1/2 of the Homes in These Areas in Australia Are Purchased 100% in Cash

In 2023, a quarter of real estate on Australia’s east coast was bought entirely in cash, the majority by retirees and wealthy investors.  

Experts say cash buyers have helped stimulate real estate market price increases by not controlling interest rates. 

According to the Property Exchange Australia (PEXA) 2023 Report, released on Wednesday, 28.5% of domestic real estate transactions are paid in cash. This number is up from 25.6 percent over the same period last year. This means that the properties are purchased without a bank loan. 

The total estimated value of these transactions reaches $129.6 billion compared to $127.7 billion in 2022.

In Sydney, the suburbs with the highest proportion of properties purchased for cash include: Milsons Point (63.6%), Darling Point (60%) and Sydney CBD (54.3%).

In Melbourne, more than half of homes were bought in cash in Carlton (52.3%) and Melbourne (50.6%). Other developed areas such as Brighton and Toorak have 44.2% and 42.9% respectively.

PEXA chief economist Julie Toth said strength in cash home sales has helped fuel the real estate market. 

“This is one of the reasons why this market has remained resilient over the past two years despite rising interest rates, proving that recovery is still possible.”

She said cash-paying customers are an important part of the market, the majority of whom are not pressured by home loans.

Nearly a third of Australian households own their home without any loans, based on the 2021 population and housing census. 

Neighborhood buyers, mostly retirees moving from the city to the countryside or the coast, and wealthy downtowners, are two groups driving the trend, Ms. Toth said.

“For example, in Melbourne – Toorak and Brighton, in Sydney – Mosman is one of the suburbs with the largest number of cash buyers.” 

“Areas with many new apartments are favored by investors with higher quantity and value. Reasonable use of financial income sources helps the process of owning other assets without needing to borrow. 

The phenomenon of large numbers of buyers paying in cash is exacerbating the generational divide between rich and poor when it comes to housing affordability. 

Daphne Sauvage from Sydney Sotheby’s International said she had seen more people paying in cash last year which helped boost prices.

“Customers with large amounts of cash will execute operations more quickly and decisively than those who rely on loans. This will continue to increase without any hindrance.” 

Alex Phillips from PPD says the market is being driven by retirees and those making money from real estate. This process is creating competition and is expected to increase the number of cash home buyers because of the growing aging population.

Jellis Craig director Andrew Macmillan, who sells for Melbourne’s Stonnington council, which includes Toorak, says finance is rarely discussed at the top end of the market.

“When negotiating a transaction, a financing contingent clause should not be used in the case of real estate sales over $1 million,” he said.

According to Macmillan’s personal opinion, those with cash are taking advantage of the market weakness caused by high interest rates.

Macmillan shares that most cash buyers tend to be small to mid-sized business owners, especially business owners who sell their companies or retirees. 

Source: SBS