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Cash buyers helping to drive forward property market recovery in UK

Wednesday, 09 October 2013

Cash buyers are driving a large part of the property market recovery in the UK, much more than buyers with a mortgage, according to new research from residential property services company Hamptons International. In the first half of this year, more than a third, 35%, of house sales in England and Wales were made by cash buyers. This represents an increase of 11% compared with the same period in 2012 and the number of people buying with cash today is at its highest point since 2008. At a time when mortgage availability is improving and confidence in the property market is returning, Hamptons International’s research suggests that the number of cash buyers in 2013 has grown at a much faster rate than mortgages.   Of the additional 20,000 property sales in the first half of 2013 compared with the same time last year, Hamptons International estimates that 70% can be attributed to cash buyers with a 13,600 or 11% increase in cash sales and just 6,300 or 3% increase in mortgaged sales. ‘Contrary to popular belief, much of the recovery in house sales in recent months has been driven by increased cash buyer activity rather than simply increases to mortgage lending,’ said Johnny Morris, head of research at Hamptons International. ‘While there is no doubt that increased mortgage activity helps to improve sentiment and increase liquidity in the market, the growth of cash buyers in the market has overtaken that of mortgage buyers,’ he added. The South West has the highest proportion of cash buyers at 39% in the last 12 months compared with an average of 33% across England and Wales. By contrast, London on average has the smallest proportion at just 24% although this figure rises to 60% in Prime Central London.  The average price of a house in the South West is £173,000, in London is £386,000 and in prime central London is £935,000. ‘Many cash buyers are downsizers planning to take advantage of the capital locked away in their properties. The South West has both the highest rate of owner occupation in England and the highest proportion of older age groups in its population,’ explained Morris. ‘London on the other hand, has the highest property values in the country and while cash transactions in prime central London are more commonplace than anywhere else in the country, less than seven per cent of London sales over the last 12 months happened in this market,’ he added. Prices for prime UK arable farm land could exceed forecasts in 2013 Monday, 21 October 2013 Growth in average prime arable land values in the UK is rising and looks set to exceed baseline forecasts for the year, according to the latest survey report from Savills Farms and Estates. Following further increases during the third quarter of 2013, the value for prime arable land now averages just under £8,300 per acre across Great Britain, the firm’s analysis shows. This pushes average growth up to 8.5% so far this year, close to Savills’s baseline forecast for average value growth for 2013 of 8.8% with a further quarter to go. This equates to an 8.5% value increase in average prime arable land since the beginning of the year and a year on year growth of 14.5%. But the firm also points out that there are significant regional variations and the farm land market remains increasingly diverse in terms of value being closely linked to location, land quality and type as well as the residential weighting of the farm. In the third quarter the strongest average prime arable growth was in the Eastern Counties of England with a rise of 4.6%, followed by Scotland at 3.3%, the North of England at 3.1%, the South East at 1.9%, and the East Midlands at 1.3%. The West Midlands, the South West and Wales saw no change in the price of prime arable land during the last three months with a lack of evidence due to very little activity. However, both the West Midlands and the South West have already witnessed 4.6% and 2% growth respectively in prime arable land since the start of the year, albeit not as steep a rise as the East of the country at 12.1%. ‘The stellar performance of the best commercial farms continues. However, although the headline figures show impressive growth, there is wider a story behind the sound bites, which is a less buoyant market for residential farms,’ said Alex Lawson, director of Savills Farms and Estates. ‘Similarly the limited supply of land advertised, ignores a booming private market, especially in the case of the largest and most expensive farms and estates,’ he added. Lawson pointed out that in terms of supply there has been a slight uptick in the number of acres publicly marketed so far this year. Some 128,309 acres of farm land were publicly marketed across Great Britain during the first three quarters of 2013, a rise of 5% compared with the same period in 2012. However, supply across the country continues to be historically low and the research shows that this year the volume of publicly marketed farm land is lower than the average relative supply for the last three, five and 10 years. With the exception of the East and the South West of England, supply in all regions increased during the first three quarters of the year. Activity started late in Scotland but has picked up and according to the research the total volume of farm land publicly marketed so far this year is the greatest on record since 2003. In contrast, although activity increased across England by just 3% it was, apart from 2012, the lowest since 2004. Supply fell furthest in the East of England, down 36% down on the first three quarters of 2012, with just 9,640 acres of land publicly marketed. This is the lowest acreage marketed in the East to this period of a year since before the firm’s records began in 1995. Lawson said that anecdotal evidence suggests a substantial acreage has traded privately this year, which could account for as much as 30% of the total market to change hands so far in 2013. The report also points out that improved weather conditions during the Summer and into the Autumn of  this year has benefitted harvest yields with reports indicating they were better than expected. In addition conditions have been ideal for Autumn planting. Lawson said that this will reduce some of the financial pressures faced by some farmers and could reduce the number of debt related sales. The research shows that so far in 2013 there has been an increase in the number of applicants who have deeper pockets for buying farm land. There are 13% more applicants with £5million to £10 million to spend on farm land than in the previous three years. Lawson pointed out that a large proportion of these funds will still be available into next year due to the lack of supply, particularly across the East counties. ‘As we move into the final quarter of 2013 and review our forecasts for the year it is clear the baseline forecast growth of 8.8% for average farm land is realistic. This growth is driven by the strength of the market for good quality commercial arable land and the best diary farms,’ added Lawson. 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