Greater proportion of cash buyers are helping to keep house prices rising as outright home owners now exceed those with mortgages.
Data from the Nationwide shows house prices are rising at a steady 4.5% for the year to February 2017 compared to 4.3% last month with the average house price at £205,846.
Robert Gardner Nationwide Chief Economist said, the UK economy has continued to perform relatively strongly and a small rise in house prices of 2% is likely this year due to low borrowing costs and shortage of homes in the market.
The share of cash transactions has not fallen back as the economy has recovered and is a more important driver of the housing market than they were a decade ago.
Cash buyers more important
Since the financial crisis the proportion of cash buyers has increased significantly from 20% in 2005 to 35% in 2008 and has remained fairly constant since then.
This was due to the decline in mortgage transactions at this time rather than a rise in the number of cash buyers and reflected the adverse labour market and tightening of credit conditions due to the financial crisis.
This limited the number of mortgage advanced to first time buyers, home movers, remortgage buyers and buy-to-let landlords whereas cash buyers were not impacted to the same degree.
Low interest rates in the UK and abroad has also contributed to a flow of cash from other assets to residential property.
The proportion of cash buyers reached an all time high of 38.9% after the introduction of Stamp Duty on buy-to-let landlords and second homes from April 2016.
This brought forward purchases before this date to avoid the additional 3% Stamp Duty tax and a large proportion of these transactions would be conducted in cash.
With competition and reduced supply of suitable properties for home movers and first time buyers means more people must stay where they are to save for a bigger deposit.
Demographics boosting cash buyers
As the population of the UK ages demographics is playing a bigger role boosting the number of cash transactions.
The proportion of people in England that own their own home outright overtook those with a mortgage in 2014 and older home movers that downsize are more likely to do so using cash.
For 2015/16 the proportion of cash buyers transactions was highest in the South West with about 44%, then the North West with 38% and Wales with 37%.
For London the data shows the share of cash purchases of 33% is below the 36% national average.
The higher prices in London averaging £473,073 compared to the UK average of £205,937 could explain this despite the greater number of domestic and overseas investors in the capital.
In London the older homeowner have greater value in their property allowing the equity release buyer to access wealth using a lifetime mortgage to maintain their lifestyle, or give to a family member.
According to Mr Gardner, the UK economy will slow in 2017 due to uncertainties such as business investment, hiring, rising inflation and the weaker pound, although the property market is likely to be stable.
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