Slow market boon to first-time buyers

The share of UK towns and cities that are affordable to first-time buyers is at its highest in a decade, a study found.

Those taking their first step on the property ladder will find homes within their means in 54 per cent of local authority districts, the highest proportion since 2002 when 64 per cent of districts were within buyers’ reach, Halifax found.

This is up from 40 per cent a year ago and almost eight times the proportion of affordable districts at the peak of the housing market in 2007, when just seven per cent were in this bracket.

A widening North-South divide was highlighted, with London being the only region where there were no affordable areas found for would-be buyers on average earnings.

By contrast, 100 per cent of districts in the North East were within buyers’ grasp.

Just nine per cent of the affordable districts are in the South East, the South West or the East of England, compared with 15 per cent ten years ago.

This means 91 per cent of the affordable districts are in the North East, North West, Yorkshire and the Humber, East Midlands, West Midlands, Scotland, Wales or Northern Ireland, up from 85 per cent in 2002.

House prices have been holding up in London, which has had strong interest from overseas buyers, as well as some commuter belt areas, compared with the patchier market in the rest of the UK.

House prices in Northern Ireland, for example, which saw a steep increase before the financial crisis, have fallen by around ten per cent over the past year.

Brent in London was named the least affordable district in the UK, where homes cost 8.8 times average earnings, while South Ayrshire in Scotland is the most affordable, with average property prices at just 2.5 times the local annual wage.

Districts were deemed “affordable” if the average house price for a first-time buyer there was lower than what someone on typical earnings living there could pay.

Local average earnings were multiplied by four and if the average price paid by a first-time buyer was lower than this sum, it was classed as affordable.

Halifax found that the average first-time deposit of £27,857 this year was one per cent lower than a year ago, but a huge 59 per cent up compared with 2002.

Halifax housing economist Martin Ellis said the findings suggested there could be an increase in first-time buyer numbers this year, although this would still be from a low level.

He said: “This partly reflects the substantial improvement in home affordability for first-time buyers since 2007, following the fall in house prices over the period.

The Council of Mortgage Lenders suggested a more positive forecast going ahead, as it saw a bounce back in first-time buyer activity in May, with a month-on-month increase of 43 per cent in the number of loans advanced.

Researchers also found that 44 per cent of first-time buyers will now pay stamp duty, compared with just five per cent when the exemption on homes worth between £125,000 and £250,000 was in place.

The survey, which found that 85 per cent of the regions in the East Midlands were now deemed affordable, used Halifax’s own database as well as CML and government studies.