First-time buyers sink to record low despite house prices being at their most affordable since 2003

By
Leon Watson

Last updated at 6:07 PM on 26th December 2011

The number of first-time buyers has hit a record low despite homes being at their most affordable for eight years, Halifax revealed today.

Houses bought by first-time buyers in November were found to be priced at ‘affordable’ levels in 44 per cent of local authority districts in the UK, the highest proportion for eight years, the First-Time Buyer Review found.

A home was deemed affordable when it cost less than four times average yearly earnings – and just 5 per cent of properties met this criteria at the peak of the housing market in 2007.

The number of first-time buyers has plummeted despite figures showing house prices have fallen

The number of first-time buyers has plummeted despite figures showing house prices have fallen

The average age of the first-time buyer has also dropped slightly, from 30 last year to 29 in 2011. The average age falls to 28 in the North, Yorkshire and the Humber and Wales, and rises to 32 in London.

Those potentially getting on the property ladder will also devote around a quarter of their disposable earnings to their mortgage payments, tumbling from half their income during the peak levels of 2007.

Despite the more positive affordability figures, Halifax estimated that there were only around 187,000 first-time buyers in 2011, the lowest annual total since records began in 1974.

This figure is less than half the recent peak of 402,800 first-time buyers seen in 2006 and can be partly explained by the need to put down a bigger deposit, Halifax said.

The study said that as a proportion of the purchase price, the typical deposit has soared from 10 per cent in 2007 to 20 per cent in 2011.

The average first-time buyer deposit in the first 11 months of 2011 was £27,032, up from £17,482 in 2007.

A survey by Halifax's First-Time Buyer Review found the average age of the first-time buyer has also dropped slightly, from 30 last year to 29 in 2011

A survey by Halifax’s First-Time Buyer Review found the average age of the first-time buyer has also dropped slightly, from 30 last year to 29 in 2011

First-time buyers in Greater London typically put down the biggest deposits, averaging £60,192 and a quarter of the average property value.

Buyers in the North had the smallest deposits – averaging £14,882 and 15% of the value of their home.

Lenders have gradually been bringing back deals requiring lower deposits, but there have been complaints that the terms of the mortgages are too restrictive.

BRITAIN’S TOP 10 MOST AFFORDABLE DISTRICTS

1. South Ayrshire, Scotland

2. Northumberland, North East

3. Renfrewshire, Scotland

4. Pendle, North West

5. North Ayrshire, Scotland

6. County Durham, North East

7. Inverclyde, Scotland

8. Stirling, Scotland

9. Fife, Scotland

10. West Dunbartonshire, Scotland

The Government recently unveiled a package of measures aiming to inject life back into the market, including underwriting mortgages for first-time buyers wanting to buy a new-build home.

Halifax also found that the vast majority of areas with affordable homes are outside the South of England. No districts in London are deemed affordable while all districts in the North East are.

Three-quarters of areas are affordable in the North East, North West, Yorkshire and the Humber, East Midlands, West Midlands, Scotland, Wales and Northern Ireland compared with just 5 per cent in the South, comprising Greater London, the South East, the South West and the East of England.

South Ayrshire was named as the most affordable area in the UK for first-time buyers, with the average property price standing at just over two-and-a-half times (2.65) gross average annual earnings.

The next most affordable areas are Northumberland, with a ratio of 2.86, and Renfrewshire, with a ratio of 2.88.

Peterborough is the most affordable local authority district in southern England with a ratio of 3.98.

The least affordable local authority district for first-time buyers is in Brent, London, where the typical first-time buyer home is 9.11 times gross average earnings.

Oxford is the second least affordable district, with a ratio of 7.75.

The study also looked at the consequences of the ending of the current holiday on stamp duty for first-time buyers this spring.

The 2011 report found that nearly four in 10 first-time buyers did not pay any stamp duty as a result of the temporary increase in the starting threshold for first-time buyers from £125,000 to £250,000.

On that basis, it predicted that 38 per cent more first-time buyers, and 43 per cent in total, will have to pay stamp duty once the concession ends in March 2012.

Lenders have warned that the ending of the holiday could disrupt the already fragile market.

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