Hello Medway property investors,
As the stamp duty holiday begins to scale back, I have been looking at some data to see what impact this may have had on the Medway property market and come across some very interesting insights!
I have been looking through data from the land registry and stumbled across a relatively new graph which compares mortgage to cash purchases and the insights for February & March are remarkable.
The startling fact is how, for the first time on record, cash purchases overtook mortgage purchases in February and March of this year.
This was not just a small anomaly, but a dramatic jump with March seeing 294 cash purchases compared to just 39 purchases with a mortgage. That’s around 7.5 times the number purchased with cash!
But wait for it… when you look at the average sale price, May cash purchases average out at £245,365 and mortgage purchases sit at £264,936 giving a whopping £72m in cash transactions compared to £10m with a mortgage.
Now, these are quite dramatic figures, but what has caused this?
Whilst I think the answer may be relatively straightforward, it does seem strange that I have been unable to find any national or local news articles referring to this trend. Particularly as the data for England is even more dramatic at 53,131 cash purchases compared to just 5,451 with a mortgage!
What seems even more strange is how it does not even feature in the ONS key points for the March 2021 House Price Index.
So, what’s going on? I personally suspect that even though the stamp duty holiday was extended, there were a significant number of transactions in process and lined up to complete before the end of March. To make the most of the stamp duty savings, perhaps a larger than usual number of people had sold up before completing a new purchase.
This may also be down to cash investors, again in the conveyancing process and lined up to complete before the end of the original deadline as the announcement was made quite late in March (with the original deadline being on 31st March).
I don’t think we will ever quite know what the reason for the anomaly was, but I am sure when the data for April is released, we will see the usual trend continue. It will definitely be interesting to see if this trend repeats at the end of September!
So, what is the benefit of purchasing a property with cash? I know that a lot of investors choose to do this and the main reasons are:
- You’re more likely to get a lower price
- The property needs work and is not mortgageable
If you are an investor and able to purchase with cash it is certainly worth considering as this would put you in a very strong position to get a good deal. For example, once you have completed the purchase you could then choose to raise a mortgage on the property (potentially for more than you paid for it), release most of the funds, and then move onto the next one. This is an excellent strategy that works without fail provided you get the price right!
I trust you found this article insightful, and I would be keen to hear your thoughts on this statistic! The best way to reach me is through LinkedIn.