What I learned buying an apartment in Melbourne in 2022

I bought an apartment in Hawthorn East in February 2022. Here are some things I learned along the way. I do not make any promises that these things are still true or are applicable to anybody's situation other than my own.

In particular, I don't know much about:

Buying an investment property
If there are any differences if you are not an Australian citizen
Doing this with another person
What to do if you are self-employed

I suggest talking to several different people who have recently bought a property and asking them about it.

Requirements to buy a place

In order to buy a place, you'll need:

A deposit of at least 10% of the property price saved (or 5% if using the VHF, see below)
Some extra money for various other fees, moving costs, etc
Proof of your income (I used payslips and bank statements)
Various identifying documents
A fair bit of spare time to manage the whole process

How getting approved for a home loan works

Depending on your income and credit score (I think?) banks will determine how much they are willing to loan to you. The process looked like this:

Look at the bank's online calculator to get a sense of what I could be loaned, and what I could afford.
Go into a branch to ask someone in there a bunch of random questions. They probably weren't the best person to ask, because they weren't a lender. Try to speak to a lender if possible.
Contact the bank via their website
Talk to someone from the bank about my situation
Provide a bunch of info (payslips, ID, etc) on the bank's website to make a formal application
Talk to someone from the bank to provide more information
Wait 2-3 weeks
Get told I have "pre approval" from the bank and the VHF. At this point I was allowed to sign a contract "subject to finance" (see below for more details on this).

Choosing a loan

My options were heavily restricted because I used the VHF, so the only bank who I was able to go with was Bank Australia. My impression of them is that they have slightly worse rates than some other banks. They give you the option of a "basic" or "premium" loan. The premium loan has some nice extra features but costs ~$350 a year so I went with the basic one.

If you haven't had a mortgage before, you might not have paid much attention to interest rates. Well, now you have to. You should keep room in your budget for the possibility that interest rates will rise a meaningful amount, and have a rough understanding of how much breathing room you've got.

Some things to consider when choosing a loan are:

The interest rate. Lower is better. Remember that the interest rate will change over the course of the loan.
The duration. I think you get a slightly better rate if you take a loan with a shorter duration. However, at present interest rates are low enough that I don't think there is much reason to want to pay the loan off early. If you've got a bunch of money at a low interest rate, you want to hold onto it for as long as you can.
Fixed or variable. A fixed rate loan is one where the interest rate does not change over time. With a variable rate loan it changes, although I'm not sure how often it can change. Fixed rate loans are lower risk, as you know that the rate won't go up to an unaffordable level. However, you pay for this lower risk with a higher rate than a variable rate loan will start with. I think this is probably not worth it unless you really need the lower risk or you expect the interest rate to go up a lot soon. Most fixed rate loans are only fixed for a certain duration before becoming variable.
Bank's values/ethical stuff. Bank Australia sells itself on being good around climate change. Many banks invest in bad stuff. I don't know how much practical difference this makes.
Deals. ANZ offers a discount if you also have a savings account with them or something.
Extra stuff with the loan. A redraw facility, offset account, and all sorts of other stuff can be nice to have.

Being "subject to finance"

When you've got "pre approval" from your bank, you're allowed to sign a contract to purchase a property. It is really important that the contract you sign states that your offer is "subject to finance". This means that if your bank decides that they are not willing to give you a loan for that particular property, you are not on the hook for anything. Otherwise you might end up losing your entire deposit!

After you sign the contract, the bank will do their own valuation of the property and presumably some other checks. So if their valuation is significantly lower than what you're paying, they might not want to accept the loan. From talking to my lender, it sounded like this was pretty rare.

The downside of the contract being subject to finance is that the seller might prefer to accept an offer from someone else who is paying upfront without a home loan, because there's no risk of the deal falling apart due to the bank backing out. Oh well, not much you can do about that.

Knowing what you can afford

There are two sorts of costs to consider: transaction costs and ongoing costs.

Transaction costs

There are various fees that you'll have to pay to make the purchase. The ones I can remember are:

Stamp duty, variable depending on purchase price and any concessions, roughly $30000 if no concession
Hire a conveyancer, ~$1000
Expenses to pay for various "searches" on the property that the conveyancer has to do, "$200 to $500"
"Settlement adjustments", "Pro-rata adjustment for any outgoings paid for a period after settlement (on average usually no more than $1000)". I don't understand what this means.
Fee to transfer deposit, $30
Registration fee, roughly $1400 for me
Lenders mortgage insurance, only if loan is for < 80% of purchase price, variable depending on loan
Identity verification for both bank and conveyancer, $40 each
Moving fees
Costs of closing out existing utilities accounts and starting new ones
Any existing overdue owners corporation fees, council fees, etc. I think normally the existing owner would pay for these as part of the transaction but you should make sure you know what is going to happen.

You'll want to budget a fair bit for these, including some extra for unexpected expenses.

Ongoing costs

Ongoing costs to consider are:

Mortgage payments. Remember that interest rates can change, make sure you can afford for them to increase a bit.
Owners corporation fees. These vary by property and can be quite expensive for some places.
Council rates. Check what these currently are, should be included in the docs the agent sends you.
Utilities.

Conveyancers

A conveyancer handles the legal side of the transaction. They talk to your bank, the seller's bank, and the seller's conveyancer to get all the contracts signed and everything. You can't really get things moving with a conveyancer until you've made an offer that's been accepted, but you should get in touch with one before making any offers. That way you'll know what to expect and you'll be ready to make an offer.

