One of the real trends of recent years has been the rise of the cash buyer.

In fact, over 2023, there were almost as many cash buyers as those needing finance in many parts of our local area.

The growth in buyers paying cash is impacting the market in several ways. We explore how and why, as well as what it means if you’re looking to buy property here in Sydney’s inner East.

Which Sydney suburbs have the most cash buyers for property?

Inner city Sydney has one of highest rates of cash buyers in all of Australia, with Potts Point coming seventh in all of Sydney for the percentage of buyers paying cash.

According to Pexa’s Buyer Report, here are Sydney’s top 10 suburbs for cash buyers, and the percentage of people who purchase a home without a mortgage:

  1. 2061 Milsons Point 63.6%
  2. 2027 Darling Point 60.0%
  3. 2000 Sydney 54.3%
  4. 2103 Mona Vale 47.3%
  5. 2060 North Sydney 46.6%
  6. 2780 Katoomba 45.6%
  7. 2011 Potts Point 44.8%
  8. 2095 Manly 43.3%
  9. 2017 Waterloo 42.9%
  10. 2257 Umina Beach 41.8%

The national average for the percentage of people who pay cash is 28.5% and it’s a trend that has been steadily increasing, with last year’s figure rising from 25.6% in 2022.

Still, as the table above shows, in many parts of inner Sydney, twice as many people buy without a mortgage than the national average. That’s despite it being home to some of Australia’s most expensive real estate.

So why are buyers paying cash and what impact does it have on our local property market here in Sydney’s inner East?

Prestige property attracts cash buyers

First, it’s an interesting fact that cash buyers tend to be more common in the prestige property market. Very few people will take out an 80% home loan on a $10+ million property.

So suburbs with higher price tags and a good range of prestige properties – like Potts Point and nearby Darling Point – actually have a high number of cash buyers.

That said, cash buyers are also common at the other end of the property market, too. In the cheapest areas for real estate, buyers simply may not need a mortgage and can often afford to pay outright for a property.

This is true of a small town called Tara, which was also on PEXA’s 2023 list for regional Queensland. In Tara, 86% of purchases are made in cash. The median house price here is just $180,000 (roughly the size of a deposit on the median Potts Point apartment).

Buyer demographics play a role

Buyer demographics also play a role in determining the number of cash buyers in the market, especially here In Potts Point and Darling Point. In our part of the world, downsizers tend to be over-represented to the point where they often drive the property market.

Many downsizers are cash buyers, having sold a large family home. They are typically looking to buy something closer to the city without a mortgage (often a luxury apartment).

But they’re not the only demographic that may be buying in cash. Overseas or ex-pat buyers are also more likely to be cash buyers, too. And sometimes, even first-time home buyers buy in cash, thanks to the growing use of the ‘bank of mum and dad’.

The impact of cash buyers on the property market

The rising trend for properties to be bought with cash impacts the market in many different ways.

First, interest rate rises don’t matter as much when you’re buying in cash. If you don’t need a mortgage, you’ll generally be insulated from interest rate rises (and, to some extent, also from cost-of-living pressures).

This partly explains why our local property market has remained so resilient in recent years despite rising interest rates. For example, in Potts Point, the median price of three-bedroom apartments has increased 13.3% over the last year. Cash buyers are often affected by external factors rather than mortgage interest rates, which may include exchange rates, GDP growth, or stock market performance.

Secondly, cash buyers can often move faster than buyers who need finance, which creates pace in the property market. They simply don’t need to build in time for loan approval and already have a crystal clear idea of their budget.

This also means cash buyers can offer stiff competition for those on a mortgage. They’re usually able to act fast. So, in a hot market this can drive prices up even further.

On top of this, sellers often prefer cash buyers because the sale is less likely to fall through.

What does this mean if you’re not a cash buyer?

If you’re buying with a mortgage and coming up against cash buyers on your property search, it pays to have a very clear idea of your budget.

Most importantly, don’t be put off. Just because you’re paying with finance doesn’t mean you can’t secure your next property, even in the face of competition from cash buyers. Instead, plan ahead, do your research and offer strongly when you see the right home.

It often also helps to make sure you have your finance approved so that, just like a cash buyer, you can act quickly and confidently.

Want more?

If you’d like to know more about the Potts Point property market get in touch.

Article by Jason Boon

In a real estate market that is the focus of Australian, and indeed worldwide attention, Jason Boon's results in the Sydney scene make him a highly significant figure within the industry. A long-term specialist in the Potts Point and inner eastern suburbs area, he is uniquely placed to leverage his skills and local knowledge as the area undergoes significant change and diversification. Jason ha…