First-time buyers priced out of 96% of towns

21 December 2007

First-time buyers are at their lowest levels since 1980 having been priced out of 96% of towns across the country.

Research from Halifax shows that just 300,000 first-time buyers got onto the property ladder in 2007, 44% less than in 2002.

And little wonder when the average house price paid by first-time buyers in 2007 was £175,093 – up 15% from the previous year and up 82% from 2002. Halifax says this means that over the past year a typical first-time buyers was unable to purchase the average house in 466 out of 483 towns.

The bank claims that even terraces – traditionally the cheapest property type – are beyond the reach of first-time buyers in 71% of towns as opposed to 11% of towns in 2002. The increase in house prices has also seen the average deposit needed rocket by 88% since 2002 from £18,259 to £34.381.

Halifax estimates this is 20% higher than UK average full-time earnings of £28,590 in 2007. In 2002, the average deposit was 26% less than UK average full-time earnings of £24,549.

This means that first-time buyers tend to have an average income of £31,294. But with people in the 20s generally earning an average of £22,360, first-time buyers may need to wait until they are in their 30s before getting their foot on the ladder.

Halifax names Henley on Thames as the UK’s least affordable town for first-time buyers, with prices 13.1 times their average income, while Bootle in Merseyside is the most affordable town. Here, the average property price is just 3.4 times higher than average first-time buyer incomes in the county.

Martin Ellis, chief economist at Halifax, says: “There is no quick fix to the first-time buyer problem. A more subdued housing market over the next few years is a positive step for potential new entrants. Lower than average earnings house price growth together with more government initiatives may, in time, address the issue."

Melanie Bien, associate director at Savills Private Finance, says there still are financing options available to first-time buyers keen to get on the property ladder.

Buyers could consider shared ownership where they take out a mortgage on a proportion of the property and rent the remainder from a housing association, or the Open Market HomeBuy scheme where borrowers take out a 75% mortgage, with the government and a mortgage lender providing a loan to cover 25%.

Bien says: “The problem with Open Market HomeBuy is that it is only available to a limited number of people. However, it is being reviewed constantly and the government has said it will continue to promote and improve it next year.”

Loans that offer 100% or more of a properties' value are another popular first-time buyer mortgage.

But Bien says: "100% plus products aren’t that competitive at the moment, as lenders have realized these are risky loans and have repriced to account for this.

“For most people, parents are the best way onto theproperty ladder. They can either act as a guarantor or put up thedeposit.”


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