Chains are formed when two or more homeowners are reliant on the sale of their property simultaneously to fund the purchase of somewhere else to live. And they serve an important role in the housing market, helping people move up and down the housing ladder.
However, the current pace of the market has put buyers with a home to sell at the back of the queue. So far this year a record 73% of buyers were chain-free, up from 69% in 2021 and a low of 65% in 2010.
Selling to a chain-free buyer has long been the preferred option for vendors looking to speed up a sale and reduce the chances of it falling through. However, the lack of stock has amplified the advantage chain-free buyers hold as chains become increasingly slow moving. Movers have found it harder to line up their next purchase given there were a third fewer homes available to buy in Q1 2022 compared to Q1 2019.
In a fast-paced market such as today, over three-quarters of sellers had multiple offers on the table to choose from. Given the choice, so far this year 61% of sellers accepted an offer from a chain-free buyer over a buyer with a home to sell, up from 59% in 2021 and 58% pre-Covid in 2019.
But money doesn’t always talk. Four in five (80%) sellers accepted an offer from a chain-free buyer where they matched an offer from somebody who had a property to sell, up from just three in five in 2016 (60%). On average, sellers accepted an offer of 2.5% less from a chain-free buyer as a means of smoothing a sale through.
What’s behind the rise in chain-free buyers? The increase has been driven by a larger share of homes being bought by first-time buyers and investors. So far this year, first-time buyers purchased a record 26% of homes in Great Britain, up from a previous high of 24% in 2021. Investors made up 14% of buyers, up from 12% in 2021, while second home buyer numbers stayed flat at 2%.
Since 2021, most movers have been chain-free, often moving into rented accommodation temporarily in order to break the chain. This has been driven by a large fall in the number of purchases by owner-occupiers with a home to sell. The share of homes bought by someone selling their main residence and buying another home fell from 30% in 2021 to 27% so far in 2022, an all-time low and a number which has been dwindling throughout the last decade. This has put downward pressure on the number of sales dependant on a chain.
In particular, there’s been a notable fall in owner-occupiers, typically downsizers, needing to sell their home before a cash purchase. Cash buying owner-occupiers made up 19% of buyers so far this year, down from 22% in 2021 and 24% in 2020.
Is it the same across the country? The only regions where chain-free buyers became scarcer over the last year were the slowest markets in Great Britain, namely London and the North East. Here, vendors tend to have fewer offers on the table to choose from. In London, the proportion of chain-free buyers fell marginally from 79% in 2021 to 78% in 2022. While in the North East, 71% of purchases in 2022 were chain-free, down from 72% in 2021.
What does this mean for the market? It’s buyers hoping to trade up alongside downsizers who rely on the capital raised from the sale of their home for their next purchase who are finding it particularly tough. Given their homes are increasingly being bought by first-time buyers and investors who generally do not have a property to sell, these homes are not being replaced by new instructions. For every 10 homes sold so far in 2022 only around three of those buyers will directly bring a home onto the market to sell. And this is exacerbating the lack of stock in the market today.
