So, Why Are There So Many Cash Buyers At The Moment?

3 June 2015

This month we are delighted to feature an article courtesy of Jonathan Rolande of House Buy Fast.

Nationwide have just released their report into the property market and headlines have been made about the fact that a record nearly four out of ten homes were sold to people not needing a mortgage – cash buyers.

The UK’s second biggest mortgage lender confirms the figure to be a massive 38% and UK home prices to be 4.6% higher than a year ago, down slightly from 5.2% for the period to April.

The figure for non-mortgaged buyers is particularly interesting as it has now reached it’s 2008 post credit crunch level when unemployment was rising, lending fell sharply and frankly the market was made up almost entirely of cash buyers.

But the reason behind this steady climb is not quite so obvious.

It’s too early to have been impacted by the release of Pension Funds. Low interest rates are bound to have attracted some investors to bricks and mortar but they have been this low for over six years so there is unlikely to have been a recent rush into property, especially with many investors tempted by a strong stock market and an increase in ISA limits.

So what is the reason?

Chances are it’s a combination of low rates, increasing Buy to Let and one additional very important, if somewhat overlooked factor.

Cash Buying Companies.

Cash buyers are now able to promote themselves in a way unheard of a few years ago – direct to the seller with nobody in the middle.

In 2013 it was estimated that the sector purchased around 1% of UK property – a staggering £0.9 Billion and it is very likely that figure is now substantial enough to have had a bearing on Nationwide’s data.

Direct buyers have (in the most part) gained a far greater degree of professionalism and many have reinvested profits to improve customer care and visibility with hundreds of thousands a year spent on sophisticated marketing, much still on the web but increasingly in printed press or even television.

It’s fair to say that with discounts of around 15 to 20% taken off sale prices, these buyers won’t suit everyone but the reaction from most sellers is very positive. Many have cited numerous fall throughs and mounting conveyancing costs as a reason to avoid the traditional ‘sell via an estate agent and hope for the best’ route.

It seems probable that the second half of 2015 will see increased activity in this sector, perhaps further skewing future data on the market.