In 2018, just under 285,000 properties across Great Britain were purchased with cash alone, comprising 29% of all property sales. This is the lowest proportion of cash sales recorded since this record began. So what’s happened? Where have the cash buyers gone?
We’ve had a look as to why and there seem to be a number of potential reasons for the decline of cash:
- The landlord effect. A few years ago, buying a single property to rent out was on the shopping list of many looking to boost their pension pots with rental income or buy themselves something to sell when retirement beckoned. But recently landlords have faced new legislation brought in by a government keen to raise tax revenues and ‘balance’ the market rather than giving landlord’s potentially unfair advantages. Landlords now need to pay an additional 3% SDLT (Stamp Duty) when they buy and can no longer claim full tax relief on mortgage interest. What’s more, agent’s charges are increasing in readiness for the tenant fee ban. Even landlords willing to buy in light of this are now reluctant as many believe that the days of big price growth as values just went up and up are likely behind us, for the near future at least.
- Prices are just too high. With the average house price now around a quarter of a million pounds, most people simply do not have enough money to buy without a mortgage. A decade ago, a good annual wage would pay for a small flat in 18 months – now it’s more like 3 years.
- Uncertainty. Buyers hate uncertain times and as many cash purchases are ‘luxury buys’ which can be made any time, a lot of people are sitting on cash waiting to see what happens politically over the next 12 months.
- Foreign buyers hesitating. A lot of wealth poured in to the UK from China, Russia and Arab countries, but this flow has slowed down due to fear of political change here in the UK as well as economies overseas not doing quite as well as they were.
- Cash buying companies reflect the market. Most professional buyers aim to re-sell the property they buy as quickly as possible so if the market gets a bit quieter, some will be less keen to make offers, or will make offers that are too low for sellers.
So What Next?
It may take a bit of time but a level will be found. When there have been changes in the market such as those that effect landlords, it just takes a bit of time for everyone to get used to the new reality, factor the costs in and get buying again. This will happen. It always does!
What is perhaps less certain is the effect of, for example, an unsatisfactory Brexit or a change in government – those shockwaves could take much longer to right themselves.
But for now at least, those at the cutting edge of the market, the cash buying companies, report high levels of business with some even unable to find enough property to buy.
This could be the ‘green shoots’ of a cash buying recovery which could be great news for the thousands of homeowners wondering just who will eventually buy their property. If the property market uncertainty is worrying you and you want to sell your property quickly. Speed Property Buyers offer a ‘We Buy Any House’ service that means they’ll buy your house regardless of condition or location in the UK.