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A report suggests the aging population could be a boon for the real estate market. The Sydney Morning Herald reported on the 13th (local time) that housing prices are bouncing back as older people, who downsized their homes and secured a substantial amount of spare cash, are turning their attention to investment real estate.
According to the 2023 National Real Estate Cash Purchase Report released last Wednesday by the Australian Real Estate Exchange, the proportion of residential real estate purchased without a mortgage and in cash increased significantly from 25.6% in 2022 to 28.5% in 2023. Experts predict that the increase in the number of cash buyers can lead to a rise in housing values, as the cash buyer market has driven up real estate prices despite rising interest rates.
The cash purchase ratio increases due to increased cash assets of people with savings and pensions as interest rates rise sharply. According to an analysis of the personal information of cash home buyers, cash buyers are older and more likely to be retired, and the proportion of home purchases by the elderly who downsized or sold their businesses was high.
According to the 2021 census, about a third of Australian households owned homes without a mortgage, and many appeared nearing retirement. Real estate experts say that these individuals have recently begun to invest in real estate using their abundant cash liquidity, which led to a return to record-high prices and transaction volumes in most areas.
Areas particularly popular among investors were those popular with older Australians likely to retire and places where real estate prices were cheaper. Some buyers were elderly people who sold their spacious homes and wanted to enjoy their retirement, and the average price of homes purchased in cash was mostly less than $750,000.
Julie Toth, Chief Economist at Australia’s Central Property and Mortgage Transactions Exchange, explained that the proportion of homes purchased in cash has remained at least 25% over the past 3-4 years, and an increase in this ratio suggests an increase in people who are immune to the impact of central bank interest rate hikes. She added that the steady proportion of cash buyers is one of the reasons for the ongoing resilience of the Australian real estate market.
However, the report expressed concern that the central bank’s monetary policy to curb inflation is structuring the gap in home-buying ability between generations. As cash-rich individuals who sold their existing properties at high prices aggressively buy homes at lower prices, it is becoming increasingly difficult for new entrants to the housing market, who are inevitably heavily influenced by the financial market.
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