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The 5th annual Halifax First Time Buyer (FTB) Review shows FTBs continuing to get squeezed. Based on data from the Halifax's own housing statistics database, along with figures from the Council of Mortgage Lenders, the Office for National Statistics and the Department for Communities and Local Government, the Review tracks housing affordability in 483 post towns (including 32 London boroughs) across the UK. A town is classified as unaffordable if its house price/First Time Buyer household income ratio is above 4.0.
The Review shows the number of FTBs at its lowest since 1980 with the average house proving unaffordable in 466 out of 483 towns. An estimated 300,000 FTBs entered the market in 2007 - 44% less than in 2002 (532,000).
Henley on Thames is the UK's least affordable town (where the average house price is 13.1 times average income) for FTBs, with Bootle in Merseyside the most affordable at 3.4 times average income. The next most affordable towns are Gosport in Hampshire (3.5 times) and Lerwick in Scotland (3.5 times).
Five of the 10 most affordable towns for FTBs are in the south of England, while 7 of the 10 least affordable towns are in the South East. The exceptions are Ilkley and Wetherby in West Yorkshire and Truro in the South West. Six towns have a price to income ratio above 10.0.
Figures also show that FTBs can't afford to purchase a terraced property - traditionally the least expensive property type - in 71% of towns across the UK (322 out of 454). In 2002, the typical FTB couldn't afford to purchase a terrace in only 11% of towns across the UK (51 towns).
Meanwhile, the average house price paid by an FTB increased by 15% in 2007 to £175,093, giving an 82% rise over the past 5 years. And in all regions of the UK - except the North (£116,223) - it was more than £120,000. Conversely, 5 years ago, the average FTB paid significantly less than £120,000 in all regions except London and the South East.
The average deposit put down by an FTB was £34,381 in 2007, equivalent to 20% of the purchase price - the size of the average deposit having risen by 88% over the past 5 years from £18,259.
As Martin Ellis, chief economist at Halifax, makes the point: rising property values have priced many potential FTBs out of the housing market. When they do enter the market FTBs are now more likely to be in their thirties rather than their twenties and buy a flat rather than a terraced house.
Ellis adds that there is no quick fix to the FTB problem. A more subdued housing market over the next few years is a positive step for potential new entrants. Lower than average earnings house price growth together with more government initiatives may, in time, address the issue.
24 December 2007 © Moneyextra.com
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