Instantaneous Hot Water Systems: How They Work, Costs & Pros/Cons

An instantaneous hot water system, also called a tankless or continuous flow system, heats water on demand instead of storing it in a big tank. That means you don't have to wait for a big 300-litre tank to refill and reheat; just turn on the tap, and the system starts heating water right away. It’s a space- and energy-saver, and can even save you a bit on your bills.

But ‘instant’ can be a little misleading. How fast the hot water actually reaches your tap and whether this type of system is right for your home depends on your house layout, how much water you use, and your plumbing setup.

In this guide, we’ll break down how these systems work, how much they cost, their pros and cons, and when they make sense for your home, so you can make an informed decision. 

TL;DR

• Instantaneous hot water systems heat water only when you turn on a tap, so you never run out. Water is heated as it flows through the unit, with temperature automatically adjusted before it reaches your tap.

• Delivery time isn’t instant because water has to travel through pipes, cold water from the last use has to flow out, and insulation affects how quickly it reaches the tap. Recirculation pumps, closer placement, or point-of-use units can speed this up.
  
  
• The types of instantaneous systems are based on
  
  

1. Energy Source: Natural gas, LPG (bottled gas), or electric. Gas handles high flow better; electric is compact but suits smaller setups.
   
   
2. Heating Technology: Standard (non-condensing) or condensing, with condensing models using exhaust heat to improve efficiency.
   
   
3. Service Area: Whole-home units, point-of-use units for single taps, or hybrid setups combining both.
   
   

• The pros are endless hot water, greater energy efficiency than storage tanks, compact design, precise temperature control, and longer service life.
  
  
• The cons are higher upfront cost, minimum flow requirements, limited maximum flow, sensitivity to water quality, and potential infrastructure upgrades.
  
  
• The system is best for large families with high demands, small households, homes with space constraints, solar-powered homes, granny flats, and home extensions.

How Instantaneous Hot Water Systems Work

When you turn on a hot tap, water starts moving through the pipe and into the hot water system. A flow sensor inside the unit detects this movement immediately and sends a signal to the electronic control unit (ECU), which acts as the system’s controller. 

The ECU starts the heating process:

• In a gas system, it opens the gas valve and ignites the burner.
  
  
• In an electric system, it sends power to the heating elements. 

At the same time, cold water flows into a copper pipe inside the heat exchanger. The burner or elements heat the exchanger, and that heat transfers through the copper pipe into the moving water. Because the water is constantly flowing, it heats up in seconds and continues heating as long as the tap stays on.

Before the water leaves the unit, a thermistor (temperature sensor) measures the water temperature as it reaches the outlet of the unit. The system is mostly set to heat water to around 60°C in Queensland homes to prevent bacterial growth and meets Australian safety standards.

If the water isn’t at that set temperature, the electronic control unit (ECU) adjusts the heat instantly by: 

• Increasing or decreasing the gas flame.
  
  
• Adjusting the power going to the heating elements. 

Once the water reaches that set temperature, it leaves the unit and travels through your pipes. Before it reaches bathroom taps, it passes through a tempering valve, which mixes in cold water to bring it down to a safer 50° to prevent burns. 

Finally, when you turn the tap off, the water flow stops. The flow sensor detects this, and the ECU shuts down the burner or heating elements, and the system goes back to standby mode. 

Types of Instantaneous Hot Water Systems

Based on Energy Source

1. Natural Gas Systems

A natural gas instantaneous system is a tankless unit connected directly to your home’s mains gas supply. 

These systems can deliver high flow rates because gas burners can produce a large amount of heat very quickly. This high heat output allows the system to heat more water at once, which is why they’re commonly used in family homes with higher hot water demand.

In Townsville, homes that already have a gas connection often go with this option because it provides strong, consistent hot water and is typically cheaper to run than electricity.

   2.  LPG (Liquid Petroleum Gas) Systems

An LPG instantaneous system works the same way as a natural gas unit, but instead of being connected to a gas line, it uses gas cylinders stored outside the home.

These systems are more expensive to run than natural gas because you not only pay for the gas but also for delivery, bottle refills, and rental of the cylinders.

As for performance, there’s no real difference. LPG units still use a gas burner, so they can produce high heat quickly and handle high demand without a noticeable drop in temperature.

This makes LPG a practical option for homes that don’t have access to mains gas, which is common in rural or outer parts of North Queensland.

