The number of cash investors and buyers for a property has hit a record 10-year low with growing numbers apparently heading for the exit.
The figures from Hamptons International reveal that the proportion of properties bought with cash in England and Wales fell to 29.6% – in Scotland the figure is 31% – in the first quarter of this year, the lowest level since the firm began keeping records.
Back in 2007, 33.6% of homes were sold to cash buyers and this peaked at 37.8% in the second quarter of 2008 – just before the financial crash.
The estate agency has used Land Registry data to calculate that buyers spent £25.3 billion on cash purchases for 113,490 homes in the first three months of 2018.
That is the lowest level in five years and cash purchases fell by 21% when compared with the first quarter of last year.
Shortage of cash buyers
The shortage of cash buyers is also leading to a drop-off in developer and buy-to-let purchases.
The head researcher at Hamptons International, Aneisha Beveridge, said: “Less than a third of homes today are bought with cash and housing affordability has a role to play in this decline, as does investor activity dropping off.”
She adds that traditionally, cash buyers were older homeowners looking to downsize and who wanted to cash in with the equity they had gained from house price rises.
Ms Beveridge explained: “Slower house price rises and higher stamp duty on a new purchase has led to fewer people downsizing and fewer cash buyers as a result.”
She points out that it’s not just about older generations cashing in by downsizing because there’s also been a shift in investor sentiment that’s led to a drop in cash buyer numbers.
Investors are accounting for just 24% of cash buyers
Ms Beveridge added: “The prospect of weak gains in future and increasing taxation for landlords means investors are accounting for just 24% of cash buyers in 2018’s first quarter, that’s down from 32% last year.”
Using data from the Land Registry and Countrywide, Hamptons International says that the steepest decline in cash buyers has been seen in London; just 21% of properties were bought for cash in the capital in the first six months of this year.
However, there are some parts of the country where cash buyers are still buying property and the data highlights where some of these cash buying property hotspots are.
According to Hamptons International, cash buyers account for 61% of activity in West Somerset, with an average cash purchase price of £223,760, followed by East Lindsey in Lincolnshire with an average purchase price of £169,310 and in West Dorset where cash buyers account for 56% of activity, with an average purchase of £285,360.
Next on the list is North Norfolk and Kensington and Chelsea, both with 55%, then the Isle of Wight with 54%, Torridge and Scarborough with 53% and then Argyll and Bute and West Devon with 52%.