The number of properties sold without a mortgage jumped sharply during the second quarter in Australia’s three largest states, with cashed-up buyers flocking to Melbourne CBD’s apartment market, new data reveals.
The share of cash buyers widened in the past year, rising to 26.7% of all sales in NSW, lifting to 27.8% in Queensland and to 24.1% in Victoria.
Last year, cash purchases accounted for 24.3% of all sales in NSW, 26.9% in Queensland, and 20.6% in Victoria.
PEXA data also show that cash buyers of property have flocked to Melbourne’s CBD during the second quarter of 2023, with 601 cash-only transactions recorded, the largest volume of mortgage-free residential property transactions of any suburb in the country.
PEXA suggests that the data shows signs that downsizer activity is ramping up.
Far behind as the second most popular destination for cash buyers is Surfers Paradise in Queensland, which recorded 358 cash transactions over the same period.
In third place was Craigieburn in Victoria with 335 cash transactions.
Five NSW suburbs also made the list of popular suburbs for mortgage-free transactions - Marsden Park, Hamlyn Terrace, Austral, Kellyville, and Macquarie Park.
Meanwhile, it was Broadbeach in Queensland - which had 193 property sales and came in 7th place - which had the highest median cash-only property price of $1.4 million.
During the three months that ended June, unit values rose 3.8% in Melbourne CBD, 5.1% in Surfers Paradise, 5.8% in Southport, and 2.7% in Broadbeach, according to CoreLogic.
|Postcode||Suburb||Number of cash purchases||Vacant land (%)||Median sell price ($)|
|4217||Surfers Paradise, QLD||358||0.6||759,950|
|2765||Marsden Park, NSW||266||77.1||596,825|
|2259||Hamlyn Terrace, NSW||170||35.9||572,500|
|2113||Macquarie Park, NSW||124||0||1,009,855|
Source of Chart – Australian Financial Review
Mike Gill, head of research at PEXA said the rise in the cash settlements partly helped stabilise the housing market.
“Limited supply relative to demand was the main fuel for the rebound in the housing market, but the rising volume of cash transactions suggests that if these cash buyers weren’t as active in the market as they were, there would be less demand, and that could have had a detrimental impact to the overall market,” he said.
“Cash buyers make up for a large proportion of sales overall, so it has helped strengthen the market and create that demand that otherwise might not be there.
“Because they aren’t sensitive to interest rate movements they can continue to transact despite rising interest rates.”
Tim Lawless, director at CoreLogic research told the AFR that he isn’t surprised by the numbers given the high interest rate environment and how difficult it is to secure a loan.
Data shows that in Melbourne’s outer fringe areas of Craigieburn, Tarneit, and Clyde North, vacant lots accounted for more than 82% of the 687 cash property transactions during the same period.
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The areas where cash sales comprise the largest portion of settlements were mostly located in rural towns such as Finley, Hay, and Deniliquin in the Riverina region in northern NSW, where cash purchases accounted for 79.2%, 66.7%, and 57.4% of all sales respectively, the AFR reports.
Cash buyers also flocked to popular lifestyle locations such as Barwon Heads in Victoria, and in Noosaville, Tamborine Mountain, and Noosa Heads in Queensland.
Across these markets, cash purchases accounted for more than half of all sales during the June quarter.
“This could reflect a continuation of the tree-change/sea-change trend that became very evident through the pandemic,” Lawless said.
“City residents may still be tempted to ‘cash out’, opting to buy regionally where they can possibly secure a home debt free.”
Although Lawless also notes that most of these areas have recorded a fall in dwelling values over the past year.
This list makes for interesting reading, but it doesn’t necessarily represent areas I would suggest investing in.
I would generally steer clear of ‘popular’ suburbs and instead focus on gentrifying areas with established money, where residents’ income is increasing faster than the national average.
These locations typically have higher disposable incomes and people are likely to be prepared to pay a premium to live in a property in one of these locations and are able to withstand fluctuations in the property market and increases in interest rate rises.
But what makes a great investment property for me, is not likely to be the same as what would suit your investment needs.
You also need to make sure to invest only in areas where properties hold their value over the long term.
But even before looking for the right location, make sure you have a Strategic Property Plan to steer you through the upcoming challenging times our property markets will encounter.
Because aside from remembering that you should focus your efforts on investment-grade properties and locations, you also need to remember that property investing is a process, not an event.
That means that things have to be done in the right order – and selecting the location and the right property in that location comes right at the end of the process.