The number of people who purchase a property with cash has fallen dramatically.
According to analysis by Hamptons International, the number of homes bought with cash dropped by a quarter to 113,490, with a total value of £25.3 billion, in the first half of 2018 alone.
Not only is that down on the same period last year, where there were 144,350 cash purchases worth £31.2 billion, it’s actually the lowest level it’s been since the firm started looking at this data back at the start of 2007.
That's a problem because cash buyers aren't just the super-rich: they're often ordinary people who play an important part in our housing market.
Bye bye investors
A significant number of cash buyers are investors, looking to add to their property portfolios.
It’s notable though that the number of investor cash buyers has dropped substantially, now accounting for one in four of all cash purchases, down from one in three back before the crash.
Similarly, the number of purchases from developers has fallen from 6% to just 2% over the same time period.
There are a couple of big factors behind this fall. The most obvious are the changes to taxation, particularly stamp duty, that these investors and developers face.
When you purchase a home that you aren’t planning to live in, you are charged an additional 3% Stamp Duty.
This makes a massive difference to the initial outlay when buying a home. For example, a £150,000 home incurs a £5,000 bill rather than a £500 bill.
Coupled with the various other legislative and taxation changes that have made buy-to-let less financially attractive, there is no doubt that investing in property is not quite as attractive as it was just a couple of years ago.
Throw in the uncertainty around how Brexit will affect the housing market, and it’s understandable that investors with the cash in the bank are looking at their options outside of bricks and mortar.
Departing downsizers?
Another significant portion of cash buyers are older homeowners looking to move to a smaller property.
But this is another area of the market that has encountered difficulties in recent years. Part of this is down to the question of supply – there simply aren’t enough homes being built which will appeal to downsizers specifically.
A study by McCarthy & Stone this year found that around a quarter (22%) of the over-65s would consider moving to a specialist retirement property.
Extrapolate that out to the entire country and that’s around 2.6 million people, yet the firm claims only around 162,000 retirement properties have ever been built for older homeowners.
The obsession is so often with making sure that we have enough homes to meet the needs of first-time buyers taking that first step onto the housing ladder, but there is nowhere near enough thought going into ensuring we have suitable homes built for older people.
There’s a big financial element here too, once again in the form of stamp duty, which is discouraging downsizers.
There have been calls for downsizers to be exempted from stamp duty on properties of a certain value, in much the same way as first-time buyers are, in a bid to get them moving.
The trouble is that a significant number of older homeowners are occupying properties that are simply much bigger than they need, and which would better suit the needs of young families.
But unless these older people are given a bit of a helping hand, they simply won’t downsize, leaving our housing market once again in a stalling pattern.
Does this really matter?
Of course, the big question here is whether this really matters. If everyone buys their property with a mortgage rather than the odd cash buyer here and there, does it really make much of a difference?
It’s true that, on the face of it, the shrinking of the cash buyer market is not something that will have an obvious impact on most of us.
But it is a sign that there are some real issues when it comes to property.
The Government is so focused on beefing up the chances of owner-occupiers, viewing landlords as the pantomime villains who are there to be milked for more cash, which is a little short-sighted.
Like them or not, we need landlords and making their life unnecessarily difficult only serves to push out quality landlords.
Similarly, the fact that older homeowners are sitting on such oversized homes is a genuine worry – we need to put far more energy into developing homes and retirement villages that suit older people, rather than simply waiting for them to die or move into care.
A widower living in a four-bedroom house that’s too big for her helps no-one, but equally, we can’t just expect her to give up a house she loves and is filled with memories just because a younger family needs it more.
The disappearance of the cash buyer is a symptom of the property market’s malaise, one for which there aren’t easy remedies.