When it comes to real estate, Darling Point has one of the highest rates of cash buyers in the country, according to recently released data.
The PEXA 2023 Cash Purchases Report revealed that 60% of Darling Point property was bought without a mortgage. That puts it second only to Milsons Point (63%) in Sydney and means that more than twice as many people here pay cash than the national average.
In fact, I recently spoke with the Sydney Morning Herald about the influence cash buyers have been having on our local market over the past year.
So why are there so many local buyers paying cash, and what does it mean for our local property market?
What do areas with a high number of cash buyers have in common
It’s a simple, and perhaps unusual, fact that the more expensive a home is, the more likely it is that a buyer will pay cash – at least once it gets to the prestige market. Few people, if any, will take out an 80% home loan on a $15 million property.
High-net-worth individuals who buy expensive properties usually pay for them from their own pocket rather than the bank’s. That means that the suburbs with the highest number of cash buyers tend to be prestige ones.
So, because Darling Point is one of Sydney’s most premium suburbs, cash buyers are over-represented here.
The main buyer groups in Darling Point
But that’s not the only reason almost two-thirds of local buyers pay cash in Darling Point, nor in the case of most of the other suburbs that made the list: It’s also because of the nature of who’s buying.
Downsizers are over-represented in the Darling Point area, and constitute our most important buyer group. According to the 2021 Census, Darling Point’s median age is 49, compared with a national median of 38. In line with this, almost exactly half our population is 50 or over (the typical demographic for downsizing).
Very often – but not always – downsizers have recently sold the family home in the suburbs and are looking to buy something closer to the city without a mortgage.
They’re joined by a large number of overseas buyers, looking for something that captures the best of Sydney living. High on their list of properties are factors such as convenience, light and space, and even harbour views.
These overseas buyers are often expats living in world centres such as New York, Los Angeles, London or Hong Kong. But we’re also seeing growth in the number of overseas citizens looking to buy Sydney property.
How cash buyers influence market dynamics
When a large number of buyers in the market pay cash, it often changes the market in interesting and important ways:
Just researching the market?
1. Resilience to interest rate rises and cost of living pressures. Because cash buyers don’t have a mortgage, they’re also largely unaffected by interest rate rises and cost of living pressures. This is reflected in the Darling Point data that shows our suburb’s median value rose in 2022, even as the broader Sydney market fell.
Darling Point’s median apartment value has grown another 16.7% over the past 12 months – easily outpacing the Sydney wide average – to now stand at $2,918,500 according to realesate.com.au
2. Greater influence from other factors. Instead of interest rate rises, cash buyers tend to be more impacted by broader economic factors, including GDP growth, economic growth and stock market performance. This means economically stable or booming times, high-value areas may see increased activity from cash buyers, further driving up property values.
3. Faster transactions. Cash buyers are often decisive, moving quickly to secure a property. That’s because they don’t have to wait for loan approval and tend to know exactly where their budgetary limits lie. Again, this can be seen in Darling Point’s ‘days on market’ metric for apartments, which at 62 days, tends to be below comparable areas such as Double Bay (82) and Rose Bay (65).
4. Increased competition. Cash buyers can intensify competition, especially in hot markets or for highly sought-after properties. Sellers often prefer cash offers because they typically involve fewer contingencies and are perceived as less likely to fall through. This can have the effect of forcing buyers who need finance to up their offers too, driving prices upwards.
5. Reduced volatility. Just as markets with a high proportion of cash buyers are less likely to slump when interest rates rise, they’re also less likely to be fueled by interest rate cuts. This can lead to greater stability and reliability.
What this means for the Darling Point property market in 2024
As I told the Sydney Morning Herald, the volume of cash buyers in our market means that sales will continue to be swift and strong, and price growth is likely to accelerate.
Our advice to anyone looking to buy in today’s Darling Point market is to act confidently and decisively and to put your best foot forward when it comes to making an offer.
My advice to those relying on a mortgage is to get their finance approved from the bank before looking at any properties to enable them to act quickly with confidence and certainty, especially if a cashed up buyer swoops in with an aggressive offer, so they can at least have the opportunity to compete. It’s wise to know your limits and stay within them.
Want more?
If you’d like to know more about the Darling Point property market or if you need help buying or selling a home in 2024, get in touch.
