Jump to content
House Price Crash Forum
Sign in to follow this  
mynamehere

Cash Buyers Are 35% Of The Market

Recommended Posts

How many cash buyers are portfolio landlords using mortgage equity withdrawal on their other properties to initially finance new purchases?

How many are downsizers entirely reliant on mortgaged buyers to purchase their previous properties and furnish them with the cash?

I don't think that the market is as clearly divisible as all that.

Share this post


Link to post
Share on other sites

Don't forget that anything bought with a foreign mortgage is counted as cash.

I think it might depend on where the information on cash purchases is being drawn from?

It's my understanding that if the mortgage is secured on the property it should show up on the Land Reg regardless of where it originated, but I might be wrong about that.

Also, some investors may potentially be using unsecured overseas finance, which would definitely look like cash purchases in the statistics, to purchase UK housing stock.

I'm not sure about how widespread that is likely to be though, relative to overall transactions?

Share this post


Link to post
Share on other sites

A large proportion of that has to be people downsizing, moving location or splitting a family house into two smaller ones after divorce.

Exactly. So if their property sale is dependent on somebody else making a mortgaged purchase the amount of cash they will have available to downsize with will be dependent on prevailing credit conditions.

Share this post


Link to post
Share on other sites

I think it might depend on where the information on cash purchases is being drawn from?

It's my understanding that if the mortgage is secured on the property it should show up on the Land Reg regardless of where it originated, but I might be wrong about that.

Also, some investors may potentially be using unsecured overseas finance, which would definitely look like cash purchases in the statistics, to purchase UK housing stock.

I'm not sure about how widespread that is likely to be though, relative to overall transactions?

It'll definitely show up on a credit score, whether it's with the same bank or a different one, as a second charge. Maybe someone else knows if it'll go into the overall 'new' mortgage figures.

Share this post


Link to post
Share on other sites

The thing with cash buyers, is that 99% of them are investors, meaning that once price falls take hold, they will stop buying, and start selling. The rush for the exits is accelerating, imo, we are a matter of weeks away now from the hard landing.

Share this post


Link to post
Share on other sites

The thing with cash buyers, is that 99% of them are investors, meaning that once price falls take hold, they will stop buying, and start selling. The rush for the exits is accelerating, imo, we are a matter of weeks away now from the hard landing.

Not sure Digsby. For example, if you are a London-based owner-occupier who owns outright and and you sell up and move out of London you may become a cash buyer.

Another thing is that as the share of first-time buyers drops relative to home movers you can get a market which is aggregate starts to behave as if there are some loops as opposed to chains, (no expense spared on the graphic BTW)

Musical%2Bchairs.jpg

Share this post


Link to post
Share on other sites

What you're describing there is basically the pyramid, where all liquidity is provided by either first time buyers or investors. The 'loop' as you call it, cannot happen without the liquidity, provided in your example by a mortgage, an injection of liquidity provided by the lender.

I'm not sure where I'm going with this. Perhaps it's to say that yes I agree that a certain % of cash buyers are just moving up the pyramid off the back of the liquidity providers, and so maybe I exaggerated with my 99%, but I still maintain that a good % of that liquidity is being (or has been) provided by cash investors.

In some ways, it further demonstrates the impact that withdrawal of that liquidity will have, as one sale not made could mean five sales not made.

I need bed, goodnight!

Share this post


Link to post
Share on other sites

What you're describing there is basically the pyramid, where all liquidity is provided by either first time buyers or investors. The 'loop' as you call it, cannot happen without the liquidity, provided in your example by a mortgage, an injection of liquidity provided by the lender.

I'm not sure where I'm going with this. Perhaps it's to say that yes I agree that a certain % of cash buyers are just moving up the pyramid off the back of the liquidity providers, and so maybe I exaggerated with my 99%, but I still maintain that a good % of that liquidity is being (or has been) provided by cash investors.

In some ways, it further demonstrates the impact that withdrawal of that liquidity will have, as one sale not made could mean five sales not made.

I need bed, goodnight!

