Where cash buyers are splurging billions on property
An analysis of settled residential property transactions by electronic conveyancing firm PEXA found that the volume of all cash purchasesalso increased by 3.9 per cent to 141,000 properties, largely reflecting a stronger property market in FY24.
Cash buyers splurged about $1.7 billion snapping up homes in the City of Sydney alone. Bloomberg
While the share of properties sold without a mortgage shrank slightly in volume terms by 0.4 of a percentage point to 26.5 per cent from a year ago, the proportion of cash purchases by value rose to 28 per cent.
Julie Toth, PEXA’s chief economist, said the sheer number of cash buyers would continue to support house prices.
“This segment is less affected by interest rates, and they comprise a large portion of the market, which I expect will continue to rise in line with the ageing population,” she said.
“The amount they spend on property, 28 per cent of all transactions, is substantial, which is one of the reasons why the housing market stayed resilient in the past year.”
Micaela Fuchila, Jarden’s chief economist, said generational wealth transfers and rising investor lending had driven this housing cycle along with an increase in listings.
“This dynamic has also avoided a much sharper housing downturn,” she said.
Wealthy cash buyers flocked into desirable inner suburbs in Sydney and Melbourne, and older retirees splurged on regional properties across the eastern states.
Sydney (postcode 2000) was the most popular among cash buyers, with $1.7 billion worth of property bought without a mortgage – the highest in the country. Buyers bought 540 properties in cash deals at a median value of $1.65 million.
Surfers Paradise on the Gold Coast followed, with $1.6 billion worth of properties transacted without debt across 1206 properties at a median sales price of $820,000.
Blue-chip suburbs Mosman, Darling Point and Bondi Beach in Sydney and Brighton, Toorak, Kew and Balwyn in Melbourne were also in high demand among cashed-up buyers, who poured in between $400 million and $1.1 billion in each of those areas.
Postcodes dominated by apartments such as St Leonards, Waterloo and Randwick in Sydney also recorded large amounts of cash sales as buyers snapped up between $500 million and $800 million worth of properties across those suburbs.
Countercyclical buy
Eliza Owen, CoreLogic’s head of research, said the slower growth in housing markets across Sydney and Melbourne could attract more cash buyers to the market.
“Given some sharp price declines across some of the higher-end markets of Sydney and Melbourne, there is an argument that for those who are looking for a countercyclical buy, it would be better for them to get in before the first rate cut comes around June next year,” she said.
House prices have plummeted by as much as 9.7 per cent across Sydney suburbs Rodd Point, Abbotsford and Balmain East over the past three months to October, CoreLogic’s data shows.
Similarly in Melbourne, house values have slumped 9 per cent across Albert Park, 8.6 per cent in South Melbourne and 6.1 per cent in Elwood.
Independent demographer Mark McCrindle agreed that falling house prices could spur on more opportunistic cash buying.
“If people have cash and can take advantage of the current buyer’s market, that will help sustain house prices,” he said.
“So Australia’s property market is not likely to see a significant fall or crash because there is a lot of money available, sitting on the sidelines, and able to step in when there are buying opportunities.
“So even though the rising listings may be a perfect storm for young house buyers, it’s also an opportunity for cash buyers, who largely are in the older generations.”
Tara in rural Queensland posted the highest proportion of cash purchases at 77.4 per cent, followed by Russell Island, located north of Brisbane, at 76.8 per cent. Those sales were dominated by vacant land, which sold at a median price of $77,000 and $65,000 respectively.
There was also an unusually high proportion of cash purchases in postcodes that have been affected by recent flooding or are at high risk of future flooding, such as Lismore (postcode 2480) and Moama (postcode 2731).
Ms Toth said this could indicate that potential buyers in those regions might struggle to secure insurance and/or mortgages because of financial institutions’ concerns regarding environmental risks.
In the capital cities, Milsons Point in Sydney’s lower north shore recorded the highest proportion of cash sales with more than one in two (54 per cent) transacting without a mortgage.
The investor-dominated postcodes of 3000 (Melbourne) and 3053 (Carlton) also attracted high proportions of cash-only transactions – about half sold without a mortgage.
“Those postcodes have many student accommodations and new high-density dwelling construction, which tend to be regarded by financial institutions as high risk,” Ms Toth said.
“However, investor demand for these dwellings is likely to remain high, especially given the record-high intake of international students in recent years.”
