Affordability for first-time buyers is at its most favourable level since 2003, according to the latest annual Halifax First-Time Buyer Review.
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 the highest proportion for eight years. This 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. 95% of all the UK LADs that are affordable for first-time buyers are in the North compared with just 5% in the South. 75% of areas in the North are affordable against only 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 first-time buyers.
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), 7% lower than in 2010 and less than half the recent peak of 402,800 in 2006.
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 first-time buyer deposit in the first 11 months of 2011 was £27,032. Whilst this was 15% (£4,873) lower than in 2010 (£31,905), it compares with £17,482 in 2007. As a proportion of the purchase price, the average deposit has increased from 10% in 2007 to 20% in 2011.

This Halifax First-Time Buyer Review tracks housing affordability in over 240 local authority districts (including 30 London boroughs) across the UK. A local authority district (LAD) is classified as affordable if the average house price for a first-time buyer is lower than the price someone on average earnings in the area can pay based on the historical average house price to income ratio of 4.0.
Halifax has noted that the calculation is based on a single income and thus is conservative. The review is based on data from the Halifax’s own extensive housing statistics database, along with data from the Council of Mortgage Lenders, the Office for National Statistics and the Department for Communities and Local Government. Halifax is the UK’s biggest provider of first-time buyer mortgages.

Seven of the 10 most affordable LADs for a first-time buyer are in Scotland. South Ayrshire is the most affordable LAD in the UK 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 the capital. The least affordable LAD surveyed for a first-time buyer in the UK is Brent in London where the average first-time buyer 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.
95% of first-time buyers were exempt from paying stamp duty in 2011. Nearly four in 10 first-time buyers did not pay any stamp duty as a consequence of the temporary increase in the starting threshold for first-time buyers from £125,000 to £250,000. On this basis, 38% more first-time buyers – and 43% in total – will be required to pay stamp duty once this concession for those trying to getting onto the property ladder for the first time ends in March 2012.
Martin Ellis, housing economist at Halifax, said: “Housing affordability for those looking to get onto the property ladder for the first time has improved significantly over recent years
