Cash buyers in retreat because of stamp duty, says Zoopla

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Cash buyers have fallen in 90 per cent of major UK cities over the past three years according to a Zoopla analysis – and the main reason is stamp duty increasingly hitting investors and holiday home buyers.

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. 

Zoopla believes this disparity is down to the changing mix of buyers since 2016 and the variable status of each city’s house price recovery.

In detail, around 25 per cent of sales are to cash buyers today – mostly a mix of buy to let and holiday home purchasers – down from 29 per cent in 2013.  These cash buyers have declined most 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, says the portal. 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 per cent more) and Aberdeen (14 per cent.)

More generally house price growth across 20 major UK cities monitored by Zoopla has slowed to more sustainable levels with prices 1.9 per cent higher than a year ago.

“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” explains Richard Donnell, research and insight director at Zoopla.

“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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