The Melbourne suburbs where billions in property sells mortgage-free

Billions of dollars in property has been purchased without a mortgage in Melbourne’s most prestigious suburbs over the past financial year, new data shows.

PEXA Group’s latest cash purchase data, to be released on Tuesday, shows that $1.05 billion in cash was spent on property in the Melbourne CBD, the highest dollar figure of any suburb in the state. The city centre was also the suburb with the third-highest proportion of cash purchases at 51.8 per cent.

Brighton and Toorak had the next most cash spent on property, at $735 million and $720 million, respectively. Kew, South Yarra, Hawthorn, Glen Waverley and Balwyn were among the top 10 Victorian postcodes.

PEXA chief economist Julie Toth said buyers in wealthier suburbs were less likely to need a mortgage, and in some cases could be getting the money to spend on property from family trusts, equity in other properties or even alternative financing arrangements.

“It really just reflects the high purchasing prices,” she said. “That’s largely because we’re seeing a small number of very high-value properties being purchased without an actual mortgage being raised on those purchases.

“At that very top end, people do tend to have a greater range of finance sources they can access so it’s not showing up as a mortgage.”

Morrell and Koren buyers’ agent Emma Bloom said wealthy buyers were side-stepping high interest rates to purchase with cash, and though the market was slow, it was because buyers were cautious.

“A lot of the people using cash are the ones who don’t have to sell to buy, and they’re the ones who aren’t as plentiful at the moment,” she said. “If they have to sell before they buy they’re reliant on mum and dad, banks, that sort of thing.

“They’re not relying on the banks so of course they’re cash buyers. When the opportunities present, cash always wins. They’re always there, but they’re just not there in the same number.”

The largest portion of cash purchases were in Paynesville, a seaside town in Gippsland, and Maryborough, between Bendigo and Ballarat. The rate of mortgage-less sales in the towns were 60.1 per cent and 57.4 per cent, respectively.

“Victoria’s pattern of purchasing is very focused on a handful of relatively cheap coastal areas, then a couple of inland spots, Maryborough, Campbells Creek,” Toth said. “These areas typically have lower purchase prices than other regional areas, and they are attracting those who can’t or don’t want to take out a loan.”

Toth said the risk of coastal inundation made it harder to get a mortgage for a property in Paynesville. She said the portion of cash purchases were higher in regional towns popular with retirees, too, and higher in areas where buyers opted to buy land first and build later.

“The financing sequence of events can be quite complex for someone trying to do a self-build,” she said. “They’re very unwilling to lend someone the amount to build a home when a home does not yet exist because that is the collateral for the home.”

Carlton had the seventh-highest percentage of cash purchases in the state at 49.6 per cent; like the Melbourne CBD, buyers there could struggle to get a loan for smaller units and student housing, which left buyers with few alternatives to buying with cash, Toth said.

“That means the money is being raised elsewhere,” she said. “It could be being raised with equity from other properties, or it could be coming from overseas.”

Harcourts Melbourne City director Dionne Wilson said cash buyers tended to be investors who wanted a cashflow-positive rental and weren’t concerned with capital growth.

“It’s usually a more mature buyer who is looking for a retirement cash flow,” Wilson said. “They don’t tend to grow in value, but they do have a high yield. So if you don’t have a loan you can use the revenue to buy the next one.”