Choosing the Right Hot Water System 

17 April 2026 | Blog | 6 min

Key Summary 

• Selection Factors: Home layout, household size, and available energy sources determine the best hot water system for your property.
• Early Planning: Choosing a system during the floorplan stage of a build or renovation ensures the unit fits your design and avoids limited installation options.
• Total Value: Look beyond the upfront purchase price to consider installation costs, running costs, and how the system performs during peak usage periods.
• Professional Advice: Always confirm sizing, suitability, and local installation requirements with a licensed installer before making a final decision.

How Gas Hot Water Systems Work

Gas hot water systems heat water for household use, using natural gas. The two main types most households will come across are storage systems and continuous flow systems.

A storage system heats water and keeps it in an insulated tank until it is needed. A continuous flow system heats water on demand as it passes through the unit. Gas hot water may be one option among several when comparing systems for a home, depending on the property, household needs and whether gas is available in the area.

The difference between these systems, and some of the factors that can influence suitability, are outlined in AGN’s article on  natural gas hot water.

When to Plan Your Hot Water System  

Planning matters whether you are building, renovating or replacing a system. The earlier you consider hot water, the easier it is to line up the system choice with the home’s design, access requirements and likely usage patterns.

Leaving the choice too late can limit your options. You may have less flexibility around where the unit can go, how much space is available, or how well the system fits with the rest of the build. Early planning can also make it easier to compare your options properly rather than making a rushed decision once other services are already locked in.

For new home builds, this is especially important. Discussing appliance choices while working through the home connection process can make planning much easier if gas hot water is one of the options being considered.

What to Consider Before Choosing a Hot Water System 

Before comparing the different types of hot water systems available in Australia, it helps to work through the main decision factors. No single option is right for every home. A practical choice should reflect how the home will function day to day.

Think of the points below as a planning checklist you can use to discuss with your builder or licensed installer.

Household size and hot water demand

Start with how much hot water your household is likely to use. A home with one bathroom and two people may have very different needs from a larger household with multiple bathrooms and overlapping showers.

It is also worth looking ahead, not just at your current routine. A new home build is often planned for future living, not just immediate needs. If your household may grow, or if you expect regular guests, those patterns can influence which hot water system feels practical over time.

Home layout and installation space

The layout of your home can influence what type of hot water system is practical. Every unit has specific size and clearance needs that can impact your final choice.

The builder will assess the number of rooms needing water and the available pipework to find the best spot. Here is how layout requirements differ:

Electric storage: These tanks are often the most flexible. You can usually tuck them into an internal laundry cupboard or a garage. This is a good option if you have very little outdoor space.

Heat pumps: These systems need room to breathe. They require significant outdoor clearance to pull in air and expel cold exhaust. They also make some noise. You should avoid placing them directly next to a bedroom window.

Gas units: These are typically mounted on an external wall because they require natural ventilation for safety. While internal gas models exist, they're less common and require special flueing to the outside. 

FUN FACT: Ever turned on a hot tap and wondered why it takes a while to warm up - even with an instantaneous system? It’s because there is water sitting in the pipes between your hot water unit and the tap. That cooler water needs to flow through before freshly heated water reaches you. Positioning your hot water system closer to high-use areas like the kitchen or bathroom can reduce this delay. It means faster access to hot water and less water wasted while you wait for it to heat up.

This is why hot water planning works best when it is considered alongside the broader home design. If you are still at the floorplan stage, it is much easier to think through placement and access before those decisions are finalised.

Energy source availability and local considerations

Not every energy option is available at every property. Availability can vary by suburb, estate, street and state, so this is something to check early rather than assume.

If you are considering gas hot water, one of the most practical first steps is checking whether  gas is available at your address.

Upfront costs, running costs and long-term value

It is easy to focus only on upfront purchase price, but that is only one part of the picture. Installation costs, daily usage, maintenance needs, energy pricing and the way the system performs over time can all shape long-term value.

A practical comparison should look at the full picture rather than relying on one factor alone. It may also help to understand the broader range of hot water systems, including where rebates or assistance may apply depending on the system type and location.

Performance, recovery time and daily comfort

How the system delivers hot water matters just as much as the energy source behind it. For busy households where multiple people need hot water at the same time - showers, baths, laundry or the kitchen - recovery time and delivery style can significantly impact day-to-day comfort.

This is especially relevant during peak demand periods such as mornings and evenings. When comparing options, it helps to look at product specifications and ask your installer how different systems are likely to perform for your home’s expected usage pattern.

Types of Hot Water Systems  

Most households will consider four main categories when comparing hot water systems. Each has distinct advantages depending on your budget, property layout, and how you use energy. While the goal is to narrow down your field of choice, always confirm the final technical specifications with a licensed installer.

