Brisbane-based Great Southern Bank (formerly Credit Union Australia) claims there’s sufficient evidence to suggest sizable cost-of-living disparities for Melbourne homebuyers depending on where they live.
The customer-owned bank cites a recent research report by urban and public policy advisory, SGS Economics and Planning (SGS), which suggests that homebuyers in Melbourne’s outer growth suburbs face significantly higher ongoing living costs than the cohort living in inner city apartments.
According to this research, annual travel drives cost-of-living disparities, with those in Melbourne’s outer growth suburbs (aka greenfield dwellings) paying $23,655 – almost three times as much as those in inner and middle suburbs (see table below).
The same research also suggests ongoing costs of a two or three-bedroom house in a growth area on Melbourne’s urban fringe can respectively be 27% and 38% higher than a 2-bedroom inner city apartment.
Andrew McDougall, principal of SGS attributes larger costs associated with housing residents in new suburbs on the urban fringes to increased infrastructure costs and the potential environmental impact of transport and land consumption.
“These costs quickly add up for both the home buyers and the broader community,” said McDougall.
Up to $80,000 more over five years
Once ongoing living expenses, including higher energy bills, fuel and public transport are added to mortgage payments, the research concludes, owners of a two-bedroom house in Melbourne’s outer suburbs could be spending up to $11,500 more annually than those who purchase a two-bedroom apartment in an inner-ring suburb.
By Great Southern Bank’s reckoning, the additional annual cost is more than $16,000 for a three-bedroom house, and up to $80,000 over the first five years of owning a home.
Despite the affordability of homes in outer growth suburbs compared to the inner city, Great Southern Bank chief customer officer Megan Keleher reminds homebuyers to weigh up the long-term costs against the potential upfront savings.
While some Australians are offsetting this cost by working from home, Keleher says it remains an important consideration for those who regularly travel to their place of work.
The property location and size of the home, adds Keleher can impact ongoing living expenses, including utilities and transport costs.
“These factors are becoming even more important for homeowners looking to balance cost-of-living pressures,” she said.
Take a 10-year view
SGS research also cites household running costs, including energy and water, as another key driver of higher costs for larger homes with gardens in the outer suburbs.
With Victorians incurring a 30%-plus power bill rise from 1 July 2023, Keleher expects short-term financial and long-term sustainability benefits of smaller, more energy and water-efficient homes with high energy and water efficiency are likely to become even more important.
“When homebuyers are weighing up options, it’s worth factoring in potential costs of home ownership over the next three, five, or 10 years, not just the upfront purchase costs,” Keleher said.
