Mortgage-Free Property Transactions on Rise

More than a quarter of residential property transactions in Australia’s eastern states last year were funded without a mortgage.

According to research released this week by PEXA, the total value of residential sale settlements in the nation’s eastern states was $478.6 billion in 2022.

Of this, $122.5 billion was cash funded, making up 25.6 per cent of these purchases, according to PEXA’s Cash Purchases Report.

In the report, cash purchases are defined as having no mortgage registered on the property title at settlement and may include alternative finance sources.

And while 2022 trended similarly to 2021, which had $124.8 billion of property exchanged without a mortgage attached, it is significantly higher than the $83.6 billion recorded in 2020, illustrating a notable shift in buyer behaviour—potentially attributable to heightened market boom post-pandemic, PEXA said.

The research found postcodes that had the highest proportion of cash purchases were mainly located in regional areas popular with older Australians.

PEXA head of research Mike Gill said the 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.

“Our research found cash buyers tended to be older and more likely to be buying in regional locations, which does highlight the generational divide between borrowers.

“Younger homeowners are more likely to have larger home loan balances, particularly those who have purchased recently, while many older homeowners are likely to have paid their home loan off or be able to pay cash for a home to retire in.

“Therefore, as the RBA raises interest rates to slow the economy and fight inflation, the burden falls more towards younger Australians who are more sensitive to rising rates and less so on older generations who may in fact benefit if they have savings.”

▲ Tara in the state’s central west in the top postcode for cash purchases by percentage in Queensland.

In 2022, 65.2 per cent of cash purchases in Queensland were in regional areas, in NSW it was 56.3 per cent while Victoria had a lower proportion of cash purchases in regional areas at 36.8 per cent.

These postcodes shared a number of key parallels—higher median ages, lower labour force participation and their primary family composition, according to ABS, was “couple family without children”, the PEXA report said.

Notably, the median prices for cash purchases in these postcodes were significantly lower than state averages. These postcodes also had lower than average family incomes due to the high proportion of retirees.

The top three postcodes for cash purchases by percentage in Queensland were Tara 4421 (78.4 per cent), Russell Island 4181 (76.4 per cent) and Gin Gin 4671 (71.9 per cent).

In NSW, Emmaville 2371 (73.3 per cent), Gloucester 2422 (65.2 per cent) and Woombah 2469 (62.5 per cent) led the way, while Yarram 3971 (57.5 per cent), Paynesville 3880 (57.1 per cent) and Metung 3904 (56.9 per cent) ranked highest in Victoria.

The report said the highest transaction value associated with cash purchases was concentrated in urban centres, with higher priced properties and larger populations living in these postcodes.

Postcode 4218 (Broadbeach) in Queensland topped the eastern states with $1.33 billion  spent on cash purchases in 2022 alone.

Blue chip metropolitan postcodes 2088 (Mosman) and 3142 (Toorak) topped the rankings in Sydney and Melbourne respectively.