More than $120 billion worth of property was purchased in Australia’s eastern states with cash in 2023.
According to PEXA’s Cash Purchases Report, 28.5 per cent of properties in Victoria, NSW and Queensland were bought without a mortgage last year, up by 1.5 per cent on 2022.
The report revealed cash property purchases in the three states totalled $129.6 billion, which was up from $127.7 billion a year earlier.
In 2022, about 25.6 per cent of residential property sales were paid for with cash.
PEXA Chief Economist Julie Toth said the cash sales were evidence of the real estate market’s resilience.
“Cash buyers are changing the dynamics of the residential property market and exerting a greater influence on overall property demand,” she said.
“The relatively large size of this group helps to explain the property market’s resilience in 2023, despite rapid rises in interest rates.
“While rising interest rates have contributed to cost-of-living impacts across most types of households, the growth of this cash-buyer cohort – at over a quarter of all residential property buyers across the eastern states – suggests the rate rises of the past year have not affected the ability of these buyers to purchase property to the same extent as buyers who require a mortgage.”
Ms Toth said this could exacerbate the existing intergenerational wealth divide when it comes to housing affordability.
“Our research found the demographic profile of cash buyers is different to mortgage buyers – cash buyers tend to be older and more likely to be retired,” she said.
“They tend to have lower household incomes, but they also have fewer dependents and are more likely to be ‘asset-rich’, with accumulated property, savings and superannuation to fund their next purchase.
“If they have interest-earning savings, then they may even have benefited from rising interest rates.”
NSW recorded the highest aggregate value of cash purchases in 2023 at $54.9 billion, accounting for 27.7 per cent of total residential purchases.
Queensland followed, with cash-purchases valued at $39.4 billion (29.6 per cent of total residential purchases), and Victoria at $35.3 billion (25.2 per cent of total residential purchases).
In NSW, Marsden Park (postcode 2765) recorded the highest aggregate value of cash purchases in 2023, with $971.9 million of properties purchased without a mortgage.
Gloucester (postcode 2422) recorded the highest percentage of residential properties purchased with cash at 63.9 per cent.
In Queensland, Surfers Paradise (postcode 4217) recorded the highest aggregate value of cash purchases in 2023, with over $1.4 billion of properties purchased without a mortgage.
Meanwhile, Tara (postcode 4421) recorded the highest percentage of residential properties purchased with cash at 86 per cent.
In Victoria, Melbourne (postcode 3000) recorded the highest aggregate value of cash purchases in 2023, with just over $1.3 billion properties purchased without a mortgage.
Paynesville (postcode 3880) recorded the highest percentage of residential properties purchased with cash at 58 per cent.
The Agency Chief Executive Officer of Real Estate, Matt Lahood, said his network’s agents were seeing an increase in cash purchases in markets such as Milsons Point and Darling Point.
“We’re definitely seeing this happen in the salubrious markets, where there’s a lot less ‘subject to finance’ clauses being asked for in contracts,” he said.
“They’re unconditional sales, being bought immediately, without finance.”
Mr Lahood said the PEXA figures showed that in Milsons Point, 63.6 per cent of sales in 2023 were paid for in cash.
He said the majority of the buyers paying cash were empty-nesters.
“They’re downsizing,” he said.
“It’s more empty-nesters than the upgraders as the upgraders are still borrowing.
“The downsizers have the big house and they’re selling it, or they have a big apartment and they’re selling it and buying something smaller.”
Mr Lahood said cash sales by this section of the market went a long way to explaining why prices across the country had continued to rise despite many interest rate hikes.
He said about 33 per cent of Australians rented and with almost the same percentage paying cash for their properties, it meant only about one-third of property owners had a mortgage.
“I’ve been selling and managing teams for 30 years now and every time I have seen an interest rate rise, I’ve seen a price drop, but this time I haven’t seen that,” Mr Lahood said.
The PEXA report also found that regional buyers contributed the largest proportion of residential cash buyers, while inner city urban dwellers made up the largest share of cash purchases by value and volume.
“Regional cash property purchases are likely being driven by retirees and downsizers looking for a ‘tree change’ or ‘sea change,’ which has become a popular trend in recent years,” Ms Toth said.
“In contrast, the inner-urban cash buyers are likely a combination of affluent owner-occupiers who are relocating, plus domestic and international investors buying rental properties.
“In Melbourne’s postcode 3000 for example, over half of all purchases were paid in cash in 2023.”
Regional areas across Queensland saw the highest proportions of cash purchases in 2023, with a total of 33,055 residential properties purchased without a mortgage in these locations.
Properties were also more affordable in these regional areas.
While the eastern state postcodes with the highest aggregate value of cash purchases in 2023 were mostly in urban centres.
These popular residential postcodes commanded higher prices, with postcode 4217 (Surfers Paradise) topping the eastern states and the aggregate value of cash purchases hitting $1.43 billion in 2023.
