Cash vs mortgage: how are landlords buying properties?

The number of people buying a property without a mortgage has reached an eight year high, according to new research.

Analysis from estate agency Hamptons shows that nearly 40 per cent of sales agreed earlier this year came from cash buyers.

What does this tell us about the property market? And what does it mean if you’re planning on expanding your property portfolio or selling up? Read on to find out the latest insight for landlords.

Cash buyers highest in 8 years

Hamptons figures in January 2023 show that 39 per cent of all sales agreed were to a mortgage-free buyer.

This is the largest monthly share going to cash buyers since December 2014 when the share of people mortgage-free hit 41 per cent.

Looking at previous years, cash buyers only accounted for 29.3 per cent of purchases in January 2022, and 29.2 per cent in January 2021.

It’s likely that high interest rates are driving more people to use cash rather than taking out a less favourable loan.

What is a cash buyer – and what are the benefits?

A cash buyer is someone who chooses to buy a property without needing to take out a mortgage. For example if they have the money from selling another, more expensive property, or have the funds available so as not to need a mortgage.

Benefits of being a cash buyer include:

• you’ll own the property outright
• more bargaining power when negotiating the property price
• not being tied to a mortgage with high interest rates
• often a quicker buying process

And if you’re considering selling up, cash buyers can be an attractive option as completion can be much quicker. Hamptons reports that sales can complete on average 20 days faster than those with a mortgage.

It’s also common that a cash buyer isn’t part of a chain, simplifying the transaction and reducing any risk that the purchase might fall through.

Read more: How to get a buy-to-let mortgage.

What does this mean for the housing market?

We’ve previously reported on rising mortgage costs and what this means for landlords. While mortgage rates are predicted to decline somewhat this year, cash is still likely to dominate at least some areas of the property market.

Prime markets are often most likely to see cash buyers as these represent the upper end of the market.

Hamptons reports that mortgage-free buyers made up a 50 per cent share of purchases in Prime Central London in January 2023.

There’s also been a decline in first-time buyers as people struggle to get on the housing ladder following the pandemic, which could mean a greater share is made up of cash-ready investors.

More guides and resources for landlords

• What do landlords need to know about the How to Rent guide?
• How to build a property portfolio in the UK
• Landlord checklist – what to do before renting out a property
• How much does landlord insurance cost?

What do you think about the rise of cash buyers? Let us know your experience in the comments.

Photograph: I-Wei Huang/stock.adobe.com