   3.  Electric Instantaneous Systems

Electric instantaneous systems use high-powered heating elements instead of a gas burner to heat water on demand. They’re smaller and more compact because they don’t need parts like a burner, flue, or ventilation, so you can easily have them installed inside cupboards, under sinks, or in tight spaces.

But heating water instantly with electricity takes a large amount of energy in a very short time. A standard single-phase power supply can only deliver a limited amount of electricity at once, which is not enough to heat large volumes of water for your entire house while multiple taps are running.

To handle higher demand, electric systems require three-phase power. But, most homes don’t have this by default, as single-phase is the standard for residential properties. And if you want to upgrade to three-phase, it often involves changes to the switchboard and supply connection, which is quite expensive.

Because of these limits, electric instantaneous systems in Townsville are only used in lower-demand setups, like a single bathroom or a granny flat, where only a small amount of water needs to be heated at a time.

Based on Heating Technology

1. Standard (Non-Condensing) Systems

A standard instantaneous system is the basic gas model that heats water with a gas burner, and the hot gases created during combustion are vented straight out through a flue.

Some of the heat produced in the burner escapes with those exhaust gases, which means not all the energy from the gas goes into heating your water. Because of this, these units are less energy-efficient than newer designs.

These systems are popular in many older homes in Australia because they are simple and cheaper to buy upfront.



   2.  Condensing Systems

A condensing instantaneous system is a high-efficiency version of a gas unit. It works like a standard system but with one key improvement: it reuses heat from the exhaust gases.

The hot gases from the burner normally leave through the flue. In a condensing system, these gases pass through a second heat exchanger, which transfers much of that leftover heat into the incoming cold water. This means more of the gas energy actually heats your water instead of being wasted.

However, these systems cost more upfront, but in Townsville homes with higher hot water use, the improved efficiency often helps recover that cost through lower gas bills over time.

Based on the Service Area

1. Whole-Home Systems

A whole-home instantaneous system is a single unit that supplies hot water to every tap, shower, and appliance in the house. These units are built for high flow rates, typically 16–32 litres per minute, so multiple outlets can run at once.

In Townsville, these systems are mostly mounted on external walls, which makes ventilation easier for gas units and keeps internal space free.

Whole-home systems are most common in big family households, which naturally have high hot water demand, and these systems provide enough water for everyone at once without temperature drops.

    2.  Point-of-Use (POU) Systems

A point-of-use system is a small, dedicated heater installed right next to a single tap or fixture, for example, under a kitchen sink or besides a bathroom vanity.

Instead of heating water for the whole house, it only warms water for that one outlet, and because it sits so close to the tap, hot water arrives almost instantly, and there’s no waiting for cold water to flush through long pipes.

POU systems are ideal for areas that are far from the main hot water unit, where hot water will take longer to arrive because it has to travel through long pipes. 

Do Instantaneous Systems Really Deliver “Instant” Hot Water?

The short answer is: they heat water instantly, but it doesn’t reach your tap instantly.

When you turn on a hot tap, the system starts heating the water right away. But before hot water reaches your tap, the water that was sitting in the pipes after the last use – sometimes called the 'dead leg' – has cooled down and will flow out first. That means the first few seconds of water coming out of the tap might be lukewarm or even cold. 

If you have a whole-house unit or a large home, especially if your bathroom or kitchen is at the opposite end from the heater, it can take 15 to 30 seconds for the hot water to arrive, because the hot water has to travel through all those pipes.

Inside the unit itself, there’s also a very tiny startup delay of about 1 to 3 seconds. The system has to detect water flow, then turn on the burner in a gas unit or the heating elements in an electric one. 

Pipe insulation also makes a difference. In many older homes, the copper pipes aren’t insulated, so the water sitting inside them cools down between uses. That’s why the first bit of water feels colder when you turn on the tap. Once fresh hot water starts flowing, it stays warm because it moves quickly and doesn’t have much time to lose heat.

What Improves Hot Water Delivery Time

• Install Pipe Lagging: Wrap any exposed copper pipes in foam insulation (lagging). This stops heat from escaping into ceilings or through external walls.

 

• Move the Heater Closer: If possible, position the hot water unit near the taps you use most, usually the kitchen or master ensuite. The closer it is, the less cold water sits in the pipes waiting to be pushed out.

