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Melbourne family exposes hidden costs of buying in ‘cheaper suburb’

Buying outside the CBD can carry serious long-term costs.

Truganina family Kayla Crea and Stacey Hope playing with their twins at their home.
Kayla and Stacey didn’t realise they were eligible for the First Home Guarantee. (Source: supplied)

If you want to buy a home, stop looking in the inner city and go to the fringes.

That's the advice peddled to many prospective Aussie buyers, but the reality is that the cost of owning a home anywhere is rising.

New research from Great Southern Bank found Melbourne two-bedroom homeowners were forking out up to $11,500 more than their inner-city counterparts living in apartments because there’s a price to pay for commuting and running a bigger household. That jumps to $16,000 for a three-bedroom house, which equates to $80,000 over the first five years of ownership.

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Melbourne couple Kayla Crea and Stacey Hope have bought a three-bedroom house in the outer suburbs of Melbourne.

They spent three years and $60,000 building their family but, after the financial commitment of IVF to bring twins Ziggy and Scout into the world, the duo didn’t anticipate they’d be able to crack onto the property ladder for several years.

That is until a lifeline was handed to them from an unlikely source: TikTok.

They didn’t realise they were eligible for the First Home Guarantee, which meant they only needed a 5 per cent deposit and didn’t need to fork out for lenders mortgage insurance.

Along with taking advantage of the stamp duty concession, the savings were upward of $46,000, and they could start thinking about buying considerably sooner.

“We always thought it was having a kid or the house. We had the money sitting there but, being a same-sex couple, we had no other options but IVF and it took us three years. I went into that at 26 not realising that three years later I’d be having failed transfers,” Crea told Yahoo Finance.

“Buying a house was always in our long term but if it wasn’t for the grants, it would’ve taken us five or six years to save for a deposit.”

The 32-year-old property manager and her young family had been renting in Truganina, just over 20km west of Melbourne’s CBD.

“With the cost-of-living pressure, we didn’t have extra money to be looking in the city,” she said.

The couple wanted a backyard for the kids to play in. The new builds they looked at were small, while older homes needed a lot of renovations, which they didn’t have the money to sink into.

Truganina family Kayla Crea and Stacey Hope playing with their twins at their home.
A backyard was a must-have for Kayla, Stacey and their twins. (Source: supplied)

Luckily, they had built a great relationship with their landlord and, after looking around and realising where they were living was “perfect”, they asked if he wanted to sell.

They saved moving costs by buying the home they were renting for $570,000, considerably lower than the $650,000 median house value in the area and meeting their goal of staying below the $600,000 mark.

Cost of living crunches hard in outer fringes: The pros and cons

The Melbourne parents were well established in the area, with friends nearby and Hope’s job around the corner.

But Crea’s work involves many hours on the road and a day in the city office at least once a week. The combined costs of petrol and day care soon add up.

“I leave the house at 7:00am and drop the kids at child care and don’t get home until 6.30pm,” Crea said.

“I am lucky to have a flexible job in that sense because I can work from the road four days a week. But I’ve been on the road the last two days and almost gone through a whole tank of petrol, which is $120. If you were going to do that every day of the week [going into the city], there’s just no way it’s feasible.”

Child care five days a week for the twins is $550 with a current rebate.

“But since the new rebate came in, I am actually paying more because the daycare increased their fees. I was better off three months ago,” Crea said.

Truganina family Kayla Crea and Stacey Hope playing with their twins at their home.
Truganina family Kayla Crea and Stacey Hope playing with their twins at their home. (Source: supplied)

The couple committed to a variable loan and, since purchasing at the end of March, their mortgage repayments have increased by $300 a month.

Crea’s family has felt the financial pinch but being “mindful” about spending - opting for bulk shops and reducing costs by renegotiating insurance and internet - has helped keep things under control.

“I am trying to save money where I can because I am worried. We don’t know what the future holds and as the kids get older and want to do more activities, and eat more, plus day care - it adds up,” she said.

“Our mortgage repayments and the kids’ day care is my entire wage gone. That means we're essentially on one wage once we get into electricity, food, clothes, activities. I don’t know how people on one wage are doing it.”

Uprooting and moving to the city or taking a job closer to home would have their own challenges.

Crea said, in her experience, jobs didn’t pay as well in the outer suburbs, but if she had to make the journey into the city five days a week she’d take the pay cut given the time and money it costs to commute.

But as more people look to the fringe suburbs to take advantage of the space, the costs of real estate have increased too. The median value of a home in Melbourne is $776,716 and, nationally, values have recovered by 6.6 per cent since January and are headed for a record high in late November, according to CoreLogic's national Home Value Index.

“So many people are moving out wider, there’s so much competition. It’s definitely not just the city feeling it. I’ve still got rates and bills to pay,” Crea said.

Running a two-bedroom apartment in the inner city can be up to 38 per cent cheaper than a three-bedroom house in a growth area in Melbourne’s fringe, according to the research report by urban and public policy advisory SGS Economics and Planning.

“While homebuyers are often attracted to the affordable purchase price of homes in outer, growth suburbs compared to the inner city, this research highlights the importance of weighing up the long-term costs against the potential upfront savings,” Great Southern Bank chief customer officer Megan Keleher said.

What’s driving higher long-term costs for outer-city suburbs?

Transport: City dwellers largely have to travel shorter distances - whether that be behind the wheel themselves or on public transport. When the costs of parking and maintaining a car are added in, the research found those living in outer suburbs of Melbourne, on average, faced double the costs.

Inner city average: $8,300

Outer suburb average: $23,655

Household costs: Homes are often smaller in the city, with more embracing high-density apartment living, which is more water and energy efficient. Power bill increases - like the one in that hit in July - can take a bigger toll on a bigger home.

Inner city average: $267 for two-bed apartment

Middle average: $267 for two-bed apartment

Outer suburb average: $572 for three-bed house, $405 for two-bed house

Mortgages

Inner city average: $34,297

Middle average: $32,847

Outer suburb average: $35,012 for three-bed house, $20,279 for two-bed house

Graphic comparing costs of running a home across various suburbs of Melbourne.
Graphic comparing costs of running a home across various suburbs of Melbourne. (SGS Economics and Planning)

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Reads 'Take Control of your money. Get the latest news, pro tips and money-saving hacks', with a map of Australia, a man holding his arms above his head, a receipt and a house in front of a green map of Australia.
Reads 'Take Control of your money. Get the latest news, pro tips and money-saving hacks', with a map of Australia, a man holding his arms above his head, a receipt and a house in front of a green map of Australia. (Yahoo Australia)