Can you buy a house with a bar of gold?

In October, Australians made news as they queued for hours to get their hands on gold, as the price of the precious metal hit record levels.

The price of gold per troy ounce skyrocketed to an average of $6000 and reached an all-time high of $6755 in mid-October. 

Gold bullion can come in various shapes and sizes, but a standard bar held by central banks is 400 troy ounces (12.4 kilograms), with a value of about $2.5 million.

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This is the equivalent of the median house price in many sought-after suburbs around the nation, including Neutral Bay in Sydney, Kew in Melbourne and Hawthorne in Brisbane. 

But can one actually cash in their bullion to buy a house?

The answer is not so straightforward.

Since gold is not considered legal tender in Australia, you can’t show up at an auction with a bar of gold in your bag and transact a sale.

However, “theoretically, you can use gold to buy [a property] in the sense that you can sell the gold to fund the house”, says PRD Real Estate chief economist Dr Diaswati Mardiasmo.  

“Or it can maybe be used through a private agreement between a buyer and a seller.

“You just have to be able to find a house seller who is happy to accept the gold, and [the agreement] needs to be documented and legal.”

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In addition, if home buyers need a loan, they’ll need to convert any gold to cash as banks do not accept it as collateral to fund a purchase.

Heritage Bank, one of Australia’s largest customer-owned banks, will not accept the precious metal as tender – as is the case with most Australian financial institutions. 

“We don’t accept gold or any other precious metal – we require Australian dollars for loans and deposits,” says bank spokesperson Andrew Fox.

However, prospective buyers could potentially use gold to seek pre-approval for a loan, says mortgage broker Tristan Vercoe.

“If you don’t want to sell the gold immediately and you are putting in over 20 per cent plus costs to the purchase price, then some lenders do not require evidence of the funds at the time of approval, only at settlement,” he says.

“Therefore, you could hold on to it and then sell off a portion at the time of settlement.”

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Converting large sums of gold, such as 400 troy ounces, into cash is time-consuming due to regulations aimed at preventing money laundering, Mardiasmo says. 

“You may need to actually prove the origin of your gold and provide supporting documentation when selling it,” she says.

“If you can’t prove the origin of your gold, then you might have difficulty selling it or have to pay higher taxes.”