Home Property Exodus of cash buyers hindering southern house price growth

Exodus of cash buyers hindering southern house price growth

by LLP Reporter
27th Sep 19 10:09 am

Cash buyers have fallen in 90% of UK cities since 2016, according to the August Zoopla cities house price index. In contrast, demand from mortgaged home buyers is continuing to grow amidst a backdrop of weaker house price growth, which together are delivering mixed signals across the UK’s housing market.

House price growth has slowed to more sustainable levels with prices 1.9% higher than a year ago. Leicester is the fastest growing city (+4.8%) followed by Liverpool (+4.6%).

This is the first time since 2012 that the fastest growth city has a rate of price inflation below 5%. Meanwhile, house prices continue to fall in Oxford (-0.4%) and Aberdeen (-4%).

New analysis in this month’s report finds that there has been a major shift in the mix of buyers purchasing homes across UK cities. Today, One in four sales are to cash buyers, down from 29% in 2013. Cash buyers are a mix of home-owners and investors. Zoopla analysis shows the number of cash buyers has declined most significantly in cities with the highest capital values and lowest yields.

The decline in cash sales has certainly outpaced changes in demand from mortgaged buyers and is a key driver of weaker price growth. Mortgaged buyer numbers have remained resilient; data from UK Finance shows mortgage home-owner demand continues to grow year on year, despite weaker house price inflation.

In contrast, cities where the recovery in prices has been weakest, or indeed where prices have fallen, have registered an increase in cash buyers in recent years, Liverpool (10%) and Aberdeen (14%).

Richard Donnell, research and insight director at Zoopla said, “The housing market is throwing off mixed signals as the headline rate of price growth slows yet demand from home-owners using a mortgage continues to increase. This is at a time when Brexit is dominating the headlines again and further complicating the outlook.

“Despite increased uncertainty, demand from mortgaged home-owners appears resilient, with demand supported by low mortgage rates, high levels of employment, and households who want a home.

“A change in the mix of buyers has impacted the demand for housing across cities since 2016. The reduction in cash buyers has been marked in southern cities and we believe this is down to a decline in investment-buying across high value cities. This has compounded the slowdown in price rises, which we see as a return to a more sustainable pace of price growth rather than an impending re-correction.

“The London market continues to see greater realism in pricing and there are signs of a modest increase in market activity. This isn’t a precursor to price rises, but we do expect sales volumes to start rising once again.”

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