New Halifax research has estimated that the number of first time buyers (FTBs) is at its lowest since 1980. During 2007, an estimated 300,000 first time buyers entered the market almost 44% less than in 2002 (532,000).

High house prices are hitting first time buyers with many unable to afford a terraced property – traditionally the least expensive property type - in 71% of towns across the UK (322 out of 454). In 2002, the typical FTB could not afford to purchase a terrace in only 11% of towns across the UK (51 towns).

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.

Main Points
- Number of first time buyers at its lowest since 1980
- Average house unaffordable for FTBs in 466 out of 483 towns
- For the first time, the proportion of FTBs buying a flat (37%) is the same as that buying a terraced property
- Henley on Thames is the UK’s least affordable town for FTBs
- Bootle in Merseyside is the most affordable town for a FTB
- The average FTB in 8 out of 12 UK regions paid stamp duty in 2007

Paying for a home
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, Halifax found 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.

Best and worse places to afford
The least affordable town for a FTB is Henley on Thames where the average property price is 13.1 times the average income** of a FTB household. Bootle is the most affordable town in the UK for FTBs with an average property price 3.4 times higher than average FTB household income for its county. The next most affordable towns are Gosport in Hampshire (3.5 times) and Lerwick in Scotland (3.5 times).

Meanwhile, 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.

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.

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.”