New research by bridging lender Market Financial Solutions (MFS) has revealed that property buyers in London were far more likely to be gazumped by rivals when trying to complete a purchase.
MFS’s survey of 2,000 UK adults found that 15% of adults in London – the equivalent of more than one million people in the capital – have lost out on a property purchase to a rival buyer despite having an offer accepted. This is three times higher than the figure of 5% from the UK as a whole. Across the country, over 1.5 million people revealed that they had lost out on their ‘dream home’ because a property purchase fell through after an offer on the house had been accepted.
The lender claims the results illustrate the competitiveness of London’s property market, with the capital ranked last year by Savills as the most competitive city in the world. The Nationwide House Price Index shows that the average house price in London stands at £473,073 – more than twice the national average of £217,000. Residents of the capital earn almost double the UK average, while London also ranks second in the world for foreign property investment, with £18.8 billion worth of property bought by overseas buyers in the year to June 2016, according to Knight Frank’s Global Cities report. The result is a huge amount of buying power that, as MFS’s research shows, increases the likelihood of Londoners losing out on property purchases at the last minute.
The issue of being gazumped on a property purchase brings added costs – 3% of UK adults (1.54 million people), and 9% of Londoners, have lost out on fees to intermediaries such as solicitors and surveyors because they were pipped to the post during a property purchase. Which? has revealed that property buyers lose on average £2,899 in fees on a failed purchase, meaning that across the nation the cost of being gazumped totals more than £4.4 billion. The survey found that an inability to access funds in time is one of the main reasons that property deals unravel at an advanced stage; 9% of Londoners said they had experienced this issue, while 1.54 million UK adults also stated they had been undone by this problem.
However, according to the MFS research, more than one million Brits admitted to gazumping other property buyers by bidding on properties soon to change hands, while the same number said they would do so in 2017.
Millennials were found to be more at risk than older generations when it comes to being pipped to the post in the property market. Of those aged between 18 and 34, 1.18 million said they had lost out to rival buyers after having an offer accepted; 1.03 million had seen a deal fall through because they could not access funds in time; and 738,000 had lost money on intermediaries’ fees after being gazumped. A growing number of millennials are willing to gazump as part of their property strategy – 442,800 18 to 34 year olds admitted to gazumping in 2016, while 590,400 millennials are considering the practice in 2017.
Paresh Raja, CEO of MFS, said: “Most people who have dipped their toe into the property market will have felt the frustration of deals falling through at the last minute. Not only are people losing out on the fees they pay to solicitors and surveyors, but many buyers are also losing out on their dream home.
“Our research reveals that failure to access funds in a timely manner is one of the most common reasons for property purchases falling through. The statistics show that as mortgage lenders implement greater regulation, getting finance promptly has become an increasingly pertinent challenge.
“This is one of the main reasons the bridging industry has significantly risen in popularity among property buyers and investors over recent years – in such a competitive industry, speed is everything and bridging provides a much-needed solution in this fast-paced market.”