This article is from the Australian Property Journal archive
MANY buyers have remained immune to the recent interest rate hike cycle, with cash funding representing more than a quarter of all residential sales across Australia’s three largest states in 2023.
According to a new PEXA report, 28.5% of all residential property sales in Victoria, New South Wales and Queensland were entirely funded with cash in 2023.
“Cash-buyers are changing the dynamics of the residential property market and exerting a greater influence on overall property demand,” said Julie Toth, chief economist at PEXA.
“The relatively large size of this group helps to explain the property market’s resilience in 2023, despite rapid rises in interest rates.”
The total value of these sales was up 1.5% over 2023, totalling $129.6 billion or an increase from $127.7 billion in 2022, where cash funded sales accounted for 25.6% of all residential property sales.
“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,” added Toth.
Toth noted this trend could be deepening the intergenerational wealth divide where it concerns 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,” said Toth.
“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.”
Over 2023, NSW recorded the highest combined value of cash purchases at $54.9 billion, which accounted for 27.7% of total residential purchases.
Queensland followed, with cash purchases coming in at $39.4 billion, reflecting 29.6% of total residential purchases.
While in Victoria, cash purchases were valued at $35.3 billion or 25.2% of total residential purchases.
The report revealed two main groups dominating the cash buyer market in regional buyers and inner city-urban buyers.
Regional buyers made up the largest proportion of residential cash buyers, with regional Queensland seeing the highest proportion at 33,055.
“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,” said Toth.
Meanwhile, inner-urban cash buyers made up the largest share of purchases by value and volume.
“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,” added Toth.
Surfers Paradise (4217) was the top postcode for the eastern states, with the aggregate value of cash purchases at $1.43 billion.
Melbourne’s 3000 postcode recorded the highest aggregate value of cash purchases in Victoria at $1.3 billion.
While Marsden Park (2765) saw the highest aggregate value of cash purchases in NSW at $971.9 million.
