Largest Annual Increase in First-Time Buyers Since 2001

Number of first-time buyers up by an estimated 22% in 2013

Marketwired

LONDON, ENGLAND--(Marketwired - Jan 8, 2014) - The number of first-time buyers (FTBs) continued to increase in 2013, according to the annual Halifax First Time Buyer Review.

Last year the number of first-time buyers grew by an estimated 22%; the largest annual rise since 2001. This was the second consecutive annual increase following a 13% rise in 2012.

There were an estimated 265,000 FTBs in 2013, up from 218,000 in 2012. While this was the highest annual total since 2007, it was still nearly 30% lower than the annual average between 2003 and 2007 (370,800). FTB numbers increased their share of all house purchases made with a mortgage, now accounting for 45%, up from 40% in 2012 (see Table 1).

Mortgage affordability has improved significantly in recent years. The proportion of disposable earnings devoted to mortgage payments by a first-time buyer stood at 30%1 in 2013 Quarter 4. This is a substantial improvement since summer 2007 when this figure reached a peak of 50%. Record low mortgage rates have been a major contributing factor driving this improvement.

There has also been an increase in the proportion of areas that are affordable for FTBs since 2007. In a third (31%) all of local authority districts (LADs) in the UK the average house price paid by a first-time buyer in November 2013 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. This compares to the peak of the market in 2007 when just 5% of LADs were affordable. The average price paid by FTBs in 2013 was 10% lower than it was in 2007 (see Table 2).

Close to half (45%) of all FTB purchases in 2013 were below the £125,000 Stamp Duty threshold. A similar proportion (46%) of properties bought by FTBs were priced between £125,000 and £250,000. The overwhelming majority (98%) of FTBs in London bought homes above the £125,000 threshold, followed by the South East (87%), and South West (74%) (see Table 3).

Martin Ellis, housing economist at Halifax, commented: "The number of first-time buyers is estimated to have grown by a fifth in 2013, the largest annual increase in more than a decade. Low interest rates, improvements in consumer confidence and Government schemes, such as Help to Buy, all appear to have contributed to the rise in the number of first time buyers.

"However, many potential first-time buyers continue to find raising the necessary deposit a problem. The Help to Buy mortgage guarantee scheme should enable more buyers to get on to the property ladder with smaller deposits. Continuing pressure on household finances during the next 12 months will no doubt remain a constraint."

ADDITIONAL KEY FINDINGS

Deposits

  • The average FTB deposit in 2013 stood at £30,943; 11% higher than in 2012 (£28,001) and £13,444 (77%) higher than in 2007 (£17,499) (see Table 4).
  • FTBs in Greater London put down the largest average deposit, at £56,183. FTBs in the North East put down the smallest average deposit, at £15,862.

Prices

  • The average price paid by a FTB is highest in Greater London (£280,915); almost two and a half times that in the North East (£105,748) where the average price paid by a FTB is the lowest (see Table 4).

Age

  • The average age of a FTB is 30 years; up from 29 in 2011. The average age of a FTB is highest in London, at 31 years old.
  • There has been a significant increase in the proportion of FTBs receiving financial help in recent years. The CML estimates 65% of FTBs had financial assistance in mid 2012 compared with 31% in mid-2005.

Table 1: Number of First-Time Buyers - UK

Number of First-Time Buyers Annual % change FTBs as % of all House Purchase Loans
2002 531,800 6 % 38 %
2003 369,600 -31 % 30 %
2004 358,100 -3 % 29 %
2005 363,800 2 % 37 %
2006 402,800 11 % 36 %
2007 359,900 -11 % 36 %
2008 192,300 -47 % 37 %
2009 196,600 2 % 38 %
2010 198,600 1 % 37 %
2011 193,000 -3 % 38 %
2012 217,900 13 % 40 %
2013* 265,000 22 % 45 %
Source: CML
*Halifax estimate

Table 2: % of affordable LADs for First-Time Buyers by Region, 2007 and 2013*

2007 2013
Affordable Unaffordable Affordable Unaffordable
% %
North East 0 % 100 % 75 % 25 %
Wales 0 % 100 % 50 % 50 %
Yorkshire and The Humber 6 % 94 % 76 % 24 %
North West 9 % 91 % 71 % 29 %
East Midlands 5 % 95 % 57 % 43 %
Scotland 33 % 67 % 70 % 30 %
West Midlands 0 % 100 % 9 % 91 %
South West 0 % 100 % 0 % 100 %
East of England 0 % 100 % 0 % 100 %
South East 0 % 100 % 0 % 100 %
London 0 % 100 % 0 % 100 %
United Kingdom 5 % 95 % 31 % 69 %
Source: Halifax. Northern Ireland has been excluded from the regional analysis
*2007 refers to 12 months to December. 2013 refers to 12 months to November.

