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How to buy the best hot water system

Don't wait until your old tank burns out – plan your next purchase now.

two hot water systems and hot tap

When a hot water system goes – with a bang, a whimper, or even a flood – it tends to go suddenly. At that point you don't have the luxury of carefully reviewing the available options, unless you love cold showers. Instead, you get a replacement of the same type wheeled in ASAP – and try to forget about it until next time. But what if you were missing out on a better product?

This guide explains the different types of hot water system and their pros and cons; choosing a brand; and choosing the right size of system for your household.

CHOICE doesn't currently have a review of hot water systems (we don't have the lab facilities for the test, and haven't found a good alternative as yet). But our hot water reliability survey tells you the best brands for hot water systems as rated by our members.


Buy smarter with CHOICE membership

  • Find the best brands
  • Avoid poor performers
  • Get help when things go wrong

Why not just get the same type again?

Water heating accounts for a quarter of typical household energy use – and it can be even more. It's worth reviewing your hot water use well before your current system dies and then checking out the alternatives. Reducing your hot water consumption will help save you money anyway, and you might be able to switch to a hot water system (HWS) that's more cost-effective and kinder to the environment.

Also, regulations aimed at reducing energy consumption now mean a new electric storage system is not an option for many homes. Check the regulations in your state.

Electric, gas, solar or heat pump?

The first decision you'll need to make when choosing a HWS is the heating method: electricity, gas, solar or heat pump?


  • An electrically heated storage tank system is usually relatively cheap to buy and install, but is usually the most expensive to run, especially if it's on the continuous (full day) rate.
  • Installation typically takes no more than two or three hours, if it's a straight replacement for a similar system.
  • Systems that run on off-peak electricity are much cheaper to run, but need a larger tank as the water heated overnight has to last you all day. And off-peak electricity isn't available to all homes.
  • A four-person household typically needs a 125–160L tank for a continuous system or 250–315L for off-peak.
  • Can be installed indoors or outdoors.
  • Electric instantaneous water heaters are also available.
  • They range in price from about $300 to $1500 (not including installation).
  • Your electric HWS could account for a major chunk of your electricity bills. It's worth checking that you're on the best electricity plan for your needs.


  • Natural gas is a good option if you have the connection for it. It's cheaper than electricity (though gas prices are rising) and because gas rates don't vary through the day, gas hot water systems can heat water as needed.
  • Installation typically takes no more than two or three hours, if it's a straight replacement for a similar system.
  • A four-person household needs a tank of about 135–170L. You also have the option of an instantaneous system.
  • Usually installed outdoors due to venting requirements, but can be installed indoors with a flue.
  • Have an energy efficiency star rating. 
  • Some have a pilot light, which uses a small amount of gas. Electric ignition is more economical, but in a blackout you can lose your hot water supply.
  • Liquid petroleum gas (LPG) bottles are an alternative to natural gas – but expect to pay significantly more in running costs.
  • They range in price from about $900 to $2000 (not including installation).


  • Consists of solar collector panels and a storage tank. A four-person household typically needs about four square metres of solar collector area (two panels) and a 300–360L tank. You need a large tank to allow for days with less sunlight (or more hot showers than usual).
  • If your panels can't be installed in an ideal location, they may be less efficient and you'll need a larger collection area.
  • The storage tank usually has an electric or gas booster element to keep the water hot on days with less sunshine.
  • Comparatively expensive and time-consuming to install. The installer will need to inspect your home to plan the installation, but the actual installation should usually be a day's work or less. A well-chosen system will pay for itself in the long run due to its low running costs.
  • Government rebates and other incentives can help offset the purchase cost.
  • See our solar hot water buying guide for more information.
  • They range in price from about $2000 to $7000 (not including installation).

Heat pump

  • A much more efficient form of electric storage tank system that works on the same principle as a fridge or air conditioner, by extracting heat from the air and using it to heat the water tank.
  • Units are usually integrated (tank and compressor together) but can also be split (separate tank and compressor).
  • They need to be installed in a well-ventilated area – usually outdoors.
  • Installation typically takes no more than two or three hours, if it's a straight replacement for a similar heat pump or electric storage HWS.
  • The compressor on the unit can be noisy, like the outdoor unit of an air conditioner, so you can't install them too close to a neighbouring home.
  • They tend to work best in warm and temperate regions, but there are models designed to work well in cold climates too, and most systems have a booster element for days of cold weather or high water usage. 
  • You'll typically need a 270–315L tank for a four-person household.
  • Government rebates and other incentives can help offset the purchase cost.
  • They range in price from about $2500 to $4000 (not including installation).