Electric storage hot water systems

Electric storage systems use a heating element inside an insulated tank to heat water and keep it ready for use. These systems generally have a lower upfront purchase price. This makes them a common choice for budget-conscious renovations or quick replacements. They're reliable and familiar to most plumbers.

However, they are often more expensive to run because the system must constantly reheat the water to maintain its temperature. You also need enough physical space for the tank. Some smaller, instantaneous electric units exist, but these usually require high-amperage wiring and are typically only suited for single-tap points like a remote kitchenette.

Heat pump hot water systems

Heat pumps work like a fridge in reverse. They pull heat from the surrounding air to warm the water in a storage tank. Their primary benefit is efficiency. They use significantly less electricity than a standard electric storage unit. This can lead to lower energy bills over the long term.

The trade-off is the upfront cost and installation requirements. Heat pumps are more expensive to buy. They also need to be installed in a well-ventilated outdoor area with enough space for air to circulate. They may be noisier than other systems due to the fan and compressor.

Gas hot water systems

Gas hot water systems are a popular choice for homes with high hot water demand. If you choose a continuous flow (instantaneous) model, you get a compact unit that only heats water as you turn on the tap. This means you are less likely to run out of hot water under normal usage conditions, even with back-to-back showers. Gas storage models are also available if you prefer a tank-based setup.

Gas systems provide excellent reliability and high performance depending on system type and household demand during peak times. While they require a gas connection and proper ventilation, they offer a great balance of moderate upfront costs and consistent delivery. Note that availability depends on your local network and state-based regulations.

Solar hot water systems with boosting

Solar systems use roof-mounted collectors to harness an energy from the sun. This is one of the most environmentally efficient ways to heat water and offers the lowest daily running costs. Most systems include a gas or electric booster to ensure you still have hot water on cloudy days or during high-usage periods.

One of the main drawbacks is the high initial investment. Solar systems are expensive to purchase and install. You also need a roof with the right orientation and enough structural integrity to support the collectors and, in some cases, a heavy storage tank.

How to Compare Hot Water Options for Your Household  

A useful way to compare systems is to keep the same set of criteria in mind each time:

• expected household demand
• available installation space
• Costs (upfront, running and maintenance)
• energy source availability
• planning and installation requirements
• likely performance during busy periods
• long-term ownership considerations

This kind of side-by-side comparison is usually more helpful than searching for a universally best system. It also makes it easier to have a practical discussion with your builder or licensed installer about what works for your property.

When Gas Hot Water is Worth Considering

Gas hot water may be worth considering where gas is available and permitted, especially for households that expect higher hot water demand or want to compare storage and continuous flow options as part of a broader decision.

Suitability still depends on local availability, property design, installation setup and household priorities. If you are still planning the build, understanding how   residential gas connections fit into the wider project can help before layout and service decisions are locked in.

State and Location Differences to Check Before You Decide 

Hot water system choices can also be affected by state policies, local requirements and infrastructure availability. These settings can change over time, which is why national guidance should be treated as a starting point rather than a final answer for every property.

If you are building in Victoria, it is worth checking the current  electrification and efficiency standards for buildings before making a final decision, as rules affecting new homes and some replacement scenarios are changing over time.

A practical approach is to confirm what applies to your address before making a final decision. That may include checking availability, reviewing connection steps, and speaking with your builder or licensed installer about what is suitable for the home you are planning.

Hot Water Planning Checklist  

Before choosing a hot water system, ask yourself:

• How many people will live in the home now and in the future?
• How many bathrooms will be used regularly?
• Are there likely to be overlapping showers or peak demand periods?
• How much space is available for the system?
• Does the layout support the type of unit you are considering?
• Which energy sources are available at the property?
• Have you checked local or state-based requirements?
• Have you looked beyond upfront cost and considered long-term use?
• Have you spoken with your builder or licensed installer?

Questions to Ask Your Builder or Licensed Installer

Useful questions include:

• Which hot water system types are practical for this home design?
• What should be decided now before construction progresses further?
• Are there any installation or placement limits we should know about?
• How should household size and bathroom count influence the setup?
• What should we consider for peak demand periods?
• Are there any local requirements or availability checks we need to complete?

These questions help move the decision away from generic advice and towards what suits your actual property.

Common Mistakes to Avoid When Choosing a Hot Water System

One common mistake is choosing based only on upfront price. Another is leaving the decision too late in the build. A third is assuming every energy option is available without checking.

These mistakes can lead to unnecessary compromise, added cost or disappointment with how the system performs day to day. A better approach is to compare options early, think about how the household will use hot water, and confirm the practical details before making a final call.

References 

https://www.energy.vic.gov.au/households/electric-and-efficiency-standards-for-buildings

https://www.energy.gov.au/households/hot-water-systems 

Want to know more? Give us a call on 1300 001 001 or click here to learn more about the gas connection process                                                                              Share on Facebook