UK first time buyers return to the market

First time buyer numbers in the UK are at their highest since 2007 but they are still nearly 50% lower than in 2005 before the global economic downturn, new research shows. There was an estimated 12% increase in the number of first time buyers in 2012, up from 193,000 in 2011, according to the annual Halifax First Time Buyer Review.

Whilst this was the highest annual total since 2007, it was still nearly 50% lower than in 2006 when there were 402,800.  The research also showed that affordability for first time buyers remains close to its most favourable level since 2003 with the average house price paid by a first time buyer in November 2012 within the reach of those on average earnings. This compares with just 5% at the peak of the housing market in 2007, but is marginally lower than in 2011 due to a modest increase in the average price paid by first time buyers in 2012.

Mortgage affordability has also improved in recent years when the proportion of disposable earnings devoted to mortgage payments by a new first time buyer stood at 27% in the third quarter of 2012, more than half of the peak level of 50% in the second quarter of 2007 and comfortably below the long term average of 34%.  Nationally, the average house price paid by a first time buyer in 2012 was £139,921, an increase of 3% on £136,195 in 2011 and over half, 55%, of all first time buyer purchases in 2012 were below the £125,000 stamp duty threshold.

Quote from PropertyCommunity.com : “There has been widespread disappointment within the UK property industry that Chancellor George Osborne did not use today’s Budget to keep first time buyers exempt from stamp duty.”

Some 38% of properties bought by first time buyers were priced between £125,000 and £250,000 and would have been exempt from stamp duty if the temporary increase in the starting threshold had been in place for the entire year. The overwhelming majority, some 96%, of first time buyers in London bought homes above the £125,000 threshold. ‘The number of first time buyers has risen to a five year high, boosted by the improvement in affordability resulting from the reductions in both house prices and mortgage rates in recent years,’ said Martin Ellis, housing economist at the Halifax.

‘Conditions for potential first-time buyers, however, remain very difficult with problems raising the necessary deposit and concerns over the economic climate continuing to prevent many from entering the market. Despite some positive steps with schemes such as NewBuy, the numbers of those buying their first home remain low by recent historical standards,’ he added.