Table 3: First-Time Buyer Purchases by Stamp Duty Thresholds by Region

% of FTB Purchases by Stamp Duty Threshold - January to November 2013
£125k-£250k >£250k
North 76 % 23 % 99 % 1 %
Yorkshire and The Humber 70 % 29 % 99 % 1 %
North West 67 % 31 % 99 % 1 %
East Midlands 65 % 33 % 99 % 1 %
West Midlands 58 % 40 % 98 % 2 %
East Anglia 37 % 59 % 96 % 4 %
Wales 69 % 30 % 99 % 1 %
South West 26 % 70 % 96 % 4 %
South East 13 % 75 % 88 % 12 %
Greater London 2 % 58 % 60 % 40 %
Northern Ireland 85 % 14 % 100 % 0 %
Scotland 68 % 30 % 98 % 2 %
United Kingdom 45 % 46 % 91 % 9 %
Source: Halifax.

Table 4: First-Time Buyers: Average Price, Loan and Deposit by Region, 2013

Average House Price (£s ) Average Mortgage (£s ) Average Deposit (£s ) Deposit as % of purchase price
North 105,748 89,886 15,862 15 %
Yorkshire and Humberside 112,147 95,183 16,964 15 %
North West 115,618 98,127 17,491 15 %
East Midlands 121,595 97,576 24,019 20 %
West Midlands 129,278 97,213 32,065 25 %
East Anglia 149,370 119,670 29,700 20 %
Wales 113,932 91,146 22,786 20 %
South West 159,319 131,810 27,509 17 %
South East 195,259 165,957 29,302 15 %
Greater London 280,915 224,732 56,183 20 %
Northern Ireland 92,778 78,861 13,917 15 %
Scotland 114,781 92,831 21,950 19 %
UK 156,701 125,758 30,943 20 %
Source: Halifax 12 months to November, CML

ENDS

Notes to editors:

1 Based on average loan taken out by a new first-time buyer.

THE AFFORDABILITY CALCULATION:

A local authority (LAD) is classified as affordable if the average house price for a First-Time Buyer (FTB) in the LAD is lower than someone on average earnings in the area can pay. Gross average annual earnings for the LAD are multiplied by 4.0 to calculate the amount that someone on average earnings could 'afford' to pay. For example, if average earnings in the LAD are £30,000, someone on average earnings in the area could pay up to £120,000. The LAD is deemed to be affordable if the average price paid by a FTB in the LAD is less than £120,000 and unaffordable if it is higher.

The multiple of 4.0 is in line with the average house price to income ratio for a FTB over the period from 1991 to 2013. (Source:Halifax)

DATA SOURCES:

This research is based on data from the Halifax's own extensive housing statistics database and ONS data on average earnings.

1. House Prices

The prices used in this research are simple arithmetic ('crude') averages. These prices are not standardised and therefore can be affected by changes in the sample from period to period.

2. Average Earnings

Average earnings figures are from the ONS's "Annual Survey of Hours and Earnings" (ASHE) and refer to the means for full-time employees.

At local authority district level, figures for the relevant local authority (residence based) are used in the majority of cases. Where this has not been possible due to data unavailability, the relevant regional average has been used.

"This report is prepared from information that we believe is collated with care, however, it is only intended to highlight issues and it is not intended to be comprehensive. We reserve the right to vary our methodology and to edit or discontinue/withdraw this, or any other report. Any use of this report for an individual's own or third party commercial purposes is done entirely at the risk of the person making such use and solely the responsibility of the person or persons making such reliance. "

For the latest housing research, previous releases, and for information on the Halifax House Price Index, please follow this link:
http://www.lloydsbankinggroup.com/media1/economic_insight/halifax_house_price_index_page.asp.

Housing Economics Helpline No: 08456 045404

Email: housingeconomics@lloydsbanking.com

ISDN facilities are available for broadcast media interviews.

Contact:
Halifax Press Team
Ben Marquand
01422 332833 / 07881 311199
ben.marquand@halifax.co.uk

Rates

View Comments (0)