Research from the Nationwide suggests that the share of cash transactions has declined over the past 18 months, at least partly because of the impact of the stamp duty surcharge on additional homes introduced in spring 2016.
Nevertheless, cash buyers continue to play an important role in the housing market, accounting for around a third of transactions according to the Nationwide.
“The significant increase in the share of cash purchases in 2008 was a function of the sharp decline in mortgage transactions, rather than cash transactions increasing” explains Robert Gardner, the Nationwide’s chief economist.
“This reflected the impact of tightening credit conditions during the financial crisis and the deterioration in labour market conditions, which reduced the number of people able to buy with a mortgage, while such constraints would have had less of an impact on cash purchasers” he adds.
He also says demographic shifts - chiefly the aging population - means the proportion of people owning their home outright has increased. Typically, when these people move or downsize, they are more likely to do so in cash.
“Our analysis of Land Registry data suggests that the share of cash purchases in London and the Outer Metropolitan regions is below the average for Great Britain. This may reflect the fact that these are the most expensive regions (prices in London are over twice the UK average), which presumably acts as a limiting factor” explains Gardener.
“There have been significant changes in the pattern of housing transactions over the past decade, beyond the rise in the proportion transacting in cash.
“In recent years, we have seen a recovery in first time buyer transactions, which are now broadly in line with pre-crisis levels. The easing in credit availability, including schemes such as Help to Buy, have helped boost activity.”