Huge rise in first time house buyers

The number of first time buyers in the first six months of 2013 was 19% higher than in the same period last year, according to the half-year Halifax First Time Buyer Review.

There were an estimated 120,000 first time buyers (FTBs) during January-June 2013, up from 101,000 in the first six months of 2012; the highest total for the first six months of the year since 2007 (181,500). This continues the trend seen last year when there was a 13% increase in the number of FTBs between 2011 and 2012.

FTB numbers also rose by more than the total number of house purchasers, increasing their share of the home purchase market from 40% in the first half of 2012 to 44% in the same period this year. This was the highest proportion since 2000.

Mortgage affordability has also improved significantly in recent years. The proportion of disposable earnings devoted to mortgage payments by first-time buyers stood at 27% in 2013 Quarter 2; nearly half of the peak level of 50% in Q3 2007 and comfortably below the long-term average of 36%.

Craig McKinlay, Mortgages Director at Halifax, said: “The increased availability and reduced pricing of higher loan-to-value mortgages introduced over the past year or so have clearly contributed to the number of first time buyers rising to a six year high. Government schemes, such as New Buy and Help to Buy, are also enabling more first-time buyers to enter the market.

“The significant increase in first-time buyers is encouraging, although the number of those buying their first home still remains low by recent historical standards. While conditions remain difficult, with problems raising the necessary deposit and concerns over the economic climate preventing people from entering the market, we remain committed to continuing to offer support designed specifically for first time buyers, ensuring even more people can take their first steps onto the property ladder.”

House prices paid by first-time buyers are still above the long-term average when compared with average earnings. Despite the improvements in mortgage affordability the average price paid by a FTB in 2013 Quarter 2 was 4.26 times average gross annual earnings. This compares with an average of 3.23 over the past 30 years. The relatively high level of prices in relation to earnings, together with the requirement for first-time buyers to put down larger deposits in recent years, are key factors behind the longer term decline in home ownership amongst the young. Halifax’s Generation Rent Report found that a fifth (21%) of non-homeowners aged 20-45 have already given up on the prospect of owning a property – this rises to 43% among 40-45 year olds.

More first-time buyers are paying stamp duty. Over half (51%) of all FTB purchases in the first half of 2013 were above the £125,000 stamp duty threshold. This is up from 44% a year earlier. Within these totals, there are considerable regional differences with the overwhelming majority of FTBs (97%) in London buying homes above the £125,000 threshold. Indeed, more than one in three (37%) of FTBs in the capital paid more than £250,000, resulting in them being liable to duties of more than 1%. This is a far higher proportion than anywhere else in the country.

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