Cash buyers drive property market resilience

More than one in four properties purchased in cash amid rising interest rates

Cash buyers drive property market resilience

Over a quarter of all residential property purchases in Australia’s three largest states were made entirely in cash in 2023, unaffected by the recent hikes in interest rates, a report by PEXA has revealed.

It also showed that cash transactions in residential sales settlements across New South Wales, Victoria, and Queensland rose by 1.5%, reaching a total of $129.6 billion, up from $127.7 billion the previous year.

Cash purchases now represent 28.5% of all residential property sales, an increase from 25.6% in 2022.

“Cash buyers are changing the dynamics of the residential property market and exerting a greater influence on overall property demand,” said Julie Toth (pictured), 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

“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.

“This could be exacerbating the existing intergenerational wealth divide when it comes to housing affordability,” Toth said. “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. 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.”

The PEXA report found that New South Wales saw the highest total value of cash purchases at $54.9 billion, followed by Queensland and Victoria, with $39.4 billion and $35.3 billion, respectively.

It further revealed a divide between regional and urban cash buyers, with the former group driving a significant portion of cash transactions, particularly among retirees seeking lifestyle changes. Urban areas, especially in city centres, attracted cash buyers due to the higher property values and volumes, with Melbourne’s postcode 3000 seeing over half of its property purchases made in cash.

In Queensland, regional areas experienced the highest proportions of cash purchases, with 33,055 residential properties bought without a mortgage, highlighting the affordability of these locations.

Urban centres across the eastern states, such as Surfers Paradise in Queensland, commanded higher cash purchase values, with postcode 4217 topping the list at $1.43 billion in 2023.

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