• Install a Recirculation Pump: A recirculation system creates a continuous loop by adding a return pipe from your furthest tap back to the heater. Instead of hot water sitting still in the pipes and cooling down, a small pump keeps it moving in that loop. As this water passes through the heater, the thermistor detects if it has cooled and briefly turns on the system to heat it again. This keeps the water in the pipes warm, so when you open the tap, hot water is already there.

• Use Point-of-Use Units: For bathrooms, laundries, or outdoor sinks that are far from the main heater, a small electric unit installed right under the tap is ideal, as there will be little to no travelling distance. 

How Much Does an Instantaneous Hot Water System Cost?

Upfront Costs

The price of the system depends mostly on the flow rate (litres per minute) and the energy efficiency. For a typical Australian home, there are three main price ranges:

1. Entry-Level ($750 – $1,100): These are smaller electric units or basic gas models with lower flow rates around 16 L/min. They work well for small apartments or as a point-of-use heater for a single bathroom or sink.
   
   
2. Mid-Range ($1,100 – $1,800): This is the most common choice for Townsville family homes. These units deliver flow rates of 20–26 L/min, which is enough to run two showers simultaneously without the temperature dropping noticeably.
   
   
3. Premium ($1,800 – $2,800+): High-end systems, using condensing technology, better internal components, and longer warranties, cost more. These units are ideal for households that want maximum efficiency, durability, and long-term savings.

To install these units, it costs between $600 and $1,500, but several factors can push the price higher. 

• Upgrading the Gas Pipe: Most older storage units use a 15mm gas pipe that provides enough gas for slow, continuous heating. But an instantaneous system needs a big burst of gas right when you turn on the tap. So, the plumber might need to put in a bigger pipe (20 mm or 25 mm) from the metre. Depending on how tricky it is to run, this can cost you $350–$900.

• Powering the Unit: Even gas heaters need a little electricity to turn on the spark and run the sensors. If there’s no power outlet nearby, an electrician will charge $200–$400 to put one in. For fully electric heaters, some homes need a switchboard upgrade or a three-phase connection, which can add $1,000–$2,500.

• Venting and Internal Flueing: Gas heaters can’t blow their hot fumes into your laundry or cupboard. You need a special metal pipe (called a flue) to send the exhaust outside, through the roof or a side wall, which can cost $400–$1,200.

Running Costs

How much you spend depends on your fuel source and how much hot water your household uses.

• Natural Gas: This is the cheapest way to run an instantaneous system. The gas comes straight into your home through the mains, so you pay less per unit. A typical Queensland family of four spends around $350–$600 a year.

• LPG (Bottled Gas): LPG cylinders are more expensive because you pay for gas, delivery, and cylinder rental. You can expect annual costs of $650–$900.

 

• Electricity: Electric instantaneous units are the most expensive to run. Unlike storage tanks, which can use cheaper off-peak electricity (around 19 c/kWh for 16 hours a day), these units run on the standard peak rate (about 32.97 c/kWh) whenever you turn on a tap. For a typical family of four, this adds up to roughly $800–$1,200 per year.

Pros & Cons of Instantaneous Hot Water Systems

Like any system, instantaneous hot water units come with clear advantages and disadvantages. Understanding both sides helps you decide if it suits your home and usage.

The Pros

• Endless Hot Water: Because the system heats water as it flows, you don’t run out of water. As long as the tap is on, hot water keeps coming. This is especially useful in homes where back-to-back showers are common.
  
  
• Lower Energy Bills: Unlike a storage tank, where sitting water loses heat all day and night and then uses energy to reheat, instantaneous systems only heat water when you use it, so they are 24% to 34% more energy-efficient than traditional storage tanks.
  
  
• Compact, Space-Saving Design: These units are small, about the size of a carry-on suitcase, and are usually mounted on an external wall, which saves you space.
  
  
• Longer Service Life: Since there’s no stored water sitting inside, there’s much less risk of internal rust and corrosion, so these systems can last 20 years or more with regular maintenance.
  
  
• Precise Temperature Control: Modern systems allow you to set the water to an exact temperature. Once set, the unit maintains that temperature consistently while you use the water, so you don’t get sudden hot or cold bursts. 

The Cons

• Higher Upfront Costs: The purchase and installation costs are higher than those of a standard tank. You’re paying for more advanced components, like sensors, control systems, and heat exchangers, and sometimes upgrades to gas lines or electrical supply.
  
  
• The Cold Water Sandwich Effect: If you turn a tap off and then back on quickly, you might get a brief burst of cold water. This happens because the system pauses when the flow stops, leaving a small pocket of unheated water in the pipe before it heats up again.
  
