Current Market Insights
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Understanding the property market can be a challenging thing, with highs and lows, twists and turns. The media and agents tend to spread the news they want you to hear, with the advice they want you to follow.
Current Market Insights is an unbiased look into what is happening, what tips you can use to buy, sell, or rent, and that you wont find anywhere else.
Current Market Insights
Episode 98: The Hidden Cost of Selling – Why Small Price Shifts Matter
Hosts Ciaran O'Brien and Peter O'Malley unpack why a seemingly “small” price change can translate into a substantial real-world loss once you factor in stamp duty, agent fees, legal costs, and market timing. Using real examples, they illustrate how the 10% break-even rule plays out and why meaningful tax reform could help unlock better housing mobility.
We also discuss:
- The 10% break-even reality across different market segments
- How stamp duty brackets and bracket creep erode gains
- Real examples of sellers taking losses despite higher sale prices
- What transaction costs you can and can’t control
- How capital gains tax (CGT) discounts and losses actually work
- The difference between tax-free gains on a primary residence vs. investor treatment
- Common media myths vs. the true net financial outcomes
- Who to consult for expert financial and property advice
- How strong agency work behind the scenes adds measurable value to a sale
As always if there is a specific topic you would like for us to cover, please reach out and let us know!
Hello and welcome to another edition of Current Market in Science. I'm your host, Kieran O'Brien, and with me as always is Mr. Peter O'Malley. Peter, hello. Kieran, great to see you. Great to be with you again, mate. Uh I want to talk today about transacting in real estate, which uh, you know, strangely is what we do here on the podcast. But I'd really like to take a bit of a deep dive today into what are the actual costs involved in transacting. I think most people would be aware of the obvious ones, uh, but I I know from my time and and you know my own purchase and and other anecdotes and stories and things around the industry that there are costs that some people, particularly, you know, if they're new or inexperienced in the market, may not realize are part of the transaction. Uh so I thought today it might be a great idea for you to take our listeners through what are those hidden costs, or not hidden, but what are the transaction costs involved? And what are some kind of tips or strategies for people to uh be aware of and in many ways mitigate or plan for those?
SPEAKER_02:Uh thanks, Kieran. Look, I think people should be acutely aware that buying the wrong property and having to resell it can end in disaster. Now, when we say the wrong property, it can be the wrong property because it doesn't meet your needs, um, it's excess to requirements, it's not big enough for requirements, um, or the mortgage is onerous and your circumstances change and you need to resell the property. And um, in instances where you purchase a property and then uh inadvertently uh find yourself having to sell it within a short time frame, um, you really need the property market to have risen 10% just to have essentially broken even.
SPEAKER_01:Is that 10% regardless of market? As in, you know, is it 10% in Sydney, 10% in Hobart, 10% in Brisbane? You know, given that they're all different house values.
SPEAKER_02:Everyone's got every state has its own stamp duty formula, um, but uh it ends up at about the same percentage, 10% slightly overstating it, but that's essentially what you need the market to rise by after you've purchased a property just to be in a break-even position.
SPEAKER_01:Okay, so we'll I'll get you to break down you know what's involved in in making up that 10%. But one question I do have about you know purchasing the wrong property, I I have to wonder what I mean, this is not meant to be the purpose of today's topic, but how do people how do they end up purchasing the wrong property? I mean, what you know, what goes into that as uh a process that makes someone move in and go, actually, all of a sudden, you know, we're two bedrooms short or uh the mortgage is too high? I mean, are these not factors that people that should should be considered before the purchase is done?
