Login
ISCOVER
Over a quarter of residential property transactions in Australia’s eastern states were funded without a mortgage attached in 2022, new PEXA research has found.
According to PEXA’s Cash Purchases Report, 25.6 per cent of the total value of residential sale settlements in the eastern states ($478.6 billion) was cash-funded purchases in 2022, amounting to $122.5 billion.
To continue reading the rest of this article, please log in.
Looking for more benefits? Become a Premium Member.
Create free account to get unlimited news articles and more!
Looking for more benefits? Become a Premium Member.
PEXA’s report defined cash purchases as having no mortgage registered on the property title at settlement and may include alternative finance sources.
While 2022 trended similarly to 2021 (where $124.8 billion of property exchanged without a mortgage), there’s been a surge since 2020 that recorded $83.6 billion, revealing a shift in buyer behaviour, possibly due to the heightened market boom post-COVID-19, according to PEXA.
Notably, the cash purchases recorded in the eastern states were skewed towards regional areas during last year.
In Queensland, 65.2 per cent of cash purchases were in regional areas, followed by 56.3 per cent in NSW.
Victoria had a lower proportion of cash purchases in its regional areas at 36.8 per cent during 2022.
PEXA’s head of research Mike Gill said: “The PEXA Cash Purchases report shines light on an often-overlooked segment of the property sector.
“Given these transactions represent more than a quarter of all residential property purchases, it is important to consider that this is a sizeable cohort of buyers who are less impacted by rising interest rates, having not taken out a loan.”
Mr Gill further stated that the research found that cash buyers tended to be older and more likely to be buying in regional locations, highlighting the generational divide between borrowers.
“Younger home owners are more likely to have larger home loan balances, particularly those who have purchased recently, while many older home owners are likely to have paid their home loan off or be able to pay cash for a home to retire in,” Mr Gill said.
“Therefore, as the RBA raises interest rates to slow the economy and fight inflation, the burden falls more toward younger Australians who are more sensitive to rising rates and less so on older generations who may in fact benefit if they have savings.”
When asked about what role brokers have to play in cash purchases, director of Kelso Finance, Sandy Kelso, told the Adviser: “I’ve often seen buyers tell the agent that [they] have cash offer when they actually just mean they have a pre-approval and know that they are bulletproof on their offer.”
Ms Kelso speculated that the surge in cash purchases could mainly be coming from downsizers who have cash in the bank.
“It makes sense to pay cash for your owner-occupied property but potentially it’s worth not doing a cash purchase especially if the debt is tax-deductible, so an investment property or an Airbnb for example,” Ms Kelso added.
“No one likes to pay tax so if you can reduce your taxable income you are one step ahead!”
[RELATED: 88.1% of property sales settled on 1st date: PEXA]
JOIN THE DISCUSSION