The total value of cash-funded residential sales – or those without a mortgage – rose 1.5% in 2023 across New South Wales, Victoria, and Queensland, coming in at $130 billion, a new report found.
Property settlement platform PEXA said 28.5% of all residential property sales in 2023 were paid for in cash, up from 25.6% in 2022.
PEXA’s chief economist Julie Toth (pictured below) said cash buyers, largely older Australians, are changing the dynamics of the residential property market and having a greater influence on demand.
“The relatively large size of this group helps to explain the property market’s resilience in 2023 despite rapid rises in interest rates,” she said.
Intergenerational divide in home affordability
Last year, home values climbed more than 8% nationally despite five interest rate hikes during the calendar year, taking the total number of cash rate increases to 13 since May 2022.
The rate has jumped from 0.1% to 4.25% in that time, yet housing market demand has remained strong.
PEXA data shows cash buyers tend to be older and more likely to be retired, with lower household incomes but also fewer dependents, with accumulated property, savings, and superannuation to fund their purchases.
They are also more likely to have benefitted from rising interest rates through interest-earning savings, Ms Toth said.
“This could be exacerbating the existing intergenerational wealth divide when it comes to housing affordability,” she said.
The research group’s report noted “the limitations of monetary policy to control inflation” with the data suggesting rising interest rates disproportionately target younger mortgage holders, increasing the intergenerational wealth gap.
Retirees driving regional cash sales
Queensland recorded the highest rate of cash sales in 2023, accounting for almost 30% of total residential purchases.
Regional sales attracted the largest proportion of cash buyers, “likely being driven by retirees and downsizers looking for a ‘tree change’ or ‘sea change’”, Ms Toth said.
Queensland ‘s 4421 postcode (Tara on the Western Darling Downs), known for its affordable rural blocks, attracted the highest cash-buying rate at 86% of property sales.
Meantime, Surfers Paradise (4217) on the Gold Coast topped the aggregate value of cash purchases nationally, hitting $1.43 billion in 2023.
In New South Wales, Gloucester on the mid-north coast (postcode 2422) saw the highest rate of cash buyers at almost 64% while in Victoria, 58% of sales in Paynesville, Gippsland (3880) were paid for in cash.
Inner-city buyers also like cash
Inner-city urban buyers were also more likely to pay in cash, the data found, through a combination of owner occupiers relocating, as well as domestic and international investors buying rental properties.
More than half of all purchases in Melbourne’s inner-city 3000 postcode were paid for in cash last year, Ms Toth said.
In New South Wales, young overseas migrants were likely to have driven almost $1 billion of cash sales in Marsden Park, in Sydney’s north-western growth corridor, where more than 60% of sales were for vacant land.
PEXA’s 2023 Cash Purchases Report also suggested demographics would continue to drive an increase in cash sales as the older age cohort grows.
Image by Melissa Walker Horn on Unsplash
Image of Julie Toth via PEXA Facebook
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