Majority of home buyers in these areas pay cash

Over half of home buyers made cash purchases – without using a mortgage – in Carlton and the Melbourne central business district last year, according to data from property settlements platform PEXA.

In 2023, 50.6% of CBD buyers and 52.3% in Carlton opted for cash purchases, accounting for nearly 1,700 and 229 residences, respectively.

PEXA reported cash transactions exceeding $1.3 billion in the CBD and $98 million in Carlton.

These inner-city trends differ from cash-buying patterns in affluent suburbs like Toorak, Brighton, and Malvern, or holiday destinations such as Rosebud, Safety Beach, and Point Lonsdale.

Julie Toth (pictured), chief economist at PEXA, noted that investors and downsizers were primarily behind the surge in cash purchases, particularly in the inner city’s lower-priced apartments.

“That means that a mortgage wasn’t required against that property, so it means that they’re covering the purchase price in other ways, but I think the low price point is relevant here,” Toth said.

“If you’re buying a student flat, and it’s only $200,000, it’s entirely possible that you don’t need a mortgage to buy that.”

Despite the increased land tax in Victoria, investors remain attracted to Carlton’s relatively cheap apartments, with an average purchase price of $235,000. Meanwhile, the median purchase price for CBD cash buyers stood at $603,500.

Also, non-mortgage buyers may have access to other streams of income to fund cash-only purchases, according to Mandi Morison, director at AB Morison Conveyancing.

“It is typically older people that pay cash, self-managed superannuation funds and foreigners,” Morison said. “We are also seeing more settlements occurring with the assistance of the ‘bank of mum and dad’ rather than a traditional mortgage.

“This may mean that although people are paying cash, it is effectively borrowed from their parents or a family trust or other, so the PEXA figures may not truly reflect what is occurring behind the scenes.”

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