Market Insight - January 2017
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Cash Buyers On The Lookout

Cash Transfers?
Cash buyers broaden their horizons on their search for a home.

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In Q3 2016 there were 92,845 cash only transactions in Great Britain, a 5 per cent fall compared with the same period last year. This fall continues the general trend of a reduction in cash buyers in the market since 2014. However, this is broadly in line with the fall seen in overall housing transactions; mortgaged purchases fell by 6 per cent in the same period.

But what the national figures hide is that the more expensive regions have generally seen the largest decline in cash buyers. In the South East, the number of cash transactions fell by 13 per cent compared with last year; in the East, it fell by 11 per cent and in London by 9 per cent. Affordability plays a part in these changes. As prices have grown, the ability for many to be able to buy homes debt-free has reduced, as has the yield on any property bought to rent out - especially with the additional effects of stamp duty. This has served to change the behaviours of cash buyers, who are increasingly looking for value for money.

In 2013, the South East had the largest share of cash only transactions but in 2016, it has now been usurped by the North which now accounts for 20 per cent of all cash transactions compared with 15 per in 2013. London, which has a low proportion of cash only transactions partly due to the cost of housing, has also seen it’s proportion fall from 7 per cent to 6 per cent. This has not simply been because cash buyers have left the market but is instead because they have changed where they buy their homes.

Typically, cash buyers buy in the region they come from, but this has changed in recent years. Nationally, in 2013, 83 per cent of cash buyers bought in the same region they came from but in 2016, only 78 per cent did – a 5 per cent fall.

The more expensive regions have seen the biggest changes in cash buyers buying where there are from. In the South East, the proportion has fallen by 8 per cent between 2013 and 2016; from 83 per cent to 75 per cent London stands out from the rest of the country with only 41 per cent of cash buyers from the capital buying there – a 12 per cent fall from the 53 per cent seen in 2013.

London cash buyers have now set their sights further afield in the search of debt-free homes. The South West has seen an increase in the proportion of London cash buyers buying there. In 2013, only 7 per cent of London cash buyers bought a home there but this has now grown to 10 per cent in 2016. Similarly, only 2 per cent of London cash buyers bought a home in the North in 2010 but this has now grown to 8 per cent. South East cash buyers also show a similar trend. In 2013, 8 per cent of their purchases were for homes in the South West but this has now risen to 12 per cent. Their purchases in the North have also increased from 1 per cent to 3 per cent.

  

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