Buy-to-let boom and older couples downsizing fuels surge in homes bought without a loan: Record 38 per cent of homes now bought with CASH
06-05-2015
- Average prices up 4.6 per cent in May, lowest annual rise for since 2013
- UK property values rose to a record £195,166 on average, Nationwide says
- House price growth running at less than half the pace seen in mid-2014
By Hugo Duncan, Economics Correspondent for the Daily Mail
A buy-to-let boom and older couples downsizing has seen the number of properties bought without a mortgage soar to a new high.
A record 38 per cent of property sales in the first three months of the year were in cash, according to Nationwide building society.
That is up from just over a third a year earlier. The figure was one in five less than a decade ago.
Nationwide said that London is 'not out of line with the rest of the UK' when it comes to cash house sales
The Nationwide report cited the buy-to-let boom sweeping Britain and increasing number of older people moving to smaller homes in retirement. It also put some of the increase down to the collapse in mortgage lending in the aftermath of the financial crisis.
Lucian Cook, head of residential research at estate agency Savills, said that with mortgage lending still well below pre-crisis levels ‘cash becomes king’.
‘It is therefore no surprise that we’re seeing a rise in cash buyers relative to other buyers, including downsizers and investment buyers, as it becomes increasing difficult for first-time buyers and second-steppers to access the market,’ he said.
Nationwide said the average price of a home in the UK hit £195,166 last month – up £8,654 on a year earlier and a whopping £27,254 on May 2013.
Average prices in May were 4.6 per cent higher than last year, as the slowdown continued, Nationwide reported
Just one in five – or around 20 per cent – of houses in Britain were bought in cash in mid-2006 as banks and building societies issued record numbers of mortgages. But the proportion of cash buyers soared as the collapse in mortgage lending during the financial crisis left many families locked out of the housing market.
Robert Gardner, chief economist at Nationwide, said the lending freeze and rising unemployment during the recession ‘had much less of an impact on cash buyers’ than on those needing a mortgage.
Many cash buyers were able to snap up properties on the cheap during the crisis as prices fell and other house-hunters struggled to get loans.
Mortgage lending has picked up in recent years, with figures from the Bank of England this week showing that home loan approvals hit a 14-month high in April. But the proportion of cash buyers has continued to rise despite the recovery in lending.
UK property values rose to a record £195,166 on average, surpassing an all-time high of £193,048 the previous month
Nationwide noted a ‘marked increase’ in the number of properties bought by buy-to-let investors in recent years – including those using cash.
Government figures show the number of homes rented out by private landlords has nearly doubled in a decade – from 2.3million in 2004 to 4.4million last year. Mr Gardner said the growth in private rentals is likely to be linked to the rise in the share of cash purchases in the wider market.
Older people looking to ‘downsize’ by selling their large family home and buying a smaller one for retirement have also swelled the numbers of cash buyers, according to Nationwide.
Adrian Gill, director of estate agents Your Move and Reeds Rains, said the number of cash buyers could increase as pensioners cash in their retirement pots to buy property. ‘With pension reforms and rising house prices, we’re seeing an increase in people with liquid assets wanting to firm them up into a stable source of income,’ he said.