Perhaps it would be fair to say that it seems likely that a large percentage of 'cash' purchasers are indirectly reliant on credit to fund their cash positions (i.e. cash out refinancing, property sales to mortgaged purchasers, etc) and most of the rest are effectively just trading places?

Share this post


Link to post
Share on other sites

Where did you get that 35% from? Is it nationwide? I don't know how easy it is to get a non-UK mortgage for investors. I would imagine there are restrictions.

+ 1

It would be good to know the source of the figure?

Share this post


Link to post
Share on other sites

Until earlier this week cash buyer to me, rather naively kind of meant that. However whilst listening to a property phone-in show the guess intimated that many in the trade considered a buyer who had his finances validated by a solicitor that is trusted and known could be considered a cash buyer. The host's other guess who was also in the trade, agreed. The gist seemed to hinge on having funding available immediately which the vendors could rely on.

This had come up due to a request as to how to set up funding for auction purchases.

Share this post


Link to post
Share on other sites

Until earlier this week cash buyer to me, rather naively kind of meant that. However whilst listening to a property phone-in show the guess intimated that many in the trade considered a buyer who had his finances validated by a solicitor that is trusted and known could be considered a cash buyer. The host's other guess who was also in the trade, agreed. The gist seemed to hinge on having funding available immediately which the vendors could rely on.

This had come up due to a request as to how to set up funding for auction purchases.

Yes, the term has been blurred all over the place. Apparently a lot of EAs get people claiming to be cash buyers and when it comes down to it, it turns out they meant they still need a mortgage but have nothing to sell. I certainly noticed a change in attitude to the term cash buyer in the EAs I dealt with up to 2013 or so. One of them even told me that she would need to see bank/investment statements to prove I was in a genuine position to buy before she would put my cash offer to the vendor. I replied that on that basis, I would need to see a mortgage statement as proof that the vendor wasn't in negative equity and was in a genuine position to sell.

Surprisingly we didn't get much further after that.

Share this post


Link to post
Share on other sites

Yes, the term has been blurred all over the place. Apparently a lot of EAs get people claiming to be cash buyers and when it comes down to it, it turns out they meant they still need a mortgage but have nothing to sell. I certainly noticed a change in attitude to the term cash buyer in the EAs I dealt with up to 2013 or so. One of them even told me that she would need to see bank/investment statements to prove I was in a genuine position to buy before she would put my cash offer to the vendor. I replied that on that basis, I would need to see a mortgage statement as proof that the vendor wasn't in negative equity and was in a genuine position to sell.

Surprisingly we didn't get much further after that.

Actually that very issue came up in the programme. In fact they seem to like funds to be validated as such by solicitors. It seems that EAs don't trust other EAs, how surprising.

Share this post


Link to post
Share on other sites

Actually that very issue came up in the programme. In fact they seem to like funds to be validated as such by solicitors. It seems that EAs don't trust other EAs, how surprising.

Odd, given what a dependable bunch they are :P

If I ever dip my toe in the market again it'll be at a time when EAs have masses of unsold stock and buyers have dried up. We'll see how keen they are to question my finances then.

Share this post


Link to post
Share on other sites

Odd, given what a dependable bunch they are :P

If I ever dip my toe in the market again it'll be at a time when EAs have masses of unsold stock and buyers have dried up. We'll see how keen they are to question my finances then.

They're the lowest form of life, and don't they let us know it.

Share this post


Link to post
Share on other sites

Far be it from me to interrupt some EA bashing, other than to refocus the forum on bashing leveraged landlords ;), but there was a good post with some relevance to this thread from FT last July on his Sundry Statistics Releases thread. In order to avoid cross-posting, I'll take the liberty of re-posting it here.

The problem with the Land Reg volume numbers is that they're not timely and they're also incomplete (some transactions have yet to be registered and certain residential sales are excluded from the figures).

HMRC's statistics are far more valuable in my view. Below is the latest chart of HMRC reported transactions vs BoE approvals (the difference between the two plots is in theory cash transactions, although they may include purchases by foreigners financed with non-domestic loans).

