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Press release: Cash becoming king as two-fifths of Prime property purchases made by cash buyers

Cash becoming king as two-fifths of Prime property purchases made by cash buyers

  • One in three Prime London property purchases made by buy-to-let investors in Q1 2015
  • Second-home owners overtake investors in Prime Central areas, making 41% of all purchases
  • Influx of these buyers means 40% of Q1 property sales were made in cash up from 34% the previous quarter
  • Overall, buyer demand increases 9% year-on-year in Prime London rising to 19% in Outer Prime belt

Buy-to-let investors were behind one in three property purchases made in Prime London during Q1 2016, boosting the proportion of purchases made in cash to two-fifths, according to estate agent Marsh & Parsons latest London Property Monitor.

Accounting for 36% of all sales from January to March, buy-to-let investors were the most prolific type of buyer across Prime London in the run-up to the April 1st implementation of an additional 3% Stamp Duty. This represents a significant spike from the 26% recorded in the previous quarter.

This Q1 jump in investor purchases also marks a sudden reversal in the recent trend of weakening investor influence, showing a rise from 29% a year previously. Investor share of the market has been in slow decline last year since it peaked at 37% in Q4 2014.

Similarly, those purchasing an additional residence became the second most prominent type of buyer in Prime London during the first quarter of 2016. This buyer group saw an even bigger jump in market share quarter-on-quarter, with second-home owners accounting for nearly a quarter (23%) of all Q1 property purchases, up from just 14% in Q4 2015.
Second-home owners even overtook investors as the most common type of buyer witnessed in Prime Central London during Q1. The vast majority (41%) of all property purchases in Prime Central London were made by those buying an additional residence, a significant leap from 24% in Q4 2015. Property investors also seeking to circumvent the extra 3% levy accounted for a further 35% of property sales.

This preponderance of second-home owners and buy-to-let investors has translated into a much higher proportion of cash purchases in Prime London. Two-fifths (40%) of property purchases were made by cash buyers in Q1, an increase from 34% in Q4 2015, and 36% a year ago. In Prime Central areas, this rose to almost half (46%).

David Brown, CEO of Marsh & Parsons, comments: Investors will always be the stalwarts of the Prime London property market its the golden goose of capital returns, and people are still clamouring for a slice of the action. But second-home owners really jumped to it this spring too, and were much more prominent in the market than we would typically expect. But this was by no means a typical quarter. Sales activity in the opening three months of this year has been exceptionally skewed by the implementation of the additional layer of Stamp Duty for both buy-to-let and second-home purchases. Naturally, the knee-jerk reaction among these groups has been to hurry through property purchases before the deadline, and make savings while they can. Now that the ruckus has passed, well see much more orderly sales over the summer months, as the market re-balances towards first-time buyers and other owner occupiers for whom it will just be business as usual, and who want to plough on up the property ladder.

Demand drives Outer Prime growth

Overall in the past twelve months, buyer demand has jumped 9% across all Prime London, taking the ratio of registered buyers for every available property for sale to 14. Competition has ramped up on both a quarterly and annual basis, increasing from 13 buyers to every property on the market in Q4 2015, and 12 in Q1 2015.

But rates of supply and demand are moving in vastly divergent directions across the capital. In Outer Prime areas of London, buyer demand has soared by almost a fifth (19%) since March 2015, while demand in Prime Central London has fallen by 4% over the same 12-month period. Similarly, while supply of homes for sale in Outer Prime London has dropped 12% year-on-year, supply has climbed 11% in more exclusive Prime Central London.

Due to the severe mismatch between supply and demand, Outer Prime parts of London are seeing the highest levels of competition across the capital with on average 16 registered buyers vying for every property for sale during Q1, an acceleration from 12 a year ago. In hot-spots such as Balham, the number of applicants for every available property rises to 21.

This fierce demand has driven a significant growth spurt in Outer Prime London, greatly outstripping the price growth witnessed in other parts of the capital on both a quarterly and annual basis. In Balham, average property prices are showing a 7.2% improvement on Q1 2015, and have soared 3.4% in just three months.

Average house prices in Outer Prime London overall are up 2.9% year-on-year, following a 0.5% jump since Q4 2015 outperforming the rest of capital.

David Brown concludes: “The seesaw of supply and demand is swinging the power towards sellers at the moment. The market is brimful of buyers, and nowhere more so than in the popular addresses of Outer Prime London. There’s still a significant price premium to be paid for living in the central confines of our capital, and this has drawn certain geographical battle lines for the next generation who are increasingly focusing their efforts in Outer Prime territories. For first-time buyers and young professionals, these are the places where they can afford bigger properties that offer them room to grow, and for savvy investors, these are the places where prices still have room to grow too.”

Average Property Price Quarterly Change Annual change Price per sq. ft

Prime London

1,610,602 0.2% 2.6% 1,233
PCL 2,088,867 0.1% 2.4%

1,612

Outer Prime 1,192,120 0.5% 2.9%

907

For further detailed analysis on Prime London house prices, lettings, and buyer demographics, the Marsh & Parsons Q1 2015 London Property Monitor is attached.
David Brown, CEO at Marsh & Parsons, is available for interview to discuss the findings. Please contact Darius Meehan on 020 7247 1430 to arrange a media interview.

— ENDS–
Methodology:
The Prime Market Monitor uses a repeat valuation methodology that tracks values in a robust mix-adjusted basket of properties across all Prime London in the main areas in which Marsh & Parsons operates. Prime Central London comprises representative baskets of properties covering Chelsea, Kensington, Notting Hill, Holland Park, Pimlico and Earls Court and South Kensington. Outer Prime London comprises outer areas such as Clapham, Balham, Battersea, Barnes, Little Venice, Fulham, North Kensington and Brook Green. Prime London is used to describe all these areas combined including Prime Central London and Outer Prime London.
Supply and demand statistics are based on an audit of Marsh & Parsons registrations and instructions during the quarter. Buyer profile information taken from Marsh & Parsons quarterly MI data.

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