In 2023, more than a quarter of all property transactions in New South Wales, Victoria, and Queensland were paid for in cash (commonly known in Hong Kong as "full pay," meaning a one-time, no-loan purchase). According to PEXA research, 28.51% of properties purchased in these three states last year were purchased without a loan, primarily by older, retired, and asset-rich Australians. The Tara region in Queensland had the highest proportion of cash buyers, while cash purchases in the Gold Coast's Surfers Paradise region exceeded A$1.4 billion.
An aging population is driving the trend towards buying properties with cash
PEXA chief economist Julie Toth expects the proportion of cash buyers to increase in the future as the population ages. Last year, more than a quarter of residential properties purchased in New South Wales, Victoria and Queensland were paid all cash by older Australians, insulating them from rising interest rates and supporting the housing market.
PEXA research found that a total of $454.7 billion of residential property was purchased in the eastern states last year, of which $129.6 billion was paid in full cash, meaning no mortgage was involved. This means that 28.5% of properties sold in the three states last year were purchased without a mortgage, an increase of 1.5% (or $1.9 billion) compared to 2022.
Julie Toth noted that the increase in cash sales explains the continued resilience of the Australian housing market. Despite rising household living costs, the rise in cash buyers suggests that more people are being insulated from the impact of rising central bank interest rates. This could exacerbate existing generational wealth divides, particularly around housing affordability.
There may be limitations to raising interest rates to control inflation
The research team's report points to the limitations of central bank interest rate policies in controlling inflation. Julie Toth noted that for cash buyers, who are typically older and retired, interest rate hikes may actually be beneficial to them because they benefit from the higher cash deposit interest rates offered by banks.
Queensland had the highest proportion of residential property purchases made with cash last year, at 29.6%, followed by New South Wales at 27.7% and Victoria at 25.2%. New South Wales had the highest total purchase value last year, with a median cash purchase price of $770,000.
Queensland properties are affordable, attracting retirees
The research also showed that areas attracting cash buyers are mainly those regional areas that are popular with older Australians who may have retired, as well as areas with more affordable property prices. For example, in the small town of Tara, about 300 kilometers west of Brisbane, 86% properties were paid for in cash last year, with a median cash purchase price of A$82,500.
However, in the "city centres", the total amount of cash purchases is the highest due to higher property prices and a higher number of purchases. For example, Surfers Paradise on the Gold Coast will have a total cash purchase amount of A$1.4 billion in 2023, with a median cash purchase price of A$800,000.
Cash buyers include interstate movers
Gold Coast City Councillor Darren Taylor said the COVID pandemic had driven a trend of interstate migration, with the availability of ready-to-move-in homes in Surfers Paradise making it a popular choice for out-of-town buyers. "There's been a big shift on the Gold Coast as well," he said. "Years ago, it was usually investors from down south buying property here, but we're actually seeing a lot of locals downsizing as well. They're selling their homes and actually moving into these units in the city, a mix of investors and people from other parts of Australia."
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