mortgage repayments $34,297 $32,867 $30,279 $35,012
Running costs $276 $276 $405 $572
Travel costs $8,310 $8,310 $23,655 $23,655
Economic costs
Loss of land - - $27 $37
Dwelling servicing costs $8,394 $8,394 $22,326 $22,326
Productivity losses Not monetised
Social costs
Time spent travelling $1,313 $2,065 $3,474 $3,474
Social isolation Not monetised
Environmental costs
Externalities from transport $398 $398 $1,217 $1,217
CO2 emissions from build Not monetised
Total annual cost $52,989 $52,290 $81,382 $86,292
Total annual cost (incremental to inner)  ($698) ($28,393) ($33,303)
What's most important to you when purchasing a home?


As living and housing costs in Australia have increased, so too has the challenge of saving a deposit and finding an affordable home to purchase.


You may be eligible to participate in a support scheme that reduces your need for a large deposit, and you may have more borrowing power than you realise.

The introduction of Government support schemes such as the First Home Guarantee and shared equity partnerships, like the one we have with National Affordable Housing’s BuyAssist program, have helped thousands of Australians buy their homes sooner with a smaller deposit. While these schemes go a long way to help, the decision on what type of property to buy and its location is often driven by the initial purchase price.

For most home buyers, immediate affordability is a priority, driven by the household’s annual income. The research found home buyers entering the market are often priced out of inner or middle ring suburbs for standalone houses. Buyers are more likely to find affordable apartments in middle ring suburbs, or houses in the outer-ring. Depending on your housing preference, this may mean accepting higher financial and environmental costs over the long term.

Which is more important: upfront purchase price or long-term costs?

While a more compact apartment or townhouse in the middle ring suburbs might have a higher upfront purchase price, they typically have lower ongoing financial, social and environmental costs, making them more affordable in the longer term. What type of property might be best for you? Read the Housing Preferences section to learn more.

Housing Preferences

The type of home you live in, and its location, will contribute to how much you'll spend on services – typically, the bigger your house, the higher the costs for services like electricity. In addition, the further you are located from the city, the greater the environmental cost particularly if you are regularly commuting to the city. Let’s take a look at the additional financial and environmental costs to consider with different housing preferences.

Energy costs

If you’re looking at purchasing a larger house, be mindful that you may be paying up to twice as much for your energy use. Larger and older homes typically cost more to run. As a general rule-of-thumb, a Clean Energy and Community Housing report says heating and cooling account for 40 per cent of energy bills, followed by appliances and equipment (33 per cent), water heating (21 per cent) and lighting (6 per cent). There is also a larger environmental cost to consider if the house you purchase has not been designed with energy efficiency in mind.

Table: Consumption and cooling / heating by room size (adjusted to 2023 values)

Room SizeCapacityAvg. Annual Energy
Consumption (kWh)
Avg. Annual Cost (Mel)
Small (up to 20m2) 2.9 - 4.2kW 1,181 $276
Medium (20m2 - 40m2) 3.4 - 6.6KW 1,732 $405
Large (40m2 - 60m2) 5.2 - 8.2kW 2,448 $572

Assumption: Reverse Cycle Air Conditioner; consumes a standard annual electricity usage of 4,200kWh; air conditioner operates three hours a day over a 90-day period; Escalated based on electricity prices (ABS CPI)

Table: Annual cost to run an air-conditioner

  2 bdr apartment 2 bdr apartment 2 bdr house 3 bdr house
Annual cost $276 $276 $405 $572

Source: SGS Economics and Planning 2023

Travel and transport costs

When you live close to the city you are more likely to use public transport to travel. The further you live from the city, the higher the likelihood you will use your car to travel for both work and leisure, due to reduced access to or limited connections in the public transport network. This not only increases financial costs for petrol, car maintenance and parking but adds to the environmental cost. The researchers also noted the personal social cost for the time it takes to travel to and from destinations.

A household in growth areas can spend twice as much on transport costs

The research shows that drivers living in inner or middle-ring suburbs incur an average annual cost of $8,310 for their car and travel expenses. Those living and driving from outer suburbs could spend up to an average of $23,655 on car ownership and operating costs. That’s a difference of more than $15,000 annually.

Summary of annual ongoing costs

  2 bdr apartment 2 bdr apartment 2 bdr house 3 bdr house
Financial costs
Mortgage repayments $34,297 $32,847 $30,279 $35,012
Running costs $276 $276 $405 $572
Travel costs $8,310 $8,310 $23,655 $23,655
Total annual financial cost
  $42,884 $41,433 $54,339 $59,239
Total annual financial cost (incremental to linear)
   ($1,451) $11,456 $16,355

Source: SGS Economics and Planning 2023

As you can see from our Summary of annual ongoing costs table, the difference in household running costs and travel costs are significant between apartments and houses as you move from inner and middle-ring suburbs to growth areas. Overall, you are likely to pay $11,000 more annually for a 2-bedroom house in an outer-ring suburb compared to a 2-bedroom apartment in the inner or middle suburbs. This rises to over $16,000 for a 3-bedroom house in an outer suburb.

