06.19.2024 Buying Tips

Will Cash Buyers Be Your Biggest Competitor When Buying Property?

Will Cash Buyers Be Your Biggest Competitor When Buying Property?

If you’re looking to buy property in Sydney’s Eastern Suburbs, you’re likely to face competition from people paying cash…

Cash buyers are a rising force in Sydney’s property market. So if you’re thinking of buying a home in Sydney’s Eastern Suburbs, will they be your biggest competitor?

How many people actually buy property in cash?

The rise of the cash buyer – or those who buy without a mortgage – has been one of the real stories in our local property market over the past few years.

A 2023 PEXA report revealed more than a quarter of properties sold in NSW, Queensland, and Victoria were now paid for in cash. It also revealed the proportion of cash buyers was growing 1.5%, year-on-year.

Cash buyers were particularly active in our part of the world, with PEXA finding some of Sydney’s eastern suburbs had among the highest numbers of cash buyers anywhere in the country. For instance:

  • In Darling Point, 84 buyers paid cash with the average sale worth $3.35 million
  • In Bellevue Hill, 80 cash buyers purchased for an average sale price of $3.63 million each, and
  • In Bondi Beach, there were an impressive 179 cash purchases totalling $621 million.

Who are these cash buyers?

We see a wide range of cash buyers in different market segments. However, they’re particularly active in the prestige market: few people buy a $20 million penthouse or house with a mortgage. This tends to mean we see a large number of cash sales in some of Sydney’s most coveted suburbs, such as Bellevue Hill.

Cash buyers aren’t all the same – people of all ages, and at all different stages of their property journey buy property with cash. Some cleverly got on the property ladder early in life and successfully paid off a mortgage. Others are simply moving from a more expensive, to a less expensive property. Some are investors, developers, overseas buyers or expats.

But easily the most likely market segments to pay cash are downsizers, followed by first home buyers backed by the bank of mum and dad.

First home buyers backed by the bank of mum and dad

First home buyers backed by the “bank of mum and dad” are a group we’re seeing much more of across Sydney’s East, particularly in popular first home buyer suburbs such as Bondi.

Data shows that parental assistance makes home ownership up to 90% more likely, and as many as 40% of borrowers tap their parents for financial help. Sometimes, this means parents pay for an entire property for their kids upfront.

However, financial contributions come in many different forms, too, including going guarantor, lending or gifting a deposit, making a financial contribution to repayments.

Whatever form the bank of mum and dad may take, we see first home buyers in this situation regularly outbid those without support, and compete with upsizers, downsizers and investors, for the properties of their dreams.

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Downsizers a constant force in the market

But important as first home buyers backed by their parents are, their influence is nothing compared to that of downsizers.

In fact, it’s difficult to overestimate just how important downsizers have become to the eastern suburbs’ property market. In many parts of the eastern suburbs, downsizers have become the dominant buyer demographic, including suburbs such as Darling Point where they compete for large three-bedroom apartments with stunning views.

Because they’ve often sold a larger family home, downsizers tend to be cash buyers with healthy budgets. This gives them the ability to compete head-to-head with first home buyers, families and even upsizers, for small houses and large apartments, across popular Eastern Suburbs villages, including Potts Point, Paddington, Double Bay, Rose Bay and Woollahra.

However, today’s downsizers tend to have rather specific wish-lists, and there simply aren’t enough properties available to satisfy this important buyer segment. This means properties suitable for downsizers tend to sell fast, and for a premium, and any new developments aimed at downsizers tend to sell out very quickly.

What we’re noticing is that very often, a downsizer will also be the bank of mum and dad, too. The sale of the family home won’t just fund the purchase of their next property, but also their children’s.

Increasing pace and competition in the market

Cash buyers impact the property market in several ways.

Because they can move fast (without worrying about finance) they often increase the pace of the market. We’ve met many cash buyers who have bought a home within hours of it being listed.

They also increase competition, by being able to bid with confidence at auction, and put their best foot forward in negotiations.

Want more?

If you’re interested in buying or selling property in Sydney’s Eastern suburbs, get in touch.