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First-Time Buyers Face Record High Prices

The first six months of 2017 saw a 3% increase in the number of first-time buyers, taking the total to an estimated 162,704 compared to 154,200 in the same period of 2016.

Rise in First-Time Buyer Numbers

According to the latest Halifax First Time Buyer Review, a decade ago just over a third (36%) of all house purchases financed by a mortgage were made by first-time buyers. In 2017, this proportion is estimated to have risen to almost half (47%), with the share growing from 44% since the launch of the Help to Buy scheme in April 2013. Whilst the homemover (current owner occupier) market has slowed, housing activity has been dependent on buyers taking the first step on the ladder. 

“For the third time in four years the numbers getting on the housing ladder have exceeded 150,000 – a level of momentum not seen since before the financial crisis,” explained Martin Ellis, Housing Economist at Halifax. “High levels of employment, low mortgage rates and Government schemes such as Help to Buy have also helped these numbers remain robust, as first-time buyers continue to form a fundamental part of the UK housing market.”

House Prices Reach Record High

Halifax also found that in the first half of 2017 the average house price paid by first-time buyers was £207,693 – the highest on record. In the past year the average value of a typical first-time buyer home has grown by 4% from £199,414. And in the past five years, the average price has grown by 50%, from £138,663 to £207,693 (an increase of 50% or £69,025), comfortably outperforming price growth across the entire market (42%).

Perhaps unsurprisingly, the ten least affordable Local Authority Districts (LADs) for first-time buyers are all in London. The least affordable is Brent, where the average first-time buyer property price of £459,499 is 12.5 times gross average annual earnings in the area.   

Stirling in Scotland is the most affordable LAD in the UK, with an average property price of £136,181 – 2.9 times local annual average gross earnings. Seven of the 10 most affordable LADs for first-time buyers are in Scotland.

Affordability Problems

These increased house prices have created affordability challenges for first-time buyers, and many aspiring home owners are choosing to stay with their parents while they save up enough for a deposit.

Research by specialist bank Aldermore found that 22% of wannabe first-time buyers are currently living with their parents. Of those, a quarter (26%) say they will have to live with their family for five or more years to save for a deposit, whilst one in ten (10%) expect to live with their family for three to four years. This situation is unlikely to get better as almost a third (31%) strongly agree that buying a home is unachievable for them at the moment (a sentiment which is consistent quarter on quarter).

“First-time buyers have a notoriously difficult time getting on the property ladder,” said Charles McDowell, Aldermore’s Commercial Director, Mortgages.  “Since saving an adequate deposit remains the biggest obstacle, more and more people have had to move back into the family home to boost their savings. Our report reveals just how difficult this can be to navigate, with real impact not just on parents’ finances but also on the relationship with their children and their own ability to save.”

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