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 FTB 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 (see Editors’ Notes for details). The calculation is based on a single income and is, therefore, 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 FTB mortgages.
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.
But the North – South divide remains stark
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 (FTBs) are in the North1 compared with just 5% in the South2. 75% of areas in the North are affordable against only 5% in the South. All LADs in the North East are affordable for FTBs whereas in London there are no affordable areas for FTBs.
Nonetheless the number of FTBs continues to decline…
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.
…with the average deposit at £27,032
Much of the fall in the number of FTBs in recent years can be explained by the need to put down a bigger deposit. The average FTB deposit in the first eleven 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.
South Ayrshire is the most affordable area in the UK for a FTB
Seven of the ten most affordable LADs for a FTB 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).
Brent and Oxford are the UK’s least affordable LADs for FTBs
Nine of the 10 least affordable LADs are in the capital. The least affordable LAD surveyed for a FTB in the UK is Brent in London where the average FTB 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.
Over a third more FTBs will be required to pay stamp duty in 2012
95% of FTBs were exempt from paying stamp duty in 2011. Nearly four in ten FTBs did not pay any stamp duty as a consequence of the temporary increase in the starting threshold for FTBs from £125,000 to £250,000. On this basis, 38% more FTBs – 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, commented:
“Housing affordability for those looking to get onto the property ladder for the first time has improved significantly over recent years, largely as a consequence of the decline in house prices since 2007. Nevertheless, conditions for potential first-time buyers remain tough. Difficulties raising the necessary deposit and concerns over the economic climate are preventing many from entering the market.”
additional Key findings
Deposits
– FTBs in Greater London put down the largest average deposit which, at £60,192, is equivalent to a quarter (25%) of the average property value. FTBs in the North put down the smallest average deposit – £14,882 or 15% of the property value.
Prices
– Nationally, the average house price paid by a FTB in 2011 is £135,160; down 3% on 2010.
– The average price paid by a FTB is highest in Greater London (£240,768) and lowest in the North (£96,324).
Age
– The average age of a FTB is 29 years old; down slight from the average in 2010 (30). FTBs in the North, Yorkshire and Humber and Wales are, on average, the youngest at 28 year olds. The average age of a FTB is highest in London at 32.
– Whilst the average age of a FTB has been largely static in recent years, there has been a significant increase in the proportion receiving financial help. The CML estimate that 64% of FTBs required financial assistance in 2011 Quarter 3 compared with 31% in mid-2005. The typical age of those FTBs who did not receive assistance has increased from 30 to 33 since early 2008.
Mortgage Affordability
– The proportion of disposable earnings devoted to mortgage payments by a potential new first time buyer stood at 26% in 2011 Quarter 3; almost half of the peak level of 50% in September 2007 and comfortably below the long-term average of 34%.
