New analysis shows that properties which are cash buyer ‘friendly’ have a better chance of being sold in today’s lethargic market.
According to Hometrack’s’ latest national housing survey, the number of cash buyers is clearly increasing. These buyers normally account for perhaps 20 – 30 per cent of the market, but more recently approximately 40 per cent of the market was dominated by cash buyers.
Commenting on their findings, Richard Donnell, Director of Research at Hometrack, said: "It is important to point out that a significant number of transactions, up to two fifths of sales, are driven by cash buyers purchasing without a mortgage - acquiring property as investments or looking to take
advantage of weak market conditions.
“All buyers, regardless of whether they hold a mortgage or not, will feel the impact of weaker market sentiment but a sizable proportion of owner occupiers - we estimate 45 per cent of households - do not have a mortgage and will not be exposed to higher rates.’’
Dips in supply and demand are characteristic of the post-Christmas period, however, this year’s figures were alarmingly extreme. In January 2010, demand stood at -2.5 per cent and supply at -1.3 per cent. Currently, we are looking at supply and demand standing at a staggering -5.4 per cent and -9.4 per cent respectively, indicating that the housing market is facing more fundamental issues.
Mr Donnell added: “There are no signs of a New Year bounce for the housing market as 2011 begins with a sluggish start. To date, record low interest rates have provided a much needed boost to households with mortgages. But with the majority of mortgagees holding variable rate products, the prospect of higher interest rates and increased mortgage costs mean that few will be considering moving house. In short, demand for housing is, over the coming months, likely to fall further.’’
But despite widespread concern over mortgage rate increases, opting to buy in cash may not be the best long term option.
Christian Faes, Managing Director of Montello Bridging Finance, said: " A borrower may take the view that they can buy one property in cash, but with bridging finance they can buy into two projects with the same amount of cash. If they are astute buyers, a few percentage points across the purchase won't make any difference to the overall profit they are looking to make on the deal."
By Caron Schreuder
Leave a comment