Is your preference an apartment, townhouse, or freestanding house?

An apartment or townhouse in an inner or middle-ring suburb is more cost effective. However, you can reduce and offset the costs of living in a house in an outer-ring suburb.

If you choose to live in a house in an outer-ring suburb, the Climate Council says there are plenty of ways to reduce your running costs, and in doing so lessen your impacts to the environment including:

  • Installing solar panels alongside home battery storage or solar hot water system, and a smart meter to track your energy use.
  • Using energy efficient light bulbs.
  • Installing energy efficient appliances and turning them off at the wall when you’re not using them.
  • Installing a rainwater tank to save on water use and costs.
  • Starting a veggie garden to reduce your grocery bill and compost to reduce waste.
  • Choosing to take public transport, walking to the bus or train station rather than driving, or even car-pooling with work colleagues to reduce your environmental footprint.
  • Requesting work from home flexibility to reduce your weekly travel needs and expenses.


Is the environmental cost a consideration in your home purchase deliberations?

As the population grows and we move and build further into the outer suburbs of our cities, it’s important to acknowledge we also move into the natural habitats of wildlife, interrupting their natural passageways and exposing them to man-made stress. Did you know 50% of threatened species are found within the urban fringes in Australia (SGS Economics & Planning)? Creeping urbanisation increases the risk to already threatened plants and animals. In Victoria, threatened species coincide with the Urban Growth Boundary of greenfield areas, particularly in the Western suburbs.

Not to mention that many people consider nature good for mental and physical health, while green spaces help to cool our cities.

Are environmental costs an important consideration?

If the environment is front of mind and you’re moving into an outer-ring suburb you may like to incorporate additional natural landscaping to support urban biodiversity. Native grasses and gardens help to reduce water use, native plants encourage birds and bees for regeneration, and wildlife shelter boxes and rocks provide a safe space for wildlife visitors. If you live inner city or in the middle ring or simply don’t have a backyard, you might consider adding some native plants to your balcony or patio, or even joining a bush regeneration group in your local area.

If you are building your own home, some energy efficient housing design practices to consider and discuss with your builder include:

  • Ensuring your home is well insulated - it is one of the most important elements for an energy efficient house.
  • Installing double glazed windows to support better heating and cooling.
  • Incorporating recycled furnishings and fittings like reclaimed wood.
  • Designing with natural light in mind.


As highlighted in the Affordability section, borrowing capacity and purchase price often determine where you will buy your home (inner, middle or outer-ring suburbs). However, depending on your housing preference, you may be able to afford a property in a different suburb to what you originally planned. When it comes to location, the further you are from the city, the higher the travel costs you'll incur. Let’s take a look at the additional social costs to consider.

Time and opportunity costs

Whether you are travelling in your own car or using public transport, travelling between destinations has an additional hidden cost – your time! Living in an outer-ring suburb means you’ll likely have an opportunity cost where you’ll spend more time commuting rather than enjoying leisure time. Australian Transport Assessment and Planning (ATAP) has estimated the value of leisure time to be equivalent to 40% of an hourly wage, so this adds up!

Households in outer regions face greater commute times

There is a considerable annual travel time cost associated with living in outer-ring suburbs as these households spend longer times commuting to work.

Table: Annual cost of commuting to work

Inner (8.2km)Middle (12.9km)Outer (21.7km)
  2 bdr apartment 2 bdr apartment 2 bdr house 3 bdr house
Annual Travel Time Cost $1,313 $2,065 $3,474 $3,474

Assumption: Calculated based on an average speed of 30 km/h across different transport modes with 2.5 working days in the office; Active transport is excluded.

Source: SGS Economics and Planning 2023

Community connection

SGS Economics found where we choose to live could also have potential  social costs. Good access to established services such as healthcare, education, and recreational community connection opportunities can help us feel socially connected and is important to consider in deciding where to live.

Where would you prefer to live – in an inner, middle or outer ring suburb?

If you are a highly social person or family, you may like to research the services and infrastructure available in the areas you are looking to purchase. Will the services available support your preferred lifestyle and social connectivity?

Need a recap?

There are many factors to think about when buying a home. To help make the right housing choice for you and your family, it’s important to consider not only the financial costs but the social and environmental costs associated with different sizes and locations of properties. Need a re-cap of costs? Review the Overall costs summary table again.

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Important Information

1 What we mean by ‘environmental costs’: When we say environmental costs, we are referring to the changes or impacts made to the natural environment when purchasing and owning a home. This could be by removal of natural vegetation during the process of building a new house, or the amount of greenhouse gas emissions created from your energy use (including from your personal vehicle, public transport to and from your home, or household energy use).