SPEAKER_02:Look, I don't want to be too harsh because change of circumstances do happen. Businesses go bad, people lose their jobs, um, marriages fall apart. Um, so there's a range of reasons. And uh, you know, when you go on social media, um there seems to be quite a few accounts um on Twitter particularly that sort of take great delight um in uh you know properties that sell for less than the the owners paid. And uh being a real estate agent and knowing what transaction costs are, I I think if you take delight in that, you're you're a mongrel. Yeah. Because there's a real cost behind that, right? There's a real human cost behind that. Like I'm looking at one example here up at Hornsby. Um, to your point, I have no idea why would what would cause them to trade like this, but they purchased it in February 2025 for 3.27 million. Stamp duty on um uh on 3.27 million is somewhere in the vicinity of$160,000,$161.862 to be precise. Yep. They've just resold that property in August 2025 for$3,170,000. So that's a loss from the purchase price. It's a hundred on the clean hundred on the purchase price,$161,862 on the stamp, so you're a quarter of a million there. Probably paid someone$60 to sell it. Um so you're uh you're out to$320 odd there. You probably paid moving costs in and moving costs out. So let's just round that out at$10. Um, you've probably paid um another six or seven in legals, um and and and I dare say you've done some improvements to the property in the time that you've owned it. So a disastrous outcome heading towards$400,000 loss, even though the difference between the purchase price and the sale price was only$100,000 less. Now, the most onerous cost when it comes to transaction costs is clearly and indisputably stamp duty because since I joined real estate, the stamp duty chart has never changed. The higher the price, the higher the percentage you pay in stamp duty. Yeah. So that was just classic bracket creep um buried into the stamp duty equation. So uh, for example, in 2000, when I sold my first house for$420,000, um, I think the stamp duty percentage then was about 3.8%. That same house now recently traded for I think it was uh 2.1 million, 2.2. Um, but stamp duty has a sliding scale, but the purchases would have paid somewhere around four and a half, heading toward five percent stamp duty on that one.
SPEAKER_01:On a much higher price, yeah, for the same property.
SPEAKER_02:So uh, and then if you go higher again when you get into the three and the I think it's maybe five or six million, you get further accelerators where the stamp duty uh above a certain price point kicks out to being seven percent.
SPEAKER_01:Yeah, wow, which is substantial, yeah.
SPEAKER_02:So um when you're talking these numbers, stamp duty on at 161,000 on three three point two seven million, that's essentially five percent right there.
SPEAKER_01:Yeah. No, it's certainly it's a big chunk. I mean, stamp duty is uh it's one of those interesting topics, right? It's you know, my understanding of it is it was ceded by the federal government to the states as an incentive in the 60s or 70s, never really vanished. The states have realized how valuable it is to their coffers, uh, and it is disproportionately uh disadvantageous, I think, to to people looking to transact in a modern era. Given, you know, this is a a bit of a segue, I guess, but given that we uh in a housing crisis in Sydney, we don't have supply. Do you think that there's ever going to be any real like movement on Stamp Duty to make it more uh enticing for people to downsize, for you know, transaction for the sake of in many ways freeing up better? You know, you talk often talk about the the average composition of the house and how many people are are utilizing to bedroom ratios and things like that. Do you think there'll ever actually be government incentives to to maximize that equation and make it more beneficial to everyone?
SPEAKER_02:Stamp duty. Yeah. Well, well, dom Dominic Perretay went as far as introducing it, didn't just talk about it, he introduced it. It was in for the last six or seven months of his government, and then Chris Minnes tore it up as soon as he got into power.
SPEAKER_01:Yeah, this is the the lifetime kind of you know, annual annual tax.
SPEAKER_02:Annual property tax as opposed to upfront stamp duty, and it would have collected more over time as an annual property tax, but if that were introduced, it's a much fairer tax spread over a longer period of time where um stamp duty punishes those that are trading and has all sorts of unintended consequences and side effects as to how the property market operates.
