The housing market in the UK continues to be dictated by price inflation, as first-time buyers are finding it difficult to climb up the property ladder. But they continue to dominate the housing market driving the growth despite a steep increase in residential property prices.

first time buyer

The number of first-time buyers reached an estimated 162,704 in the first six months of 2017, only 15 per cent below the peak of the last boom in 2006 (190,900), according to the latest Halifax First Time Buyer Review. However, the average first-time buyer house price is now at £207,693 – highest on record, the Halifax report observed.

The first-time buyers accounted for almost half of all mortgage financed house purchases. A decade ago, just over a third (36 per cent) 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 per cent), with the share growing from 44 per cent since the launch of the Help-to-Buy scheme in April 2013.

Whilst the home-mover (current owner occupier) market slowed down, the housing activity has been dependent on buyers taking the first step on the ladder.

For the third time in four years, the numbers of first-time buyers crossed 150,000 – a level of momentum not seen since before the fiscal crisis. “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,” the Halifax report said.

As said earlier, the first-time buyer prices and deposits rose to record levels this year. In the past year, the average value of a typical first-time buyer home grew by 4 per cent from £199,414. In the past five years, the average price grew by 50 per cent from £138,663 to £207,693 (an increase of 50 per cent or £69,025), easily outperforming price growth across the entire market (42 per cent).

In London, the price inflation is even higher for the first-time buyers. The price increased by 66 per cent (or £163,664) since 2012 to £409,975. Not only is the average price in London three-and-a-half times higher than in Northern Ireland (£115,269) – it is also 48 per cent higher than the second most expensive region, the South East (£276,773).

The average first-time buyer deposit was £32,899 in the first six months of 2017 – accounting for about 16 per cent of the purchase price. Not surprisingly, London commands the largest deposits, which is three times the national average of £106,577.

It is evident that first-time buyers are clearly driving the housing market in the UK. Developers must come up with innovate models to deliver homes at lower capital values to the first-time buyers if the housing crisis is to be addressed from the long-term.

Source: Halifax Press Release