Storage tank or continuous flow ('instantaneous')?

The next decision, after heating method, is whether you go for a system with a tank, or one that heats water as needed.

Storage tank

  • Most electric, gas, solar and heat pump hot water systems use a tank.
  • Mild-steel tanks can corrode over time; maintenance every few years can help prevent this. They usually have five- to 10-year warranties.
  • Many tanks have one or two "sacrificial anodes". This is a metal rod inside the tank which attracts minerals and other impurities that would otherwise corrode the tank; the anode corrodes instead, 'sacrificing" itself. Get a plumber to check the system and replace the anode every five years (or as per manufacturer instructions); doing this can add years to the life of the tank.
  • Stainless steel tanks are more expensive, but generally last longer and don't require as much maintenance as mild-steel tanks. They usually carry a 10-year warranty, but still require occasional maintenance (such as replacement of valves and seals).
  • Local water quality may dictate which type is best for you; check with the installer.
  • Tanks are insulated, but there is always some heat loss over time, so it's good to install them in a sunny spot or in an insulated space. 

Continuous flow

  • Also often referred to as "instantaneous", a continuous flow HWS heats only as much water as you need, when you need it. They aren't truly instantaneous - it can take a few seconds before hot water starts flowing from the tap, especially when there's a fair distance of pipe between the HWS and the tap.
  • Most models use gas, but electric models are available.
  • As there are no heat losses as with water stored in a tank, they're often cheaper to run than storage systems.
  • Electric models will use the full electricity tariff for whenever they are in use, so running costs may be higher than for an off-peak tank, but less than a continuous tank system.
  • The size you need (flow rate in litres per minute) depends more on the number of hot water outlets the heater has to serve than on the number of people in the household. As a general rule, for a two-bathroom house you need a flow rate of about 22–24 L/min. Talk to your supplier to find the right capacity for your home.
  • We've had members advise that their continuous flow water heaters were not turning on because of a combination of low flow showerheads and too high a trigger point for the hot water heater to start up; essentially, the water flow was not sufficient for the water heating to be triggered. Keep this in mind if you are considering having low-flow shower heads and a continuous flow hot water heater, and confirm the trigger point is set appropriately.

Which brand is best?

We surveyed our members in 2017 about their hot water systems to find the brands they found most reliable, that they were most satisfied with, and which gave the best after-sales service. See the hot water reliability survey results.

Household size and water usage

Typically, one person uses about 50L of hot water a day; more if you use your dishwasher often, take very long hot showers or often wash clothes in warm or hot water.

Get a hot water system supplier to analyse your home and usage and recommend some options. To determine the right size of system, a supplier should ask a few key questions to figure out how much hot water your home uses, and when.

  • How many people live in your home?
  • What's the usual time for showers or baths? Morning, evening or both? How many showers and how long?
  • Do you wash clothes in hot or cold water?
  • Do you use a dishwasher, or do you mainly handwash your dishes?

Get quotes from at least two hot water suppliers.

For most households, a solar HWS can be the most efficient and cheapest to run. If that's not an option, here are other suggestions:

  • Small household (1-2 people): Continuous flow HWS (gas or electric) or small gas storage HWS.
  • Medium household (3-4): Gas systems (continuous flow or storage), or a heat pump.
  • Large household (5+): Multiple continuous flow HWS may be an option but gas storage units may be more economical. Large heat pumps are also an option.

Energy star ratings

Minimum Energy Performance Standards (MEPS) currently apply for electric hot water storage systems, gas hot water storage and gas instantaneous systems. However, they aren't required to have energy star rating labels. 

You will see star rating labels on gas hot water systems, but that's an industry-managed scheme and isn't regulated by government. It's unrelated to the energy efficiency star rating labels that applies to products such as fridges and air conditioners.

MEPS are currently under consideration for other water heater types. This will help to remove inefficient models from the market and may see star rating labels appear on all hot water systems.