Cash Rich

The average price paid by cash buyers for a home in the UK is 9% less than that paid by mortgaged buyers, but it’s a different story in London.

Estate agency comparison website GetAgent has compared the average price paid by cash buyers over the last 12 months around the UK with the average paid by mortgaged buyers. Cash buyers paid an average of £220,100, 9% less than the mortgaged average of £240,758.

GetAgent concludes that this is because cash-toting house-hunters are nearly always in a better negotiating position than their bank-reliant counterparts. But of course the data could also mean that cash buyers tend to go for cheaper properties, while borrowers – who are enjoying historically low interest rates – can afford to stretch budgets a bit more.

The gap is greatest in the North East and North West (-12%), but the national trend is completely flipped in London. Cash buyers tend to pay 6% more for a property in the capital than buyers with a mortgage; it’s the only region where this is the case.

Within London, Merton and Westminster boroughs have the highest cash premium (both at +7%), while Sutton has the biggest cash discount (-9%).

Colby Short, Founder and CEO of GetAgent.co.uk: “Cash is always king when it comes to pretty much any transaction and this doesn’t change just because you’re buying a house. In fact, it becomes even more pertinent.

“Cash buyers are preferable to many sellers because they provide a much simpler transaction with fewer hoops to jump through and often come without a complicated chain. The flip side of this convenience is that cash buyers have a far stronger position when it comes to negotiations and often sellers will accept a more sizeable reduction for the speed and convenience of a cash sale.

“While this is nothing new, it has become more prevalent in recent times due to a few factors.

“Brexit uncertainty over the last year has left many on the fence and so those that are looking to sell have had to do so with a lower price expectation due to a dwindling level of buyer interest. Therefore, finding the golden ticket of a cash buyer with honest intentions in a market slowdown has prompted an even greater tendency to sell with a greater cash discount in order to get a sale over the line.

“At the other end of the transaction scale, the continued affordability of borrowing money due to low interest rates has seen many aspirational buyers commit to a greater sum than they may have otherwise.

“Of course, the cat and mouse game of a lower bid during the offer stage happens regardless of how a buyer may be funded, but with mortgage buyers already starting at a higher price point in terms of the sum they’ve been approved for, the final price paid has been greater than it may have been in different circumstances.”