TransactionsVsApprovals0615.gif

Share this post


Link to post
Share on other sites

Yes, the term has been blurred all over the place. Apparently a lot of EAs get people claiming to be cash buyers and when it comes down to it, it turns out they meant they still need a mortgage but have nothing to sell. I certainly noticed a change in attitude to the term cash buyer in the EAs I dealt with up to 2013 or so. One of them even told me that she would need to see bank/investment statements to prove I was in a genuine position to buy before she would put my cash offer to the vendor. I replied that on that basis, I would need to see a mortgage statement as proof that the vendor wasn't in negative equity and was in a genuine position to sell.

Surprisingly we didn't get much further after that.

I've had agents ask me that question. They were happy when I supplied summary printouts of relevant savings and investments. The fact the cash was just about sufficient for my offer seemed a Good Thing: my best possible defence against them trying to push my offer up nearer the asking price.

Share this post


Link to post
Share on other sites

I've had agents ask me that question. They were happy when I supplied summary printouts of relevant savings and investments. The fact the cash was just about sufficient for my offer seemed a Good Thing: my best possible defence against them trying to push my offer up nearer the asking price.

I simply don't like the idea of some shitty little spiv estate agent questioning whether I'm good for the offer I've made. If you think about it, it should be more than enough for them to confirm with you that by "cash buyer" you mean the same as they mean, and that there's no misunderstanding. Once that is established then the only risks they take are that you're i) lying with the intention of driving the price down at the last moment, or ii) a little bit confused. Assuming the former to be what they're trying to avoid, the fact that they would only get away with such impertinence in a rising market really negates the risk to a large extent anyway.

Aside from that, the mere fact that an EA is demanding such proof tells me they have more buyers than sellers and thus it's not a good time for me to be offering.

Share this post


Link to post
Share on other sites

Looking at Ghost Bird's reposting of FreeTrader's chart it does look like there is far larger foreign buyer element operating within the UK market, be that either without borrowings or the need of the UK's lenders. Rumours of the miss use of the Chinese stimulus might hold some water.

Share this post


Link to post
Share on other sites

Looking at Ghost Bird's reposting of FreeTrader's chart it does look like there is far larger foreign buyer element operating within the UK market, be that either without borrowings or the need of the UK's lenders. Rumours of the miss use of the Chinese stimulus might hold some water.

Yep. I would guess the recovery in the transaction is mainly down to forigners buying flats in London.

Looking at LR data for areas outside London shows fckall transaction. My home are is struggling to keep up with probate sales, never mind the other reasons for selling.

Share this post


Link to post
Share on other sites

EA lie for a living, get all kinds of chancers through their doors (and I dress like a scruff) so I wasn't surprised or offended when they asked to see proof. As others have stated it's important to make sure they see you are good for the sum, but not anymore. I got the distinct impression I was a rarity, and it was advantageous on both occasions in terms of negotiating so goodness knows where the 35% number comes from.

Edited by StainlessSteelCat

Share this post


Link to post
Share on other sites

I am interested to know what different agencies consider a cash buyer to be. I get the feeling that many may regard the ability to proceed without having any third party question where funds are going is all that is needed. As an example if I borrowed a million pounds and the lender forwarded the funds into my bank I could effectively be a cash buyer. All that's happened is l have complete control of that money. Interestingly if I try to buy property via an investment trust there could very well be difficulties however in reality many agents are happy to consider me a cash buyer.

Share this post


Link to post
Share on other sites

Create an account or sign in to comment

You need to be a member in order to leave a comment

Create an account

Sign up for a new account in our community. It's easy!

Register a new account

Sign in

Already have an account? Sign in here.

Sign In Now
Sign in to follow this  

  • Recently Browsing   0 members

    No registered users viewing this page.

  • The Prime Minister stated that there were three Brexit options available to the UK:   81 members have voted

    1. 1. Which of the Prime Minister's options would you choose?


      • Leave with the negotiated deal
      • Remain
      • Leave with no deal

    Please sign in or register to vote in this poll. View topic


×

Important Information

We have placed cookies on your device to help make this website better. You can adjust your cookie settings, otherwise we'll assume you're okay to continue.