Cash Buyers Drive Sydney’s Luxury Real Estate Market Amid Slumping Housing Prices

Despite a general downturn in the housing market, Sydney’s luxury real estate is seeing increased activity from cash buyers and international investors. As interest rates rise, average home buyers are hesitant to enter the market, fearing short-term losses and uncertainty surrounding the Reserve Bank’s cash rate adjustments. Sydney’s home values have decreased by 12.1% over the past year, according to CoreLogic data, with buyer activity at its lowest since September 2020 (Malo, 2023). However, cash buyers in the luxury market are remaining active as the top 5% of Sydney’s home values saw an increase of 1.1% in 2022 (Cary, 2023).

Industry experts attribute this growth in luxury real estate to the sector’s relative immunity to interest rate movements. Erin van Tuil, Australia’s Head of Residential, noted that Australia has a larger-than-average proportion of high-end cash buyers, with 60% of prime market buyers being cash purchasers (Cary, 2023). The uncertainty in the market is causing potential homebuyers to be risk-averse. RMIT auction expert Dr. Peyman Khezr stated, “They’re essentially in some ways risk-averse to the future events and try to hold on to see what’s happening to rates” (Malo, 2023).

Meanwhile, the luxury market continues to attract cash buyers from overseas. Monika Tu, founder and principal of Black Diamondz, a luxury property brokerage, said that around 70% of her deals are cash transactions, with a very active pool of buyers searching for homes valued at A$25 million and above. “Many buyers are coming from China, Hong Kong, Singapore, and Vietnam,” Ms. Tu said (Cary, 2023). These buyers find Australia’s real estate market relatively stable and affordable compared to other international markets.

Low supply of prestige property also contributes to the luxury market’s resilience, as wealthy homeowners don’t want to or don’t need to sell (Cary, 2023). According to Gavin Rubinstein, director of real estate agency TRG, wealthy locals who benefited from Sydney’s real estate boom in 2021 also contribute to the surge of cash buyers in the luxury market. He explained, “A lot of people made a lot of money over the last couple of years… That’s another major factor that’s contributing to the amount of cash buyers out there – it was the biggest boom we’ve ever seen in the history of property” (Cary, 2023).

In summary, while the general housing market in Sydney experiences a downturn, cash buyers and international investors are driving growth in the luxury real estate sector. The uncertain market conditions and rising interest rates discourage average home buyers, but the luxury market remains buoyant due to its relative immunity to interest rate movements and the influx of wealthy cash buyers.

References:

Cary, B. (2023). International Buyers and Cash Deals Are Boosting Sydney’s Real Estate Market. Mansion Global. https://www.mansionglobal.com/articles/international-buyers-and-cash-deals-are-boosting-sydneys-real-estate-market-bebb428a

Malo, J. (2023). Waiting for a fire sale’: Is it a good time to buy a house yet? Domain News. https://www.smh.com.au/property/news/waiting-for-a-fire-sale-is-it-a-good-time-to-buy-a-house-yet-20230410-p5czb1.html