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Nine out of ten towns unaffordable for first-time buyers

Amanda Jarvis

January 24, 2005

The key findings of the Halifax Annual First Time Buyer Review are:

House Prices and FTB Numbers
-The average price paid by FTBs increased by 16 per cent in 2004 from £112,541 in 2003 to £131,024*. FTBs in the North and Wales experienced the biggest price rises in 2004 with increases of 27% and 25% respectively.
– The affordability difficulties confronting FTBs have significantly reduced the number of FTBs entering the market. There were an estimated total of 361,000 first-time buyers in 2004, the lowest annual total since 1981. The number of FTBs last year was almost a third lower than in 2002 (532,000).
– FTBs accounted for less than three in ten of all new mortgages in 2004. This was well below the longer-term average of almost one in two.

FTB Affordability
– Nine out of ten of the post towns surveyed were unaffordable for FTBs in 2004. There were some regional differences. In four regions – East Anglia, the South West, South East and the North – the survey found that 95 per cent or more towns were unaffordable for FTBs. On the other hand, 19% of the towns surveyed in Scotland and 25% in Northern Ireland were affordable. (See the technical note in Notes to Editors for the affordability calculation).
– There has been a significant increase in the number of towns that are unaffordable for FTBs outside southern England since 2002. The proportion of towns in the North unaffordable for a typical FTB has risen from 54% in 2002 to 95% in 2004. There have also been marked increases in Yorkshire and the Humber (72% to 92%), the North West (67% to 88%), Scotland (57% to 81%) and Wales (62% to 86%) over the past two years.
– The least affordable town for a FTB in the UK is Gerrards Cross in Buckinghamshire where the average property price is 18 times the average income of a FTB. All 10 of the least affordable towns are in London and the South East with the exceptions of Knutsford and Altrincham in Cheshire and Ilkley in Yorkshire.
– Lochgelly in Scotland is the most affordable town in the UK for a FTB with an average property price three times higher than a FTB’s average income. 8 of the 10 most affordable towns are outside the south of England. Erith in Greater London and Gosport in Hampshire are the two exceptions.

Deposits, Age and Property Type
– FTBs put down an average deposit of £26,455 in 2004. This accounted, on average, for 20% of the value of the property. Regionally, the average deposit varied from £48,364 in Greater London to £13,366 in Northern Ireland. The equity put into a first home was significantly higher than in the late 1980s with FTBs putting down a deposit equivalent to 12% of the property value in 1989.
– The average age of someone buying his or her first home has risen in recent years with the average age of a FTB in 2004 being 34 years. This compares with an average age of 32 in 1999. Scotland has the oldest FTBs (average age of 37 years). The proportion of those aged 25 and under buying their first home remains low, at just 16 per cent of FTB home purchases. This is almost half the proportion in 1988 when 31% of FTBs were under 25.
– More than seven in every ten properties purchased by FTBs in 2004 were terraces (43%) and flats and maisonettes (28%). Detached homes and bungalows accounted for only 7% of all purchases by FTBs.

The Future
– The proportion of first-time buyers is likely to increase from its current record low during the next few years. Earnings growth is set to outstrip house price growth in 2005 and over the medium-term. This will cause a reduction in the ratio of house prices to earnings, which will begin to make it easier for first-time buyers to enter the market.

Stamp Duty and FTBs
– The average FTB now pays over £1,300 in stamp duty, equivalent to around 5% of their deposit or nearly two and a half weeks of their gross annual income. More and more FTBs are falling into the stamp duty net because the government has declined to index link the £60,000 threshold. The threshold has remained unchanged since 1993.
– Halifax will launch a campaign to persuade the government to reform stamp duty on residential property. Halifax would like to see the government raise the £60,000 stamp duty threshold to allow for the rise in house prices since it was last increased in 1993 and to commit to increasing the thresholds in line with house price inflation in the future.

Martin Ellis, Chief Economist, commented: “Affordability has become a serious issue making it very difficult for those looking to get onto the housing ladder for the first time. This is highlighted by the sharp decline in the number of first-time buyers over the past two years to the lowest level since 1981.

“There is some light at the end of the tunnel, however. We expect the situation to improve somewhat as earnings growth outstrips house price growth over the next few years. This will make it easier for first-time buyers, thereby boosting the number from its current historically very low level.”


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