Over a quarter of all homes purchased in Australia’s eastern states were funded entirely with cash in 2023, with buyers immune to recent interest rate hikes, according to a report released by Property Exchange Australia (PEXA) this week.
PEXA’s 2023 Cash Purchases Report has revealed that the total value of cash-funded residential sale settlements (that is, properties purchased without a mortgage attached) increased by 1.5 per cent in 2023 across Victoria, New South Wales and Queensland, totalling $129.6B.
This was up from $127.7B in 2022, with cash funding now accounting for 28.5 per cent of all residential property sales in 2023 (up from 25.6 per cent in 2022).
NSW recorded the highest aggregate value of cash purchases in 2023 at $54.9B, accounting for 27.7 per cent of total residential purchases. QLD followed, with cash-purchases valued at $39.4B (29.6 per cent of total residential purchases), and Victoria at $35.3B (25.2 per cent of total residential purchases).
PEXA’s Chief Economist Julie Toth observed that cash-buyers are changing the dynamics of the residential property market and exerting a greater influence on overall property demand.
“The relatively large size of this group helps to explain the property market’s resilience in 2023, despite rapid rises in interest rates”, Toth said.
“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”, she added.
Toth said the research also found the demographic profile of cash buyers is different from 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”, she said.
“If they have interest-earning savings, then they may even have benefited from rising interest rates.”
PEXA’s report revealed that the growing cash-buyer market is dominated by two groups; regional buyers – who contributed to the largest proportion of residential cash-buyers; and inner city-urban buyers – who made up the largest share of cash purchases by value and volume, due to greater transaction volumes and higher priced properties in inner city locations.
“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”, 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”, she concluded.