When choosing a conveyancer, you can choose to get one that is either a lawyer or is not a lawyer. I don't have a deep understanding of the difference here - my impression is that going with a lawyer is a little more expensive than a non-lawyer. If your purchase is particularly complicated or weird, it's probably a good idea to go with a lawyer to make sure it's all handled well. There are many conveyancers out there and I don't really know how to choose a good one.

Typical fees for conveyancing for a purchase are roughly $1000-$2000. There's variability depending on who you go with.

I went with a quite well known one, https://www.lawlab.com.au/. Lawlab were totally fine and I would recommend them. They have a nice online portal that shows the steps of the process and keeps track of all the documents for you.

Choosing a place

Searching for places

The main places that I looked were realestate.com.au, domain.com.au, homely.com.au

I found it useful to keep a text file containing a list of all the places I found interesting across all websites, as well as notes on each one. This meant I could update each place's status with what step I should take next.

Some places are only listed on one website, so it is worth looking on multiple to check for those.

The "Contract of Sale and Section 32" is a set of documents containing what the terms of the sale will be, and lots of other information about the property. See the Due Diligence section for more.

Some things to consider when looking at a listing:

Which direction is it facing?
Are there any plans to build new buildings nearby that might block the view or be an inconvenience? I don't think this is a reason not to buy, just something to be aware of. You can find documents about this online, but I don't know the best way to find this info. The council should have it?
How close is it to public transport, shops, etc? In my opinion, the best thing about buying an apartment is that it can be adjacent to lots of cool stuff. However, a lot of places are weirdly far away from amenities - there's a real difference between a 2 minute walk and a 15 minute walk.
What sort of transport options do you need?

Inspections

Some things to ask the agent at the inspection:

What are the owners corp fees?
Had any other offers on the property?
If the price is expressed as a range eg. $500k - $550k, how willing is the owner to sell at the bottom of the range?
Where can I store a bike?
Can I see the carpark/storage?
Can I see the common areas and other facilities?
If you care about good internet, what sort of internet access does it have?
If you've got an electric car, is there somewhere for you to charge it?

Some things to look for:

Does it have gas appliances?
How's the insulation? How's the heating/cooling? A lot of the older 70s flats are really poorly insulated.
If you're not very familiar with the area, take a walk around and see what you think of it. Pay attention to things that might be noisy, and consider coming back at a different time to see what its like then.
Lots of other stuff that I can't be bothered typing up right now.

Due diligence

You should ask the agent for a copy of the latest minutes of the meeting of the owners corporation, which is usually included in the info they will send you. Some things to look for in this document:

How much are the owners corp. fees? Have they increased/are they going to increase?
Does it make any mention of repairs/maintenance? Some amount of maintenance is normal, you just want to look out for big expensive things, structural damage, etc.
Does the building need its cladding replaced with fire-safe cladding? I think most of this has been done by now but there are probably still buildings out there that need it replaced. If so, look into what the cost and consequences of that would be.
Do people seem happy with the management?
Probably some more stuff I can't think of right now.

Making an offer

Ok so you've found a place that you like and you want to buy it. By this point, you should have talked to the agent and gotten a rough idea of the sort of price the owner is looking for. This is a really important part to get right! Doing a good job here could save you tens of thousands of dollars.

Unfortunately, I am not a very skilled negotiator and don't have a great idea of how to do this well. I would definitely do some more research of your own to find out how to do this part. The advice I have:

For apartments, there seems to be a lot less competition than for houses. If you don't think anyone else is likely to make an offer soon, you aren't under too much time pressure. This gives you the room to make a low offer and see whether it gets accepted or not.
The price range on the listing is often not very accurate to what the owner will actually accept - in either direction. Some listings are deliberately low in order to drum up interest. On the other hand, if a listing has been sitting around for a while, the owner might be feeling pressure to sell and be willing to go for a lower price.

Government assistance

There are various schemes to support people buying a home, particularly new homes or people who are buying a home for the first time. Please remember I haven't looked into this any further since early 2022.

Victorian Homebuyer Fund (VHF)

The VHF is a system where the government will buy 25% of a place that you buy. They provide the money upfront, and when you sell the property eventually you give them 25% of the sale price. There are some requirements to be approved for this.

The main advantages of this are:

You only need to provide a minimum of a 5% deposit, rather than the usual 10%
Because the bank's loan is less than 80% of the property price, you don't need to pay Lender's Mortgage Insurance
You can buy a place with a higher price than you would otherwise be able to afford

The disadvantages are:

There are only currently two banks who participate, Bank Australia and Bendigo Bank
You have to do some paperwork each year

Although I read somewhere that there are only 3000 places available in the scheme, the lender at the bank who I spoke to said that there was a lot of funding available and I did not need to worry about it running out any time soon.

New home grant

I forget what the actual name for this is. If you're building a new home, or you're buying one that was recently built and has not been lived in/sold before, you get $10000 from the government.

New home buyer fee cancellation/decrease

As described in another section, normally you have to pay stamp duty when buying a place. If you're a new home buyer (i.e. you haven't owned a place before), then if the place you're buying is under $600000, you don't have to pay this fee. If it's between $600000 and $700000 the fee is reduced. Note that there are still some other fees of roughly $1500.