First-time buyers have seen the cost of stepping onto the property ladder rise sharply in the past year, according to new research.

The average price paid by a first-time buyer in Britain last year was £231,455, up 9 per cent – or £18,252 – on a year earlier, according to Halifax.

One expert says that despite more lenders offering competitive mortgages at high loan-to-values, it is ‘harder than ever to be a first-time buyer.’

Mapped: Average deposits have risen by up to 13% in some parts of Britain in the past year

Mapped: Average deposits have risen by up to 13% in some parts of Britain in the past year

The biggest monetary increase was in London, where the average price paid for a first home rose £27,764 in the past 12 months. 

However, as values tend to be higher in the capital, this equates to a 7 per cent rise, a lower percentage than for the country as a whole.

The average deposit for a first-time buyer has also increased to a record high of £46,187, up 7 per cent – or £3,032 – from £43,155 a year ago. 

Average deposits for first-time buyers in London increased at a slower rate of 2 per cent, the equivalent of £2,016 in monetary terms, from £107,869 to £109,885.

Certain areas of the country saw more rapid growth than others, with average first-time buyer deposits growing by 13 per cent or £2,828 in the North from £21,263 to £24,091.

East Anglia was the only region to record a fall in the average first-time buyer deposit, down 4 per cent or £1,640 from £44,828 to £43,188.

Cheap: Burnley, Lancashire is the most affordable area for local first-time buyers, says Halifax

Cheap: Burnley, Lancashire is the most affordable area for local first-time buyers, says Halifax

Despite the increasing costs facing first-time buyers, overall numbers in 2019 remained stable, up around 1 per cent from 353,130 in 2018 to 356,767 in 2019.

It means that first-time buyers continue to account for more than half of all home purchases.

Northern Ireland saw the biggest increase in the number of first-time buyers in percentage terms, up 6 per cent year-on-year from 10,430 to 11,013.

London remained broadly stable, with numbers up 2 per cent from 40,960 to 41,712.

The South West was the only region to record a fall, down 4 per cent from 29,430 to 28,378.

AVERAGE PRICE, LOAN SIZE AND DEPOSIT FOR FIRST-TIME BUYERS IN 2019
RegionAverage House Price (£s)Average Mortgage (£s)Average Deposit (£s)Deposit as % of purchase price
North136,104112,01224,09118%
Yorkshire and the Humber156,232128,63427,59818%
North West163,459133,98729,47218%
East Midlands181,876148,95932,91718%
West Midlands185,091150,91334,17818%
East Anglia220,719177,53143,18820%
Wales153,267127,56325,70417%
South West221,357178,77342,58419%
South East295,348240,92254,42518%
Greater London453,385343,501109,88524%
Northern Ireland136,850111,53225,31719%
Scotland152,728122,77829,95020%
UK231,455185,26846,18720%
Source: Halifax, UK Finance   
Merthyr Tydfil in Wales is also among the most affordable places to live in Britain

Merthyr Tydfil in Wales is also among the most affordable places to live in Britain

NUMBER OF FIRST-TIME BUYERS IN BRITAIN IN THE PAST DECADE
YearNumber of First Time BuyersAnnual % changeFTBs as % of all House Purchases Loans
2009193,9402%39%
2010193,5900%37%
2011187,990-3%38%
2012211,92013%40%
2013258,70022%44%
2014300,37016%46%
2015297,520-1%46%
2016329,00011%48%
2017345,9205%49%
2018353,1302%50%
2019*356,7671%51%
Sources: UK Finance and Halifax   

Russell Galley, from Halifax, said: ‘While price growth in the overall housing market has been modest in recent years, the level of inflation facing first-time buyers is greater, which compounds the challenge in raising bigger deposits.

‘However, given their importance to the market as a whole, it’s reassuring that the overall number of new buyers getting on the ladder remains stable.’

He added: ‘This is in part explained by initiatives designed specifically to support this key group, including Help to Buy schemes and family support mortgages, and they also benefit from the continued period of record low interest rates.

‘However, it’s clear that more needs to be done to address more fundamental long-term issues, not least the shortage of new, affordable homes being built.’

TEN MOST AFFORDABLE AREAS FOR FIRST-TIME BUYERS IN 2019
Local Authority DistrictRegionHouse Price to Average Earnings ratio
BurnleyNorth West3.1
North AyrshireScotland3.3
East AyrshireScotland3.3
InverclydeScotland3.3
Merthyr TydfilWales3.4
RenfrewshireScotland3.5
StirlingScotland3.5
South AyrshireScotland3.5
Blaenau GwentWales3.5
PendleNorth West3.6
Source: Halifax and ONS   

The shows Burnley, Lancashire is now the most affordable area for local first-time buyers – calculated by comparing average earnings to average house prices – producing a ratio of 3.1. It replaces East Ayrshire in Scotland.

The vast majority of the top 10 most affordable areas are in Scotland and Wales, including North Ayrshire at 3.3 and Merthyr Tydfil at 3.4. 

Only Pendle – just north of Burnley – in the North West at 3.6 also make the top 10.

