This analysis captures the full financial commitment for owning a $1,000,000 Principal Place of Residence (PPR) over a 10-year period, integrating all major initial and ongoing costs, including the indirect Land Tax factor.
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Assumptions for a $1,000,000 Property over 10 Years
| Assumption | Value | Basis |
|---|---|---|
| Initial Sale Price | $1,000,000 | Reference Price |
| Loan Amount (80% LVR) | $800,000 | Standard 80% Loan-to-Value Ratio (LVR) |
| Average Interest Rate | 6.00% p.a. | Current market average for owner-occupiers. |
| Annual Rate of Cost Increase | 4.00% p.a. | Conservative estimate for inflation/premium rises. |
| Indirect Land Tax Share | 1.00% | High-end estimate of an investor passing their 10-year Land Tax cost onto the PPR buyer. |
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The table below calculates the estimated 10-year total for each cost category and expresses it as a percentage of the initial $1,000,000 sale price.
| Cost Element | Calculation Basis | 10-Year Total (Estimate) | % of $1M Sale Price |
|---|---|---|---|
| 1. Interest on Loan | Interest paid on an $800k loan at 6.00% P&I over the first 10 years. | ~$444,000 | 44.40% |
| 2. Maintenance & Repairs | Average of 1.5% of property value per year, compounding at 4.0% p.a. | ~$180,000 | 18.00% |
| 3. Initial Transaction Costs | Stamp Duty, conveyancing, etc. (State average 6.00%). | ~$60,000 | 6.00% |
| 4. Council Rates | Average of $2,800 p.a., increasing at 4.0% p.a. | ~$33,500 | 3.35% |
| 5. Home/Building Insurance | Average of $2,000 p.a., increasing at 4.0% p.a. | ~$24,000 | 2.40% |
| 6. Indirect Land Tax | High-end estimate of 1% of sale price (the cost to 'no' from an investor). | ~$10,000 | 1.00% |
| Total Property Costs | Sum of all 10-year outlays (Excluding Principal Repayment) | ~$751,500 | 75.15% |
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The Total Financial Outlay (excluding principal repayment) over the 10-year period amounts to 75.15% of the initial purchase price. This figure highlights how the cost of financing and maintenance dominate the long-term financial picture.
* TOTAL 10-YEAR EXPENSE: ~$751,500 * PERCENTAGE OF SALE PRICE: ~75.15%
Note: The principal portion of the loan repayment (approx. ~$136,000) is not included as it builds equity, but it is a cash outflow.