When you want to sell your property, it’s only natural that you want to maximise your sale price for best returns. It might be an investment property or even your own home but at the end of the day the more that you can sell your property for, the more you can keep in your pocket, right?
You may be surprised to know that this might not be the case. There are occasions where sellers are caught out hunting for the big numbers or haggling over a small percentage without ever considering what it really costs to hold onto their properties, or the repercussions, should a sale fall through.
[Disclaimer: this blog does not consider the individual circumstances of the reader but aims to provide information that may apply and be useful to an interested reader].
What are Holding Costs?
Holding costs in real estate are the costs associated with holding a property which need to be paid whether you are receiving an income or not.
In South Australia, potential property holding costs can include but are not limited to:
- Loan Repayments
- Council Rates
- Emergency Services Levy
- Land Tax
- Strata Fees
- Water Rates
- Electrical Rates
- Property Manager Fees
- Advertising Fees
Loan Repayments – Interest Only
Interest expenses usually account for a reasonable amount of holding cost. Those with home loans who are finance savvy may consider having their loan on interest only while trying to sell, to minimise loan commitments during this period. This is because they are only needing to pay the bank interest on the amount financed for the duration.
According to the Australian Bureau of Statistics for January 2023, the average loan size for owner occupied dwellings in SA was $489k.
Australian Bureau of Statistics (January 2023), Lending indicators, ABS Website, accessed 9 March 2023.
Interest Holding Cost Example
| Loan Amount | $400,000 |
| Interest Rate | 5% |
| Monthly Interest Installment | $1,666.66 |
If you have a home loan of $400,000 at a variable rate of 5% (approximate current market variable rate), your monthly interest only repayment would be circa $1,666 per month. If your property sold quickly and settled in say 3 months, that’s over $4,500 of interest payable alone to hold the property and if the property did not sell over the course of a year, interest would be $16k if the variable rate stayed the same.
Land Tax
If you have land that is taxable, the land tax payable for the year can be a sizeable amount to consider from hundreds to even thousands of dollars. The calculations for land tax are not straight forward depending on your own circumstances so if you do want to calculate how much land tax you may be liable for, we recommend visiting the Revenue SA website (for those in South Australia) or your local revenue office as each state has its own rules around land tax.
For SA, you can find the land tax calculator here:
https://www.revenuesa.sa.gov.au/landtax/calculate-land-tax
For more information about land tax in South Australia check here: https://www.revenuesa.sa.gov.au/landtax
Consider Your Holding Costs
If you’re looking to sell, it’s only expected that you want to get your best return for your property but don’t forget to think of your holding costs when negotiating your sale price. If you are haggling over a few hundred or even a few thousand dollars, letting a sale fall through over a small amount could be more costly than if you let the property go a little lower without having to pay for the additional holding costs.
Selling Your Home Fast
If you want to learn more about how long it takes to sell your property, have a look at our previous blog here where we talk about selling your property quickly and how long it could take to sell your property.
If you are wanting to sell your home fast or you’re looking for quick cash for your house in Adelaide, get in touch with the team at Sell My Home Today. We buy houses for cash in Adelaide and make the process as quick and painless as possible.