Decline of the cash buyer

  • By admin
  • 29 September 2019

We are running low on cash — buyers, that is. The number of properties bought without a mortgage has fallen in 90% of UK cities since 2016.

You might be surprised to learn that one in four British homes are snapped up by buyers who don’t need a loan, but this number was higher four years ago. Back then, 29% of property sales in the UK were purchased with personal wealth.

Who are these people, I hear you cry, and can they lend me a few thousand pounds? The word “cash” can be misleading: it suggests buyers are surfing into house viewings on a wave of banknotes. If they were to do that, they would likely be referred to the National Crime Agency or HMRC.

In reality, cash buyers are often downsizers, using equity accumulated over many years; serial property investors; or affluent parents gifting the money to their incredibly fortunate offspring.

The rest of us are mortgaged up to the eyeballs — if we’re even on the ladder — so why does this matter? Well, it says a lot about the investability of the UK property market and tells us where demand is coming from. There may be fewer cash buyers, but the Zoopla UK Cities index for August shows that new mortgages for home purchases are at their highest level since the 2008 recession, despite house-price growth crawling along in most areas.

This suggests demand from owner-occupiers is still strong, but investors think most of our cities are too high-risk to bother with. To underline this, there are only two locations where cash is still being splashed — and they are about as risky as a ready-salted crisp.

Aberdeen saw the biggest bump in cash buyers (14%), but only following the oil-price collapse, a disaster for the city that drove property values down. Liverpool has seen 10% more cash buyers since 2016, but it is also home to the lowest average property values of any UK city (£124,700) and has seen steady price growth of 4.6%.

If gamblers are to return to the market, something has to change.

What’s hot… Ofsted ratings. You can’t peek at an index these days without being inundated with schools data. Sutton was crowned the most family-friendly borough in London last week by the travel company Premium Tours, partly because it is in the catchment area of five schools rated outstanding by the inspectors. The Search Partnership, a buying agency based in Yorkshire, released its list of the most desirable places to buy in God’s own county, handing out marks based on ease of commuting, house prices and, you guessed it, schools with an outstanding Ofsted rating. And Harrods Estates is marketing a £4.25m penthouse in Chelsea on the basis that it’s “only minutes from a number of outstanding schools”. If a Labour Government does take control and abolishes Ofsted, as it promised to do at last week’s party conference, how will estate agents convince anyone to move anywhere ever again?

What’s not… gazumping in the rental market. Renting is meant to be the easy-breezy option, but this grubby practice is on the rise, if recent accounts are to be believed. The Chelsea estate agency Russell Simpson says a penthouse on Redcliffe Square was let for 17% more than its asking price after a two-day gazumping frenzy and 15 viewings.

Read the original article here.


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