Focus
Cash Buyers
Hamptons International Research
Autumn 2013
www.hamptons.co.uk
Beyond your expectations
Cash Buyer’s Report
Autumn 2013
Uptick in Property Sales
Driven by Cash Buyers
In the first half of 2013 more than a
third of housing sales have been to
cash buyers. Hamptons International’s
latest research estimates that between
January and June 140,000 sales were
made to cash buyers out of a total
400,000 transactions.
“Contrary to popular belief,
much of the recovery in
house sales in recent months
has been driven by increased
cash buyer activity rather
than simply increases to
mortgage lending.”
So far in 2013 both the proportion of
cash buyers and the absolute number
has increased. Contrary to popular
belief, much of the recovery in house
sales in recent months has been driven
by higher cash buyer activity rather
than simply increases to mortgage
lending. The number of cash buyers
has grown at a much faster rate than
mortgage buyers in 2013 and is now
at its highest total number since 2008.
Throughout the recession and due to
the collapse in mortgage availability,
cash buyers have become a more
important sector of the market.
Some might ask what role cash buyers
play in the market: The answer, in part
at least, is that they can be as important
as first- time buyers in adding liquidity
to the market. Cash buyers often break
chains at both the top or the bottom
and allow several other, mortgaged,
transactions to take place. But
unlike first-time buyers they are not
necessarily constrained by mortgage
finance. Increased mortgage activity
does facilitate cash buyers too though.
New buyers coming to the market and
second steppers moving up ultimately
enable those at the top of the market to
release equity on sale to buy their next
home with cash.
In the first 6 months of 2013 Hamptons
International Research estimates
35 per cent of all properties sold have
been to cash buyers. This is an increase
of 11 per cent from the same period
in 2012, translating into 13,600 extra
cash sales across England & Wales. By
comparison the increase in the number
of mortgages for house purchase is
small, just 6,300 (3 per cent) over the
same period. Hamptons International
estimates up to 70 per cent of the
20,000 additional property sales
recorded by HMRC in the first half of
2013 can be attributed to cash buyers.
Number of Sales
Change in Number of Cash Buyers
200,000
150,000
100,000
50,000
2013
2012
2011
2010
2009
2008
2007
2006
0
First 6 months by Year
Source: Hamptons International, HMRC, CML
© Hamptons International 2013
www.hamptons.co.uk
Cash Buyer’s Report
Autumn 2013
How Cash Buyers are Spread
Across England & Wales
Hamptons International Research
estimates that more than a third of
sales in England and Wales over the
last 12 months were cash sales but the
proportion of cash buyers is not spread
evenly across the country.
The South West has the highest
proportion of cash buyers. 39 per cent
of purchases in the area over the last
12 months were cash sales, against an
average across England and Wales of
33 per cent.
The South West has both the highest
rate of owner occupation in England
and the highest proportion of older
age groups in its population, so it
shouldn’t be a surprise that it has a
larger proportion of outright owners
and cash buyers than the English
average too. The reason? The older age
cohort is precisely the group of house
buyers most likely to be downsizing
and releasing enough cash to buy
without a mortgage. The fact that more
cash buyers in the region are buying
one and two bedroom properties than
anywhere else in England and Wales
would seem to support this.
East Anglia shares similar
demographics to the South West
which goes some way to explaining
why it has the next largest proportion
of cash buyers, at 36% of sales in the
last 12 months.
Region
Proportions of
Cash Sales
(12 months)
England & Wales
33%
South West
39%
East Anglia
36%
Yorks & Humber
36%
East Midlands
36%
Noth East
35%
Wales
35%
South East
32%
North West
31%
West Midlands (region)
30%
London
24%
Source: Hamptons International, HMRC, CML
“The South West has both the highest rate of owner occupation in England
and the highest proportion of older age groups in its population.”
Retired
Other
Outright ownership, %
Owner occupation by region, %
Other
Retired
80
70
60
50
40
30
20
Source: ONS
England
London
N East
Y&H
N West
West Mid
East Mid
East
S East
S West
10
0.0
Source: ONS
Not all of London’s Housing Market
is Defined by International Wealth
At the other end of the spectrum, and
perhaps contrary to some overblown
expectations of the wealth of
Londoners, London has the smallest
proportion of cash buyers, only 24%.
That is simply a reflection of the high
cost of housing in the capital. Clearly
some cash sales do take place, but the
proportion is and has consistently been
much lower than elsewhere in England.
Much attention is paid to London’s
Prime Central housing markets, giving
the impression cash sales dominate
across the capital. Often however the
© Hamptons International 2013
distinction between these markets and
the wider London market is lost in the
detail, as the size and impact of the
premium markets are exaggerated.
Less than 7% of London sales over the
last 12 months happened in the Prime
Central London areas.
Whereas the Prime Central London
market is very much driven by cash
and international buyers (only 40 per
cent of buyers this year have been from
the UK and 60% of sales were cash) this
is only a small segment of the wider
London market. Much of the rest of
London is fuelled by domestic demand,
for example 74 per cent of buyers across
the rest of Hamptons International’s
network in 2013 were from the UK.
