Glossary

Australian property glossary

40terms every Australian buyer and investor runs into, explained in plain English. Where there's more to say, we link to the full guide.

Auction clearance rate: The share of properties scheduled for auction in a week that sold, either at auction or shortly before or after. Above 70% is generally read as a strong market, below 60% as soft.
Body corporate (strata): The legal entity made up of all owners in a strata scheme. It maintains common property and charges quarterly levies. Called owners corporation in Victoria.
Borrowing capacity: The maximum a lender will lend you, based on income, expenses, debts and a serviceability buffer, usually 3 percentage points above the actual loan rate.
Capital gains tax (CGT): Tax on the profit when you sell an investment property. The gain is added to your taxable income in the year of the contract. Read the guide
Capital growth: The increase in a property's value over time. In Australia it has historically driven most of the total return on residential property. Read the guide
Cash flow positive: A property whose rent covers all costs including interest, leaving a surplus before tax. Read the guide
CGT discount: Individuals and trusts that hold an asset for more than 12 months only pay tax on 50% of the capital gain. Read the guide
Comparable sales (comps): Recent sales of similar properties nearby, used by valuers and buyers to estimate market value.
Conveyancing: The legal work of transferring property ownership, done by a conveyancer or solicitor. Typically $1,000 to $3,000.
Cooling-off period: A short period after signing a private-treaty contract during which the buyer can withdraw, usually for a small penalty. Length varies by state, and there is none at auction.
Cost base: What a property cost you for CGT purposes: purchase price, stamp duty, legal fees, capital improvements and selling costs, less capital works deductions claimed.
Depreciation (Div 40 and Div 43): Tax deductions for the wear of a building (Division 43, 2.5% a year for 40 years) and its fittings (Division 40). Read the guide
Equity: The market value of a property minus the loan against it. Usable equity is usually what you can borrow up to 80% LVR, minus the existing loan.
First Home Guarantee (5% deposit scheme): Federal scheme letting first home buyers purchase with a 5% deposit and no LMI, with the Government guaranteeing up to 15% of the loan. Read the guide
First Home Owner Grant (FHOG): A state cash grant for first home buyers, now limited in most states to newly built homes under a price cap. Read the guide
Gross rental yield: Annual rent divided by purchase price, before any costs. Read the guide
Help to Buy: Federal shared-equity scheme where the Government contributes up to 40% of the price of a new home (30% for existing) in exchange for an equity share. Read the guide
Interest-only loan: A loan where you pay only interest for a set period, usually up to 5 years for investors. Lower repayments, but the debt doesn't reduce.
Investment Score: PropPulse's 0 to 100 rating of a postcode's investment fundamentals, combining yield, SEIFA wealth, renter demand, dwelling diversity and affordability. Read the guide
Land tax: An annual state tax on the unimproved value of land you own above a threshold. Your home is usually exempt; investment properties are not.
Lenders mortgage insurance (LMI): A one-off premium charged when you borrow more than 80% of a property's value. It protects the lender, not you. Read the guide
Loan-to-value ratio (LVR): Your loan divided by the lender's valuation of the property. Above 80% usually triggers LMI.
Median price: The middle sale price in an area over a period. It shifts with the mix of properties sold, so it can move even when individual property values don't.
Mortgage stress: Commonly defined as spending more than 30% of gross household income on mortgage repayments. Read the guide
Negative gearing: When an investment property's costs exceed its income, and the loss is deducted against your other taxable income. Read the guide
Net rental yield: Annual rent minus ongoing costs (excluding interest), divided by purchase price. Read the guide
Off-the-plan: Buying a property before it is built, from plans. Some states offer stamp duty concessions on off-the-plan purchases. Read the guide
Offset account: A transaction account linked to your home loan. Its balance is subtracted from the loan before interest is calculated, without the money being locked away.
PPOR (principal place of residence): Your home. It is generally exempt from CGT and land tax, and qualifies for owner-occupier stamp duty rates in some states.
Pre-approval: A lender's conditional indication of how much it will lend you, usually valid for 3 to 6 months. It is not a guarantee of final approval.
Principal and interest (P&I): A loan where each repayment covers interest and reduces the loan balance. Standard for owner-occupiers.
RBA cash rate: The Reserve Bank of Australia's target interest rate for overnight loans between banks. Variable mortgage rates generally move with it.
Redraw facility: Lets you withdraw extra repayments you've made on a loan. Similar to an offset, but with tax traps if the property later becomes an investment.
Rentvesting: Renting where you want to live while owning an investment property somewhere more affordable.
SEIFA: The ABS Socio-Economic Indexes for Areas. Ranks areas from decile 1 (most disadvantaged) to 10 (most advantaged). A strong long-run predictor of property values. Read the guide
Serviceability buffer: The extra interest rate (currently 3 percentage points, per APRA guidance) lenders add when testing whether you can afford repayments.
Six-year rule: Lets you treat a former home as your main residence for CGT purposes for up to six years while it is rented out. Read the guide
Stamp duty (transfer duty): A state tax paid by the buyer when property changes hands. Usually the largest upfront cost after the deposit. Read the guide
Vacancy rate: The share of rental properties in an area that are vacant and available. Below 2% is a tight market that supports rent growth.
Valuation: A lender-ordered estimate of a property's market value. If it comes in below the price, your LVR rises and you may need more deposit.