SPEAKER_01:Yeah, I wonder whether, you know, New South Wales governments love to shoot down the other the opponent's work and then redo it in a different format. I wonder if Chris Mins as part of his housing reforms will ever do something similar here. Um, okay, so we talked about uh an example of transacting at a loss and that being a substantial kind of uh, you know, or maybe an unexpected fee for uh those operating in the market. Um are you able to kind of talk to our listeners a little bit about just what kind of makes up some of the other costs? I know you mentioned them briefly. There are some legals, there are some agents fees, there are some, et cetera, et cetera. But uh outside of stamp duty, which we know can be a little bit punitive, it is expensive, and it can be uh something that a lot of buyers don't necessarily consider uh when they come to market. What are the major components that do make up all of the kind of transaction costs? And are there stamp duty? Are there any the buyers or sellers can, you know, kind of work around or mitigate as part of the process?
SPEAKER_02:Uh well look about the only ones that you can mitigate is moving costs. You can hire a utility or a van and move yourself. Just yeah, muscle, muscle costs. Good good luck with that. Um I've done that many times. And you and you can sell without a real estate agent. Um, can you get full market price? Maybe, maybe not. Um, a little bit like um being your own removalist. Good luck with that. Yeah. Um, but essentially, uh, you know, it would be ill-advised to do your own legals. It would be ill advised to are you allowed to? Is it like is your restrictions? Yeah, if you make a mistake, it's on you. Right. Yeah. Yeah, but you can self-act. Highly ill-advised. Yeah. Yeah. And the vendor's lawyer or the uh counterparty's lawyer will probably end up having to coach the person through because it's just too complicated and it'd be a disastrous transaction. But again, good luck with that. So realistically, um, very few people opt to sell their property without a realtor. Uh, very few people, even less percentage of people do their own legals. Um very few people, if any, do their own removal. So, in theory, yeah, you can you can reduce the transaction cost, but in reality, not really. So that's where I come back to that point. You can see if stamp duty is swallowing five percent straight off the bat when you purchase the property in transaction costs, you can see it doesn't take much with everything else that goes in it to run up to 10%. So when you do see a property sell for a modest loss or even a modest gain uh in real terms, that that that can often be a nasty, uh nasty uh financial loss for someone.
SPEAKER_01:So, what about the one of the other components or another major component that contributes to transaction costs in capital gains? So, you know, people that are not transacting in their primary place of residence uh activating a capital gain event. How does capital gains work in those kinds of scenarios? So let's assume uh, you know, for the sake of our our uh example that the property in Hornsby was an investment uh bought for their children and they had to sell for whatever, you know, arbitrary not arbitrary, but whatever reason they needed to sell for. They've accrued this incredible loss. How does that factor into capital gains? Do they can they claim that as a loss?
SPEAKER_02:Yes and no, not all of it. So stamp duty is not a tax deductible expense for investors. Right. So you you're you're wearing you're wearing a clean half of the transaction costs, whether you're an investor, an owner occupy, you're wearing it regardless. Yeah. So there's no benefit there. Yeah, if you've purchased an investment property and you sell it for a loss, the agents fees and the legals on the way in and the way out are a tax-deductible cost. Um, there'll be no moving costs on an investment, of course. And you can write off repairs and and and capital improvements that you've you've you've made on the property if you have done any in that time. So there is some taxation uh relief, but all it's doing is slightly minimizing the loss. If you're paying tax, you're making a profit, and if you're claiming a um, you know, uh a tax deductible, carrying a tax-deductible loss going forward, well, you've still got a loss of some description.
SPEAKER_01:Yeah, yeah. So can you take out listers then if if you're happy to? An example of let's assume uh again, just working with capital gains, because I think it is a slightly confusing topic for a lot of people. Let's assume in this scenario that uh the house was sold for a modest profit and factoring in stamp duty and moving and all the legals and etc. etc. they've broken even or they Well, you can't factor in stamp duty because it's not a tax. No, but I just meant in the sale price. So let's assume uh they paid 3.1 or 3.2, and with all of their their sale price excluding all of the cost, the transaction costs, they come out with a slight capital gain. Let's say it's you know a hundred thousand or something. Yeah. Um, how how exactly do they calculate the gain itself?
SPEAKER_02:Because I think rough, roughly 25% of of the um of the gross capital gain provided you haven't bought and sold inside 12 months.
