More than one in four transactions for dwellings or land is settled with cash in Australia’s three most-populous states, with buyers largely unaffected by higher interest rates, data group Pexa said.
Many of the cash purchases (those paid for in full without a loan) were made in regional parts of New South Wales, Queensland and Victoria, often by retirees or others downsizing to less expensive properties. Cash purchases for foreign students or recent migrants also make up a sizeable share of sales in inner-city areas.
Properties worth more than $25bn were bought with cash in the three states in the March quarter alone, including about 31% of the transactions in Queensland, Pexa data shows.
The share of cash purchasers in the eastern states has hovered aroud the 25%-mark for about five years.
Mike Gill, head of Pexa’s research, said the cashed-up buyers were by definition immune to higher interest rates. In fact, increases in deposit rates would give this cohort a competitive edge in snapping up land or dwellings.
“The [Reserve Bank] does use interest rates as a mechanism to control inflation,” Gill said. “It is disproportionately targeted towards borrowers”, who tend to be younger and have had to take out a relatively large loan to enter the real estate market.
The RBA has lifted interest rates 12 times since last May to rein-in the highest inflation in three decades. The June quarter consumer price figures, released this week, suggest the central bank may not need to lift rates much higher – if at all.
Median dwelling prices are now on the rise in all capital cities – except for Canberra – a trend that may lure more people back into the market. The price uptick is likely to include those sitting on a cash pile, Gill said.
“We had a very strong finish to the [financial] year,” he said. “Cash purchases have also risen in line with the overall market.”
Many of the postcodes with the highest share of cash purchases were outside the major cities, often in areas with lower median prices and older populations, Pexa data shows.
Pexa tracks almost all transactions and then compares the numbers with data on bank loans to identify which were likely paid for by cash.
In Queensland, almost two-thirds of cash purchases in 2022 were in regional areas. For NSW, the share was 56.3% and almost 37% in Victoria.
Surfers Paradise, a favoured destination for retirees, topped the Queensland tally for cash purchases in the June quarter this year with 358 transactions. The median price of these sales was almost $760,000. Noosaville had the highest proportion of cash sales at 53.8%.
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Exceptions included Melbourne’s 3000 postcode area. In the June quarter, there were 601 purchases for cash with a median sales price of almost $600,000. Just over 50% of transactions were cash-settled.
The equivalent Sydney postcode, 2000, registered 108 such sales for cash in the quarter, with the median price at $1.45m. Within Sydney, Milsons Point had the highest proportion of cash sales at 54.3% and a median price of $2m.
Other relatively urban hotspots for cash purchases include Marsden Park in Sydney’s fast-growing western suburbs. About 266 properties changed hands for cash in the quarter, with 77.1% of them involving the purchase of vacant land.
Similar activity was evident in Melbourne’s rapidly expanding outer suburbs. About 82% of the 335 cash purchases for the June quarter in the northern suburb of Craigeburn were for vacant land, as were 83% of the 223 transactions in the south-western suburb of Tarneit, the data showed.
A separate Pexa report showed that 665,000 properties changed hands nationally in the year to June, down 18.6% from the previous year. All states showed a retreat.
However, June alone saw 66,000 property sales, a result comparable to earlier years and suggesting “the market has bottomed in anticipation for a recovery in FY24”.
Factors boosting the market include “the re-opening of borders and the resulting increased migration, low volumes of new listings as sellers wait for the market to improve and a very tight rental market”, Pexa said.
