The number of first-time buyers in the first six months of 2012 was up by a third compared with the first half of 2011, the Halifax has said.
The proportion of UK towns and cities that are affordable for first-time buyers has risen to its highest level for 10 years, according to the latest Halifax First-Time Buyer Review.
The average house price paid by a first-time buyer in June 2012 was affordable for someone on average earnings in 54% of all local authority districts (LADs); the highest proportion for 10 years. This is up from 40% a year ago and almost eight times the proportion of affordable LADs at the peak of the housing market in 2007 when only 7% of LADs were affordable.
Halifax estimates that there were approximately 114,000 first-time buyers in the first half of 2012, up by 34% from the same period in 2011 (85,600), but less than half the number a decade ago (244,700). The recent ending of the stamp duty holiday is likely to have boosted the number of first-time buyers in the first six months of 2012 as some buyers brought forward their purchases to meet the March deadline.
“With first-time buyers forming a vital part of the housing market, it is clearly encouraging that the number of those getting onto the property ladder for the first time may well increase this year, albeit from a historically low level,” said Martin Ellis, housing economist at Halifax. “This partly reflects the substantial improvement in home affordability for first-time buyers since 2007, following the fall in house prices over the period.
“However, the continued uncertainty over the outlook for the UK economy and the difficulties faced by many in raising the necessary deposit remain significant hurdles for those wishing to buy their first home.”
Halifax said there is a stark contrast between conditions in the north and the south. In June 2012, just 9% of all UK LADs that are affordable for first-time buyers were in southern UK; a tenth of the proportion in the north (91%). In 2002, 15% of all UK LADs that were affordable for first-time buyers were in the south compared to 85% in the North.
The North East is the only UK region where all LADs are affordable for first-time buyers. The North West has the second highest proportion of LADs (97%), followed by Scotland (93%). In contrast, London is the only region with no affordable areas for first-time buyers on average earnings.
The average deposit in the first half of 2012 was marginally (1%) lower than in the same period in 2011. The average first-time buyer deposit of £27,857 in June was, however, still some 59% higher than in 2002 (£17,523).
Regionally, first-time buyers in London put down the largest deposit (£59,221), followed by the South East (£34,843). In contrast, first-time buyers in Northern Ireland put down the smallest deposit (£16,267).
38% more first-time buyers are required to pay stamp duty as a result of the end of the temporary increase in the stamp duty threshold for first-time buyers – from £125,000 to £250,000 – at the end of March. In total, 44% of first-time buyers will now pay stamp duty compared to only 5% during the period of the temporary threshold increase.
Four of the five 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 2.5 gross average annual earnings. Pendle in the North West is the second most affordable LAD (2.6). Swindon is the most affordable LAD outside the north (3.6).
London accounts for nine of the ten least affordable LADs. Brent in London where the average first-time buyer property price is 8.8 times gross average earnings in the area is the least affordable LAD for first-time buyers. Oxford (7.6) is the second least affordable LAD. Herefordshire (5.2) is the least affordable LAD outside southern England.