SPEAKER_01:Right. And it's higher if you've done it within 12 months, is that correct?
SPEAKER_02:Because you've treated it as a trader rather than um a capital um capital gain.
SPEAKER_01:Yeah, okay. Uh all right, and then outside of primary place of residence, are there any other factors that minimize the capital gains uh uh like levy or fee that you have to pay other than it being your primary residence or holding it for a certain amount of time?
SPEAKER_02:No, the primary residence is a is a tax-free sale, and that's why we've got this uh part in part reason why we've got this massive wealth inequality in society at the moment, because uh a lot of people over a sustained period have used that vehicle to create massive gains for themselves, and we've got baby boomers now sort of selling down you know assets that they paid 1.5 million for, and they're selling them down now for eight and eight and a half million. And um, you know, there's there's essentially what's that seven million dollars tax-free gain. Yeah, what other area of the economy can you profit um by seven million dollars and not pay a cent in tax? And I'm not saying Bitcoin pre-2020, mate. Um, well, I I wasn't in on that, unfortunately, but uh unfortunately. But um uh the the um the the point there being is that uh uh it's a very, very generous um uh system that we have for for homeowners that make a big gain. And um unfortunately if you achieve a loss, you earn the loss. There's no so when you make a loss on your primary residence, you can't write that off on tax.
SPEAKER_01:Yes, yeah. But it yeah, if if most people in city property that have had a house for any period of time, that's a highly unlikely scenario.
SPEAKER_02:Well, look, I gave you one example in Hornsby. No, that's the point of today's podcast, right? Is that there's a lot of people that lose out there, um, and and and and it's very painful. So going back to one of those accounts that we're talking about, there's a Riverview house here um where they paid 6.5 million for it in December 2022. Think of all the holding costs, the interest costs, beautiful home. Um probably spent teething costs. Now, let me give you an idea of uh stamp duty on 6.5 million. I'll just quickly go to my calculator here. Substantial, regardless. So just looking at that, Kieran, stamp duty on uh 6.5 million is 340,000. Yeah, wow. So that pushes the base price um uh of our uh subject property up to uh 6.84 million, and that particular home um in September 2025, three years later, is on the market with a fixed asking price at 6.3 million.
SPEAKER_01:Wow. So again, for the scenario, they're 500,000 behind just before they even sell the property from where the value was last time, and that excludes all the other things they talked about the legals, the moving costs, the agents fee on six and a half or six point three million dollar property is going to be substantial. Uh so they, you know, ultimately they could walk away with quite a bit less than six million, right? Even at six point three. Yep. Yeah, that's a significant, uh significant cost.
SPEAKER_02:And I don't think so. There's another one here. I'll give you another good example here. Uh one in Seaforth, um uh sold in September 2021, the peak of the market, that bull market, 3.19 million. Uh it's just resold in September 2025, four years later. They made a gain, they sold for more than they purchased for. They sold for 3.3.
SPEAKER_01:Yep.
SPEAKER_02:So that's obviously uh$110,000 more, but clearly that does not even cover the stamp duty back. And that's just about$160 odd, same as the other one. So essentially, if you buy for 3.19, you really need to sell for 3.4 or better to be getting your money back.
SPEAKER_01:To break even. Yeah. To break even. It's important for our listeners to break even at 3.4 to 3.5. That's not to make profit. And I I, you know, I actually wonder how many people don't realize that. You know, when you buy a property and you think, oh, look, I've been in it for a number of years, we've paid into the mortgage, etc. Let's just sell and take all our equity and buy something else. There's probably not that much equity at the end of it, you know, depending on what your rate is and how much you're paying and all, you know, there are other factors, but you know, five years, ten years of mortgage payments may not actually have gotten you all that much equity when you consider all these other costs.
