The number of cash buyers in London has plummeted over the last year according a leading property management company. Apropos by DJ Alexander has found that the number of cash sales in London fell by 19.8% between 2017 and 2018 with steep falls also recorded in the East of England (14.5%) and the South East (14.3%). Average prices for cash sales in London also fell over the same period but declining by just 0.7%.
All countries of the UK recorded falls in the volume of cash buyers with England recording a 13.3% drop; Wales down 6.6%; and Scotland falling 2.9%. All the main regions in England have lost cash buyers with the South West down 12.9%; East Midlands falling 12.5%; Yorkshire drops 12.1%; the North East down 11.6%; West Midlands falling 10.7%; and the North West dipping 10.0%.
This has occurred at a time when mortgage volumes have fallen across most of the UK but by much smaller margins.
David Alexander, joint managing director of Apropos by DJ Alexander who has almost 40 years of experience in property management, said: “It is clear that cash buyers are viewing property investment as more of a risk due to the uncertainties caused by Brexit, the direction of the economy, and more stringent taxation and regulation on property investment. Cash investors have many options and these figures would indicate that property appears to be taking a back seat for the moment.”
“London, as has been well documented, is undergoing a prolonged downturn in prices so it is only natural that many investors will be put off property if values are to remain static for a year or two. There will almost certainly be better returns to be made elsewhere. An overheated market is rarely one which produces profit.”
David continued: “However, the shrewd investor will also recognise that all markets bottom out at some stage and investing at the bottom of a cycle is the surest way of making the greatest profit. The only difficulty is in knowing precisely where the bottom of the market is! Deciding when to make that leap is where sound financial judgement kicks in. There will be few who doubt that in the next five years London and the South East will again be areas where property investment produces good returns and long-term stability.”
“There is an argument for simply shifting location in property investment from one part of the country to another. Scotland, for example, does not seem to have experienced the exodus of cash buyers indicating a positive view of the property market north of the border. Cash buyers leaving London and the South East will be able to buy a lot more for their money in many other parts of the country, so we may see some of that in the months and years to come.”
David concluded: “With so much political and economic uncertainty it is inevitable that investors will be wary of investing in property and other asset classes. However, the more entrepreneurial individuals and organisations will undoubtedly see this as an opportunity and invest strongly. There is no doubt that property remains a sound long-term investment and that the ebb and flow of the market is simply a natural response to uncertain times.”