More than one in four residential properties purchased in New South Wales, Victoria and Queensland last year were paid for entirely with cash by older Australians, making them immune to interest rate hikes and propping up the housing market.

The research by Property Exchange Australia (PEXA) found that $454.7 billion worth of residential property was purchased in the eastern states last year, with $129.6 billion paid for in cash — that is, without taking out a mortgage with a lender.

It means 28.5 per cent of properties sold in New South Wales, Victoria and Queensland last year were purchased without a mortgage — an increase of 1.5 per cent (or $1.9 billion) since 2022.

PEXA’s chief economist, Julie Toth, said the strength in cash sales explained the ongoing resilience in Australia’s property market.

“The relatively large share of purchases that are continuing without the mortgage pressures, and without really being all that vulnerable to interest rate rises, helps explain why that resilience was persisting,” she said.

“Over the three to four years that we have visibility of this data, the cash purchase group has persistently been at least 25 per cent across the three major markets.

“It does seem to be a structural feature that we can expect to see continue forward.”

Despite the higher cost of living for households, Ms Toth said the increase in the number of cash buyers suggests there is a growing number of people who are immune to the effects of rate increases by the Reserve Bank.

The research group’s report noted “the limitations of monetary policy to control inflation,” referring to the Reserve Bank’s series of interest rate hikes.

Ms Toth noted that higher rates have likely been advantageous to cash buyers, who are typically older and retired, and benefit from higher savings rates offered by banks.

“Our research found the demographic profile of cash buyers is different to mortgage buyers — cash buyers tend to be older and more likely to be retired,” she said.

“They tend to have lower household incomes, but they also have fewer dependents and are more likely to be ‘asset-rich’, with accumulated property, savings and superannuation to fund their next purchase.

“The demographics also suggest that we might see an increase because the older age cohort is growing.”

Regional areas attracting cash buyers

Queensland had the highest percentage of residential properties purchased in cash last year at 29.6 per cent, followed by NSW at 27.7 per cent, and Victoria at 25.2 per cent.

NSW also had the highest aggregate value of cash purchases last year, with the median cash-only purchase totalling $770,000.

(The median value of cash purchases in Victoria and Queensland was $604,500 and $570,000 respectively.)

Ms Toth said the data from NSW confirmed that Sydney is “the most expensive property market in Australia”.

“Even though the proportion of cash sales are lower, the aggregate value still picks up when we’re at such high property values to begin with,” she said.

The places with the highest proportion of cash purchases were in regional areas popular with older Australians who are likely to be retired — and in areas where property prices are more affordable.

In Tara, a town around 300km west of Brisbane, 86 per cent of properties sold last year were paid for in cash, with a median cash purchase value of $82,500.

(PEXA’s data only includes postcodes that have shown at least 80 cash purchases in the 2023 calendar year.)

Russell Island, in Queensland’s Moreton Bay, had 76 per cent of properties purchased paid for in cash last year, with a median cash purchase value of $85,000. 

‘Diverse’ properties drive city cash splash

However, “urban centres” had the highest overall value of cash purchases due to their higher property prices and greater number of purchases.

Surfers Paradise in the Gold Coast, saw $1.4 billion of cash purchases made in 2023, with a median cash purchase value of $800,000.

The coastal hotspot is home to nearly 20,000 units, apartments and townhouses according to the Gold Coast City Council.

“It should be noted that cash buyers in these metropolitan postcodes were diverse and included both owner occupiers and investors (domestic and overseas), purchasing a range of property types at different price points,” PEXA’s report noted.

Similarly, Melbourne (postcode 3000) recorded over $1.3 billion of cash purchases last year, but had a lower median cash purchase value of $603,500 when compared to Surfers Paradise.

Ms Toth said Victoria’s performance in the cash sales market was slightly skewed by a larger share of vacant land purchases compared to other states.

“That’s people buying a block of land in preparation for a house and land package to be built later,” she said.

“In Queensland it tends to be more of the established home market.

Gold Coast City councillor Darren Taylor said the COVID pandemic had brought waves of interstate migration to the Glitter Strip and the ready availability of dwellings in Surfers made it a popular choice for out-of-town buyers.

“There’s also been a really big shift on the Gold Coast,” he said.

“Years ago, it used to be a lot of investors from down south [buying property] but we’re actually seeing a lot of locals downsizing too.

“They’re selling their houses and actually moving into the city and into these units as well as the investors and people moving from other parts of Australia.”

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