Housing in UK more affordable for first time buyers, research shows

The number of first time buyers has risen over the last year

The proportion of UK towns and cities that are affordable for first time buyers has risen to its highest level for a decade, according to the latest Halifax First Time Buyer Review.

The average house price paid by a first time buyer in June 2012 was affordable for someone on average earnings in 54% of all local authority districts (LADs), the highest proportion for ten years.

This is up from 40% a year ago and almost eight times the proportion of affordable LADs at the peak of the housing market in 2007 when only 7% of LADs were affordable.

The number of FTBs has risen over the past year, albeit from a historically low level, helped by the improvement in affordability. Halifax estimates that there were approximately 114,000 first time buyers in the first half of 2012, up by 34% from the same period in 2011 when there were 85,600, but less than half the number a decade ago of 244,700.

It said that the recent ending of the stamp duty holiday is likely to have boosted the number of first-time buyers in the first six months of 2012 as some buyers brought forward their purchases to meet the March deadline.

‘With first time buyers forming a vital part of the housing market, it is clearly encouraging that the number of those getting onto the property ladder for the first time may well increase this year, albeit from a historically low level. This partly reflects the substantial improvement in home affordability for first time buyers since 2007, following the fall in house prices over the period,’ said Martin Ellis, housing economist at the Halifax.

‘However, the continued uncertainty over the outlook for the UK economy and the difficulties faced by many in raising the necessary deposit remain significant hurdles for those wishing to buy their first home,’ he added.

The research also found that the North/South divide in first time buyer affordability has widened over the past decade. In June 2012, just 9% of all UK LADs that are affordable for first time buyers were in the south while 91% were in the north. In 2002 it was 15% in the south and 85% in the north.

Indeed, the North East is the most affordable region in the UK with 97% of LADs affordable followed by Scotland with 93%. In contrast, London is the only region with no affordable areas for first time buyers on average earnings.

The average deposit in the first half of 2012 was just 1% lower than in the same period in 2011. The average first time buyers deposit of £27,857 in June was, however, still some 59% higher than in the £17,523 of 2002.

Regionally, first time buyers in London put down the largest deposit at £59,221, followed by the South East at £34,843. In contrast, first time buyers in Northern Ireland put down the smallest deposit of £16,267.

Over a third more first time buyers now pay stamp duty as a result of the end of the temporary increase in the stamp duty threshold for from £125,000 to £250,000 at the end of March. In total, 44% of first time buyers will now pay stamp duty compared to only 5% during the period of the temporary threshold increase.

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