New Halifax research estimates that the number of first time buyers (FTBs) is at its lowest since 1980. An estimated 300,000 first time buyers entered the market in 2007 - 44% less than in 2002 (532,000). First time buyers cannot afford to purchase a terraced property - traditionally the least expensive property type - in 71% of towns across the UK (322 out of 454). Despite this lack of affordability, in 2007 the average FTB in 8 out of 12 UK regions paid stamp duty, a government tax levied on the purchase of property above £125,000.
Halifax calculates that a typical FTB was unable to purchase the average house in 96% of towns in 2007 (466 out of 483). In 2002, the average house in 30% of towns (146 out of 483) was unaffordable. In 2007, the average house was unaffordable in all towns in five regions - the South West, East Anglia, East Midlands, Yorkshire & the Humber and Northern Ireland.
The average house price paid by an FTB increased by 15% in 2007 to £175,093. Over the past five years, the average price paid by an FTB has risen by 82% from £95,994 in 2002. In 2007, the average FTB house price was more than £120,000 in all regions of the UK except the North (£116,223). Five years ago, the average FTB paid significantly less than £120,000 in all regions except London and the South East. For example, the lowest average price paid by an FTB was in the North (£52,665).
For the first time, the proportion of FTBs buying a flat (37%) was the same as the percentage purchasing a terrace (37%) - historically the most popular FTB property choice - in 2007. Flats have seen the biggest proportionate increase in FTB purchases over the past five years, a 13 percentage point rise. The proportion of FTBs purchasing a terrace has slipped by 7 percentage points over the same period. In 2002, only 24% of FTBs purchased a flat, with 25% purchasing a semi-detached house and 45% buying a terrace.
The average FTB house price is above the £125,000 stamp duty threshold in eight of 12 regions. In London, the typical FTB was liable for 3% stamp duty in 2007. The average London FTB house price of £288,615 would generate a stamp duty bill of £8,658. Across the UK, the average FTB faces a stamp duty bill of £1,750.
A typical FTB was unable to afford the average terrace in 71% (322 out of 454) of towns across the UK in 2007. This compared to 11% of towns (51 out of 454) in 2002. Terraces in 63% of post towns in the UK were unaffordable for FTBs in 2006 (287 out of 454).
The average deposit put down by a FTB was £34,381 in 2007, equivalent to 20% of the purchase price. The size of the average deposit has risen by 88% over the past five years from £18,259 in 2002. The average deposit was £18,259 in 2002, representing 19% of the purchase price. The average FTB deposit was 20% higher than UK average full-time earnings of £28,590 in 2007. In 2002, the average deposit (£18,259) was 26% less than UK average full-time earnings (£24,549).
The average income of a FTB was £31,294 in 2007. This is broadly in line with average full-time earnings of 30-39 year olds (£30,638) across the UK. The average income of a FTB was 37% more than the average full-time earnings of 22-29 year olds (£22,360). Only the highest earning 10% of 22-29 year olds (averaging £33,883) had comparable income levels to the average FTB in 2007.
In 2007, 51% of FTBs purchased their first property in a city, compared to 47% five years ago. Almost one in two FTBs (47%) buying in a city bought a flat or maisonette compared to around one in three (36%) of FTBs across the UK. Two thirds of all flats purchased by FTBs were in cities in 2007.
In 2007, FTB mortgages made up 29% of all new mortgages in the UK. In 2002, FTBs accounted for more than one third of all new mortgages (34%).
Martin Ellis, chief economist at Halifax, commented: "Rising property values have priced many potential first time buyers out of the housing market. When they do enter the market first time buyers are now more likely to be in their thirties rather than their twenties and buy a flat rather than a terraced house. First time buyers are also buying proportionately more in cities than towns as they opt for convenience over size. Despite the increase in property prices in the past few years, the financial position of the majority of first time buyers is sound and they, on average, put down a 20% deposit, which is equivalent to more than a year's earnings. There is no quick fix to the first time buyer 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."