SPEAKER_02:Yeah. Yeah. So there's a massive cohort um in Sydney and across the Eastern Seaboard of Australia that are sitting on massive tax-free paper gains, and um, you know, they do become the subject of uh criticism because they are enjoying these big massive uh paper gains having bought in the early 90s, say, and selling in 2025. And um, yeah, it's essentially it's nearly the equivalent of selling a company, a small company, the profit um that that's that's there for them. Um, but equally, there are many people, like we've just outlined with those examples, um, who have purchased and resold for around in percentage terms, around the price they paid, a little bit more, a little bit less. But you can see that that becomes a devastating um loss on the bottom line when you take all the transaction costs into account. And where I see this all the time is um in the gossip columns, uh, some celebrity will buy a house for uh$7 million, spend one and a half million dollars renovating it and selling it for$10, and they're saying$3 million windfall. And it's like there is no$3 million windfall there, um, they'd be lucky to be breaking even or doing much better.
SPEAKER_01:Yeah. Yeah, look very, very true. Final question then for you, Peter, before we wrap up. If uh any of our listeners out there are in the process of kind of selling, buying, whatever, is there a good resource or a person, uh, you know, an agent or an accountant or a lawyer? Like who's the person to talk to, I guess, to get a better understanding of all the elements involved? Because obviously the agents have their own uh things that they're interested in, their own biases to a certain extent, you know, conveyances have their own expertise area, but is there like a good central resource that people can go to and get all the info they need to understand all these costs before they really commit?
SPEAKER_02:Uh there's not really, no, you've got to start pulling it together yourself, yeah. Yeah. I say to people who are buying and selling is that uh buying and selling is a full-time job as a consumer. Um, but it's a job you didn't know you applied for, but you've suddenly got when you're doing it. And it's immensely distracting because you kind of do your, you're still trying to do your Monday to Friday job to the best of your ability and what's required of you. Um but you've got this other high-stakes game of poker called buying and selling real estate happening on the side.
SPEAKER_01:Yeah, it's amazing the amount of people who say to me, What do I need an agent for? I could just sell my own house. And I tell them, Well, you know, absolutely, mate, go for it because there is so much more work involved and so much complexity and so many layers of legals and everything that you don't even understand, uh, and you still want to come to work and do your normal job, you know, best of luck. It's uh it's hard.
SPEAKER_02:Yeah, it's a shame that the real estate industry has uh got itself to a point where it's trivialized like that because the consumer doesn't respect um, you know, the depth of what's involved because agents are um you know too often showing themselves on social media as being, you know, all flash and go. But even the agents who are doing it, the majority of them behind the scenes are working very, very hard. And uh, you know, the the the Hollywood lifestyle that some agents in the industry promote, um, it's either a complete illusion or it's a tiny fraction of what their uh what their working week looks like. And it shocks people. You've seen it yourself here in in in this business. It shocks people who come in here and think that uh uh real estate is just standing at an open house and someone says, I want to buy it, how much do I have to pay?
SPEAKER_01:And and you get a free Mercedes or whatever. Yeah, yeah. It doesn't work like that.
SPEAKER_02:And then you come into the industry and they realise the hours and the meticulous grunt work that need needs to happen behind the scenes for a successful outcome on the day.
SPEAKER_01:Yeah, look, I think that that's a whole other discussion, but people certainly don't appreciate how challenging it is. Look, uh really great chat today, Peter. Uh I you know appreciate the topic. I think it is a confusing one, uh, and one that we certainly have, you know, we will explore over time, and it will continue to be a thing. And I I certainly uh myself hope that the government does find a way to incentivise uh property exchange, because I think we do have a lot of locked-up properties that could be better utilised if the government was a little bit more kind of supportive with uh with the way taxation works, that's for sure. But but uh I certainly appreciate you coming in and having a chat. Thanks, Kieran. And thanks for everyone for listening to Current Market Insights. We look forward to speaking with you next time.
SPEAKER_00:Thanks for joining us on the current market insights public. The public can must come in, realistically insummants, anyone else.
