Recent data from the Council of Mortgage Lenders shows that almost 40% of home buyers in January purchased their property in cash rather than taking out a mortgage. The proportion of people buying in cash has now more than doubled since records began in 2005.
This would suggest that the housing market has become a cash-rich domain and other buyers are being frozen out.
The chief executive of Chesterton Humberts, Robert Bartlett, says the proportion of cash buyers in certain regions will be higher than this data suggests. He predicts that in the south-west of England, between 50 and 55% of properties are cash purchases and in some parts of London, the figure could be as high as 80%.
Henry Pryor, an independent housing expert, says this trend is being driven by the Saga generation. These are people who are downsizing and pocketing the profit from previous booms in the market, divorcees who have obtained financial settlements and expats or foreigners.
When data first started to be collated in April 2005, 16,457 residential properties were sold to buyers who paid cash. In January this year, the figure had increased to 27,600.
The government has recognised that there is a problem and the new First Buy scheme, announced in the March budget, is one of the steps it’s taken to help first time buyers get a contractor mortgage to purchase new builds.
But we could be seeing a shift in the culture surrounding home ownership. Back in 2004, 71% of people owned and lived in their properties. This has now fallen back to 67%. At the same time, the private rental sector has grown and we are moving towards a European set-up where people spend their entire lives renting and tie their wealth up in other things.
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