The cash buyer hotspots: A third of homes are bought mortgage-free but its the South West leading the way not London

By Lee Boyce

PUBLISHED: 03:54 EST, 14 October 2013 | UPDATED: 03:54 EST, 14 October 2013

The proportion of house buyers using cash to snap up properties increased in the first half of 2013 to make up one third of all purchases, research has found.

Increasing numbers of mortgage-free purchases mean that between January and June, 140,000 sales were to cash buyers out of a total 400,000 transactions, according to estate agent Hamptons International.

The South West is the number one hotspot for cash buyers and London saw the least mortgage-free sales. Hamptons says: ‘Contrary to popular belief, much of the recovery in house sales in recent months has been driven by higher cash buyer activity rather than simply increases to mortgage lending.’

Cash sales: Have increased faster in 2013 compared to the previous four and are fast approaching 2008 levels

Cash sales: Have increased faster in 2013 compared to the previous four and are fast approaching 2008 levels

The number of buyers using cash has grown at a much faster rate than mortgage buyers in 2013 and is at its highest total number since 2008.

In the first six months of the year, 35 per cent of all properties sold have been mortgage-free. This is an increase of 11 per cent from the same period in 2012, translating into 13,600 extra sales across England and Wales. 

 

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By comparison, the increase in the number of mortgages for house purchase is smaller with just 6,300 extra over the same period.

Cash house sales by region

According to the data, the South West has the largest proportion of those using cash to buy a property at 39 per cent.

It says the reason is because of the older population – these buyers are most likely to be downsizing and releasing enough to buy without a mortgage.

The fact that more cash buyers in the region are buying one and two bedroom properties than anywhere else in England and Wales also supports this.

Perhaps surprisingly, London has the smallest proportion of cash buyers at 24 per cent.

Hamptons says this is a reflection of high cost of housing in the capital compared to the rest of the country.

It says much attention is given to the capital’s prime central market, giving the impression that cash sales dominate London.

However, less than seven per cent of London sales over the last year were in prime central areas where cash buyers make up 60 per cent of transactions.

Much of the rest of London is fuelled by domestic demand. 

Hamptons says that 74 per cent of buyers across the whole of the capital were from the UK.

Cash buyers became more prominent during the downturn

The shift in the proportion of cash buyers in the housing market occurred over the downturn, Hamptons says.

Cash sales swelled from around a quarter of the total market in 2007 to 35 per cent by mid-2013. But it adds that this doesn’t mean there was a boom in people with the means to buy property with cash, instead there was a bigger dive in the wider mortgage-borrowing market.

The numbers of cash buyers also fell in the downturn, from a total of about 400,000 in 2007 to a low of 260,000 by 2010 - but this decline was smaller than the rest of the market.

Cash buyers: Increased in the first six months of 2013

While total transactions fell by 45 per cent between 2007 to 2010, cash sales declined by 35 per cent.

The data show growth in cash buyer demand has been strongest in the sub £500,000 price bracket with corresponding falls in higher price bands.

Growth in this price band has also been fairly uniform across England and Wales indicating the bulk of new cash buyers are likely to be investors and downsizers.

That inference is reinforced by the fact that the cash buyer rate is higher among one and two-bedroom properties than larger ones.

Improved sentiment towards the housing market and additional liquidity injected by an increase in mortgage lending could drive the downsizer market on further too.

The ageing demographic means a whole generation is getting ready to downsize, planning to take advantage of the capital accrued over a lifetime but locked away in their properties.

An increasing number of these have paid off their mortgages, the number of households owning their home outright increased by 830,000 between 2001 and 2011 according to the Office for National Statistics, increasing in proportion of total households from 29 per cent to 31 per cent.

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So if investors are moving into the south west it's good news for renters as there will be an over supply if rentals and as we keep being told it's all down to supply and demand. This should see rents start to fall soon!

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And prices up... But who says the majority is investors, professional investors use finance. It's common sense. Oh and don't say no one warned you there weren't cracking cash deals out there. Good luck with the rent thing though, 2 million more people in the next decade to compete with.

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....He quipped hopefully, as a large pink, hoofed mammal glided majestically past the bedsit window

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probably retired people moving to the area, who already don't have a mortgage

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So a third of house sales are cash buyers we can,t blame the help to buy scheme if house sales shoot up can we.

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my buddy's mom makes $82/hour on the internet. She has been without a job for seven months but last month her check was $15448 just working on the internet for a few hours. Get More Information...w­­w­w.Jo­­bs­­79­.C­­o­­m

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The financial headlines of the last few years give the impression there's little spare money around and we're all Wonga clients. In reality there's tons stashed away in both savings, investments and property equity. Naturally, those with said reserves are looking to strengthen and diversify thier portfolios, maintain a healthy income from thier assets, hedge against inflation, and make thier money work harder for them. Bricks and mortar is always the obvious choice as we're seeing. Confidence by it's very nature tends to snowball - I get the feelling the floodgates for all the spare investment cash are only just opening.

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It's not surprising that people will pay cash if they have it. Everyone who has a mortgage looks forward to the day it is paid off. However the government and the banks won't be happy with people by-passing them and not climbing onto their debt-based money creation scams. If everyone bought cash it would scupper a large portion of their easy money supply. You can see why they set policy to constantly push up prices and make it as difficult as possible for people to save and buy anything cash. The banks, their commission agents and other middlemen in the chain and other lenders would soon go out of business. And we couldn't have that, could we, they might have to find real jobs then.

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