Cash no longer seems to rule the U.K.’s housing market, as the number of buyers paying without bank loans has fallen from last year.
There were 92,845 cash sales in the third quarter of the year, according to new research by Hamptons International, a U.K. brokerage, released Sunday.
This was 5% lower than the same period last year, as extremely high house prices, especially in London, made it more difficult to buy a home debt free.
“As house prices have grown, the ability for many to be able to buy homes debt-free has reduced, as has the yield on any property bought to rent out,” said Fionnuala Earley, residential research director of Hamptons.
The number of cash purchases fell most in the South East, West Midlands and East of the country between the third quarter of 2015 and the same period of this year (13%, 12% and 11% respectively).
In London, cash purchases dropped 9% to 7,684 and now represent 19% of the market, as buyers without financing increasingly seek out homes in the surrounding southern regions due to sky high prices in the U.K. capital.
“With lower expectations of future capital growth in London, those buying with cash are looking further afield,” confirmed Ms. Earley.
The areas recording the greatest increase in the number of cash buyers were the North East and East Midlands, which include cities like Newcastle and Nottingham, with increases of 14% and 2% respectively.
Hamptons also found that demand among investors is starting to wane. Investor cash transactions throughout the U.K. fell 8% over the year to 22,800 transactions in the third quarter. This was a bigger fall than those buying a home as a residence.
“Shifting investor sentiment about future gains in the housing market has contributed to the fall in cash buyers,” said Ms. Earley.
“Investors make up more than a quarter of cash buyers and their activity is far more erratic as it is driven by commercial returns,” she said.