UK properties more affordable but fewer first time buyers are entering the market

Total number of first time buyers at its lowest since 1974 despite more affordable property

First time buyer affordability in the UK is at an eight year high but fewer are buying properties, new research from one of the biggest lenders reveals.

The average deposit is down 15% but the total number of first time buyers is at its lowest since 1974, according to the Halifax First Time Buyer Review which tracks housing affordability across the UK.

It also found that there is a major regional divided with 75% of areas in the North affordable compared to just 5% in the South of the country.

The average house price paid by a first time buyer in November 2011 was affordable for someone on average earnings based on the ratio of the average house price to earnings being below the long term average of 4.0 in 44% of all local authority districts (LADs) in the UK.

This is the highest it has been since 2003 and compares with 42% in 2010 and just 5% at the peak of the housing market in 2007.

Despite the overall improvement in affordability, there remains a strong north/south split with 95% of all the UK LADs that are affordable for first time buyers in the North compared with just 5% in the South. All LADs in the North East are affordable for first time buyers whereas in London there are no affordable areas for them.

Notwithstanding better affordability, Halifax estimates that there were around 187,000 first time buyers in 2011, the lowest annual total since records began in 1974, some 7% lower than in 2010 and less than half the recent peak of 402,800 in 2006.

It says that much of the fall in the number of first time buyers in recent years can be explained by the need to put down a bigger deposit. The average deposit in the first eleven months of 2011 was £27,032, some 15% lower than in 2010. But as a proportion of the purchase price, the average deposit has increased from 10% in 2007 to 20% in 2011.

Seven of the ten most affordable LADs for a first time buyer are in Scotland. South Ayrshire is the most affordable with an average property price that is just over two and a half times (2.65) gross average annual earnings. The next most affordable areas are Northumberland (2.86) and Renfrewshire (2.88). Peterborough in the East of England is the most affordable LAD in southern England (3.98).

Nine of the 10 least affordable LADs are in London with Brent the least affordable where the average property price is over nine times (9.11) gross average earnings in the area. Oxford (7.75) is the second least affordable LAD. Herefordshire (5.03) is the least affordable LAD outside the south of England.

First time buyers in London need a deposit of £60,192 whereas those in the North of the country need to put down the smallest average deposit at £14,882.

Nationally, the average house price paid by a first time buyer in 2011 is £135,160, down 3% on 2010. But in London it is £240,768 and lowest in the country is in the North at £96,324.

‘Housing affordability for those looking to get onto the property ladder for the first time has improved significantly over recent years, largely as a consequence of the decline in house prices since 2007. Nevertheless, conditions for potential first time buyers remain tough. Difficulties raising the necessary deposit and concerns over the economic climate are preventing many from entering the market,’ said Martin Ellis, housing economist at the Halifax.

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