Is cash still king in the country’s housing market?

Is cash still king in the country’s housing market?

As the number of homes buyers paying without a bank loan has dropped, it might be time to check whether cash is still king in the UK’s property market.

A new research by Hamptons International, a UK brokerage, revealed that there were 92,845 cash sales in the third quarter of 2016.

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Compared to the same period last year, this is a drop by 5%. The main reason for this development is especially seen in London’s extremely high house prices, which made it more difficult to buy a home debt free.

“As house prices have grown, the ability for many to be able to buy homes debt-free has reduced, as has the yield on any property bought to rent out,” said Fionnuala Earley, residential research director of Hamptons.

The areas to experience the biggest drop in cash purchases are the South East, West Midlands and the country’s East with drops of 13%, 12% and 11% respectively between the third quarter of 2015 and the same period this year.

The capital experienced a drop in cash purchases of 9% to a total of 7,684 and 19% of the entire market. Buyers without financing tend to now seek out homes in the surrounding areas rather than the capital as prices are pushing them out of London.

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“With lower expectations of future capital growth in London, those buying with cash are looking further afield,” confirmed Ms. Earley.

Areas with the highest ratio of cash buyers were the North East and East Midlands, including cities like Newcastle and Nottingham with a rise of 14% and 2% respectively.

“Shifting investor sentiment about future gains in the housing market has contributed to the fall in cash buyers,” said Ms. Earley.

“Investors make up more than a quarter of cash buyers and their activity is far more erratic as it is driven by commercial returns,” she said.

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