An interesting new report from Countrywide has revealed that the proportion of landlords paying in cash for a property during January hit 61%. This was the highest since records began ten years ago.
The report indicates that buy-to-let investors who have opted to purchase since the introduction of the 3% stamp duty surcharge in April rely more heavily than ever on cash to complete their transactions.
During the last decade, the proportion of landlords buying with cash has steadily increased. In 2007, only 41% of landlords purchased a home without a mortgage, a number which rose to 58% in 2010 before falling again.
Those landlords buying in the North of England were found to be most likely to use cash in order to fund their purchase. 70% of landlord purchases in the North West were in cash-the greatest proportion in England.
On the other hand, those looking to buy in London were found to be most likely to use mortgage finance. With house prices in the capital rising sharply, there has been a slide in landlords opting not to use a mortgage.
What’s more, cash purchases drove the top and the bottom of the rental market, with both the most and least expensive properties most likely to be purchased with cash.
In the last year, nearly two-thirds of homes costing less than £125,000 were paid for using cash. These were closely followed by the 64% of landlords who paid in cash for properties costing over one million pounds. Nearly one quarter of all landlord cash buys were funded by the sale of another property.
Johnny Morris, research director at Countrywide, said: ‘On average landlords sell a home once every 17 years meaning as prices have increased, a significant amount of wealth has built up in the sector. This is now fuelling cash purchases.’
‘With the forthcoming tapering of tax relief on mortgage interest payments, landlords have less of an incentive to borrow, suggesting more cash activity in 2017,’ Mr Morris added.