“The smaller proportion
of cash buyers in London is
simply a reflection of the high
cost of housing in the capital.”
www.hamptons.co.uk
Cash Buyer’s Report
Autumn 2013
The Value of Cash Buyers
Cash buyers account
for a third of sales
That’s 280,000 homes
purchased without a mortgage
in the last 12 months.
Since 2007 Cash Buyers have
become an increasingly important
part of the market...
Proportion of cash buyers
40%
30%
20%
10%
0%
2013
2012
2011
2010
2009
2008
2007
2006
280,000
...But at Lower Actual Volumes
In the downturn the number of
transactions collapsed, although the
number of cash sales reduced it wasn’t
as much as mortgaged purchases.
850,000
t 12 Months
From 2007 to Las
589,000 less
000 - 853,000 =
2,
4
1,4
=
es
al
S
ll
A
= 485,000 less
,000 - 570,000
Morgaged = 1,055
,000 less
284,000 = 104
0
00
8,
38
=
Cash
So even though cash buyers are
more important now than ever, the
actual total number of cash sales is
lower than in 2007.
And now cash buyers are leading the recovery in sales in 2013:
Of which mortgaged - 6,3000 = +3%
Of which cash - 13,600 = +11%
Additional new sales
in first half of 2013 -
That means 70%
in 2013 of the
uplift in sales
can be attributed
to cash buyers.
20,000
© Hamptons International 2013
www.hamptons.co.uk
Cash Buyer’s Report
Autumn 2013
Cash Buyers Became More
Prominent over the Down Turn
45%
100,000
35%
30%
80,000
25%
20%
60,000
15%
40,000
10%
Proportion of Cash Buyers
120,000
40%
20,000
5%
0
Number
Q413
Q213
Q412
Q212
Q411
Q211
Q410
Q210
Q409
Q209
Q408
Q208
Q407
Q207
Q206
Q405
0%
Q205
Quite the opposite, the numbers of cash
buyers also fell in the downturn, from
a total of about 400,000 in 2007 to a
low of 260,000 by 2010, but this decline
was smaller than the rest of the market.
While total transactions fell by 45 per
cent between 2007 to 2010 cash sales
only declined by 35 per cent. The big
rise in the proportion of cash buyers in
recent years is very much a symptom
of the collapse in the number of
mortgaged transactions. Paradoxically,
because mortgaged transactions can
free up equity at the top of housing
market chains, there would be a larger
actual number of cash buyers if the
mortgage market was healthier too.
Cash buyers Change over the Downturn
Number of Cash Buyers
The shift in the proportion of cash
buyers in the housing market
occurred over the downturn. Cash
sales increased from around a quarter
of the total market in 2007 to 35 per
cent by mid 2013. But that doesn’t
mean that there were suddenly lots
more people with the means to buy
property with cash.
Proportion
Source: Hamptons International, HMRC, CML
“The number of cash buyers actually fell over the downturn,
but at a lesser rate than the rest of the market. The result?
Cash buyers have become a more important part of the
housing market.”
Downsizers and
Buy to Let Investors
Our data show that the growth in cash
buyer demand has been strongest in
the sub £500,000 price bracket; with
corresponding falls in higher price
bands. Growth in this price band
has also been fairly uniform across
England & Wales. That indicates that
the bulk of new cash buyers are likely
to be investors and downsizers. That
inference is reinforced by the fact that
the cash buyer rate is higher among
one and two bedroom properties than
larger ones.
“Many cash buyers are
downsizers planning to
take advantage of the
capital locked away in
their properties.” © Hamptons International 2013
Improved sentiment towards the
housing market and additional liquidity
injected by an increase in mortgage
lending could drive the downsizer
market on further too.
Our ageing demographic means that
a whole generation is getting ready to
downsize, planning to take advantage
of the capital accrued over a lifetime
but locked away in their properties.
An increasing number of these have
paid off their mortgages, the number
of households owning their home
outright increased by 830,000 between
2001 and 2011 according to the ONS
(increasing in proportion of total
households from 29 per cent to
31 per cent).
In contrast, the lack of mortgage
finance throughout the downturn is
likely to have driven investors to buy
with cash. The activity of investors
has been no secret in recent years,
with private individuals and small
institutions stepping in to meet
demand from a growing number
of renters. According to figures
from DCLG between 2007 and 2011
alone there were one million more
properties added to the rental market,
a 30 per cent increase. Generally
rental investors prefer to borrow, to
increase their buying power, ultimately
maximising the return on the money
they invest. But the availability of
buy to let mortgages has been more
constrained in recent years, with BTL
mortgage advances running at half of
their peak levels, more investors have
been pushed into the cash
buyer category.
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Open Data
Hamptons International Research’s cash buyer estimates are
primarily based on property transaction data from HMRC. We
compared HMRC transaction numbers with mortgage lending
figures from the CML making adjustments for buy to let and some
geographical quirks between the two data sets to provide a cash
buyer estimate. We then supplemented and refined our cash
buyer estimates with information on buyer types from property
sales across the Countrywide Group and Land Registry
Sales Data.
Johnny Morris
Head of Research
[email protected]
+44 (0)207 758 8438
www.hamptons.co.uk
Caterham Sevenoaks
Dorking
& Reigate
Brighton & Hove
GOLD
LARGE
ESTATE
AGENCY
Fionnuala Earley
Residential Research Director
[email protected]
+44 (0)207 758 8465
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