Caveat Emptor. What percentage of houses in the UK are bought with cash?

You may be surprised to learn that it is around 40%. However, the long- term average is more like 25%. Why are so many more people buying with cash now than before?

The answer is that they are not. The absolute number of people buying this way is the same as always. It’s just that the total number of transactions has fallen so much that the number of cash buyers as a percentage of the total has jumped.

This is odd. You’d think that with house prices 20%-25% down from their highs in nominal terms (and by much more in many places), and with there being almost no return on cash savings, those with money to park would be pouring it into property. The fact that they aren’t could tell us something good. It could tell us that a new national consensus is being reached - that house prices are far too high and that now isn’t the best time in the world to make large consumption purchases (unless you’re buying at a discount from auction, of course). All we need now is for prices to fall to meet the recognition of that new reality.

The only area that comes as an exception to all this is central London. But it seems that if you are buying a £10m house in London at the moment and expecting its price to go up, you aren’t betting on the UK economy or the wealth of rich UK families. You are betting on continuing instability abroad (what percentage of London houses changing hands are going to those who don’t want to keep their money at home in Greece or Egypt?) and on the pound (the lower it goes, the cheaper London houses look to foreign buyers). You may want to bet on these things, but if you are thinking of buying a house in Kensington, you might as well know that’s what you are doing. If you look at a chart tracking house price rises in Blackpool and in Kensington, over the long term they always converge. They will this time too. The question is simply whether prices in Blackpool will rise a lot or prices in Kensington will fall a lot. Which do you think is more likely?