  
• Minimum Flow Requirements: These systems need a water flow of around 1.5–2 litres per minute to activate. If the flow is too low, the unit may not switch on properly, and the water can feel lukewarm instead of hot.
  
  
• Flow Rate Limits: Every unit has a maximum output, such as 26 litres per minute. If too many taps are used at once, the system has to spread that hot water across them. This can lead to a drop in temperature or pressure, especially in larger households.
  
  
• Sensitive to Water Quality: Townsville’s water has a higher mineral content, which can build up inside the heat exchanger over time. This scale reduces efficiency and makes the unit work harder. Without regular flushing, it can lead to higher running costs and eventual damage. 

Is an Instantaneous Hot Water System Right for Your Home?

You’ll get the most out of an instantaneous hot water system if your home fits one of these scenarios: 

• Large Families With High Demand: Traditional tanks can run out and take 30–60 minutes to reheat. An instantaneous system heats water as you use it, so everyone in the household can get hot water when they need it, even during busy mornings or evenings.

• Homes with Limited Space: These units are small and wall-mounted, since there is no huge storage tank that will take up space. For gas models, just make sure they’re installed somewhere with proper ventilation.

• Occasional or Seasonal Use: For granny flats, holiday rentals, or guest rooms, these systems are perfect because they only use energy when you’re actually using hot water. You’re not wasting money keeping a full tank hot when no one’s home.

• Retirees or Smaller Households: If your house used to be full but now only has one or two people, an instantaneous system adapts to your usage, so you only heat the water you actually need.

• Solar-Powered Homes: Electric instantaneous units pair well with solar panels. During the day, you can heat hot water using solar energy instead of the government grid electricity, which keeps running costs down.

• Renovations and Extensions: If you’re adding a new bathroom, ensuite, or granny flat, connecting it to your existing hot water system can be complicated and expensive. Installing a small, dedicated instantaneous unit for the new area is often faster, cheaper, and gives hot water almost instantly. 

Final Thoughts

Instantaneous hot water systems are a game-changer for homes with limited space where installing a large storage tank isn’t practical. They provide a steady, on-demand supply of hot water, while often keeping both upfront and running costs lower compared to traditional storage systems.

But know that these systems perform their best only when they’re installed and set up properly. Things like pipe lengths, water pressure, and even the quality of your water can make a big difference to how quickly and reliably you get hot water.

Because of all these variables, it’s not always easy to choose the right system or position it in the perfect spot. That’s why you need professional guidance. A licensed plumber can make sure the unit suits your home, the installation is done correctly, and the system is optimised so you get fast, consistent hot water.

At 1touch Plumbing, we handle all these things, from helping you pick the right system to expert installation and ongoing maintenance, so you don’t have to worry about leaks, poor flow, or premature wear.

Contact us today for professional, efficient, hassle-free installation!

FAQs

Why does my water temperature fluctuate in the shower?

If you feel hot and cold waves while showering, it’s usually because another tap in the house has been turned on. Instantaneous units can only heat a certain amount of water at a time. When a second tap opens, some of the hot water gets shared, so the shower temperature drops for a few seconds. Smaller units (16–20 L/min) are more affected because they’re closer to their maximum capacity.

Can I install an instantaneous system myself?

No. In Queensland, hot water installations must be done by a licensed professional under the Plumbing and Drainage Act 2018. These systems involve high-pressure gas and complex electrical connections, so DIY installation is dangerous and illegal and can void your warranty and home insurance. 

A licensed plumber must also complete and submit Form 4 for notifiable work – hot water installations fall under this, which homeowners aren’t allowed to do themselves.

Are instantaneous systems noisy?

They are louder while running than storage tanks. When you turn on a hot tap, you’ll hear a whoosh or humming from the internal exhaust fan and burner (or electric heating element). This is normal and about 50–60 decibels, which is similar to a quiet dishwasher. 

Loud banging or high-pitched whistling isn’t normal. It might mean there’s a water pressure issue or mineral buildup inside the system, so it’s best to call our plumber to take a look.

Will an instantaneous system work during a power outage?

Usually not. Even gas units need a little electricity for the digital control board, flow sensors, and electronic ignition that sparks the burner. Without power, the unit won’t heat water unless you have a backup power source. Electric units obviously require a large amount of electricity, so they also won’t work at all during an outage.