The list of least affordable areas in the country is dominated by London, with Hackney recording a house price to earnings ratio of 12.1, followed by Brent at 11.6 and Lambeth at 11.1.

Oxford in the South East has an average earnings to average house prices ratio of 10.3, and is the only place outside London to make the top 10.

Cheap spots: Halifax compared average earnings to average house prices to determine affordability

Cheap spots: Halifax compared average earnings to average house prices to determine affordability

THE LEAST AFFORDABLE AREAS FOR FIRST-TIME BUYERS
Local Authority DistrictRegionHouse Price to Average Earnings Ratio
HackneyLondon12.1
BrentLondon11.6
LambethLondon11.1
HillingdonLondon11
NewhamLondon10.7
HounslowLondon10.7
Waltham ForestLondon10.3
OxfordSouth East10.3
HarrowLondon10.2
SouthwarkLondon10.1
Source: Halifax and ONS   

What about the last decade?  

Halifax also looked back at the previous decade, which highlighted some big shifts in the first-time buyer market.

The volume of transactions surged by around 84 per cent in the last 10 years – from 193,940 in 2009 to 356,767 in 2019 – while it grew from 39 per cent to 51 per cent of all home purchases during the same period.

 

Northern Ireland has seen the biggest growth since 2009 in percentage terms, up by 151 per cent from 4,380 to 11,013, while London recorded the slowest growth, up by 43 per cent during the past decade from 29,250 to 41,712.

BIGGEST IMPROVEMENTS IN AFFORDABILITY FOR FIRST-TIME BUYERS 2009-19
Local Authority DistrictRegionHouse Price to Average Earnings ratio 2019House Price to Average Earnings ratio 2009Change %
MiddlesbroughNorth East4.24.2-1%
Newry, Mourne and DownNorthern Ireland5.85.8-1%
InverclydeScotland3.33.4-2%
North AyrshireScotland3.33.3-2%
CeredigionWales5.25.4-3%
Blaenau GwentWales3.53.7-5%
Merthyr TydfilWales3.43.7-8%
BurnleyNorth West3.13.6-13%
EdenNorth West5.37.3-27%
Kensington and ChelseaLondon6.210.9-43%
Source: Halifax and ONS    

Halifax said the explanation for these figures may lie in average price changes during the same period.

The average first-time buyer price in London has surged 104 per cent or £231,278 during the past 10 years, from £222,107 to £453,385.

By contrast, Northern Ireland has seen the lowest growth, up only 12 per cent or £14,151 from £122,699 to £136,850.

It compares to a national average of 67 per cent growth or £92,822 – from £138,633 to £231,455 – for first-time buyers.

It’s a similar story with deposits, as the average amount needed by a first-time buyer in London jumped 41 per cent or £31,908 from £77,977 to £109,885 during the past decade.

However, in Northern Ireland, it fell by 26 per cent or £9,039 from £34,356 to £25,317.

The national average first-time buyer deposit during this time grew by 19 per cent or £7,827 from £38,900 to £46,187.

Oxford in the South East has an average earnings to average house prices ratio of 10.3

Oxford in the South East has an average earnings to average house prices ratio of 10.3

Halifax said only 10 areas across Britain have become more affordable for first-time buyers during the past decade, although there are some surprising results.

Kensington and Chelsea has remarkably recorded the biggest improvement in the house price to earnings ratio since 2009, falling from 10.9 to 6.2, or 43 per cent.

However, with an eye-watering average first-time buyer price of £693,905 in 2019, up from £480,454 in 2009, Halifax said this reflects a rapid growth in average earnings in the area from £44,014 in 2009 to £111,063 in 2019 rather than any significant improvement in affordability.

The high street lender said the exclusive area in London remains ‘firmly out of reach’ for all but the wealthiest first-time buyers.

Eden in the North West is next on the list, where the average price to earnings ratio fell by 27 per cent during the last decade, from 7.3 to 5.3.

 With most first-time buyers purchasing new homes from national housebuilders, the middle and top market of second-steppers and downsizers is stagnating because there is a lack of buyers.
Ben Johnston – Houso 

Middlesbrough, Newry, Mourne and Down, Inverclyde, North Ayrshire, Ceredigion, Blaenau Gwent, Merthyr Tydfil and Burnley are the only other areas in Britain to have recorded at least a modest improvement in affordability.

Ben Johnston, director of Houso, the off-market property app, said: ‘Despite more lenders offering competitive mortgages at high loan-to-values, it is harder than ever to be a first-time buyer. 

‘This presents a problem for us all as first-time buyers are the lifeblood of the housing market.

‘Encouragingly, despite increasing costs in the form of higher purchase prices and bigger deposits, the number of first-time buyers edged up last year. 

‘But schemes such as Help to Buy, which are designed to help them on the ladder, may be having the opposite effect in pushing up property prices. 

‘Are buyers over-stretching themselves when it comes to buying a home because the scheme enables them to do so?

‘With most first-time buyers purchasing new homes from national housebuilders, the middle and top market of second-steppers and downsizers is stagnating because there is a lack of buyers. 

‘The Chancellor should consider reducing stamp duty in the forthcoming Budget to see whether this has a positive impact on the market.’

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