The number of first-time buyers has fallen to its lowest since 1980 as rising
house prices have forced prospective homeowners to rent properties or live
with their parents.
About 300,000 people bought their first home this year, down from 532,000 in
2002, a report from Halifax, the UK’s biggest mortgage lender, shows.
The average cost of a first home rose by 15 per cent this year to £175,093.
Those who bought their first home five years ago paid an average of £95,994.
A typical buyer new to the market is now unable to afford the cost of an
average house in 96 per cent of towns in the UK – treble the number of towns
that were unaffordable for prospective homeowners in 2002.
In some areas – the South West, East Anglia, the East Midlands, Yorkshire and
Humberside and Northern Ireland – the average house is unaffordable in every
town.
House price increases have put the cost of even the least expensive terraced
properties beyond the reach of new buyers in 75 per cent of towns. In 2002,
those climbing on to the housing ladder could afford to buy a terraced home
in 89 per cent of towns.
New homeowners are now increasingly in their thirties, rather than twenties,
as a result of the time it takes individuals, or more often working couples,
to amass sufficient savings.
Halifax classifies a house as unaffordable if it costs four times more than
the annual income of a first-time buyer.
Richard Morea, technical director at London & Country mortgages, a
mortgage broker, said: “In most cases, first-time buyers just can’t afford
the mortgage repayments. House prices have simply left them behind.”
Stamp duty, which is payable on all homes worth more than £125,000, is also a
burden. Halifax says the average first-time buyer pays stamp duty of £1,688.
Prospective buyers struggling with spiralling house prices are instead buying
flats or putting their plans for home ownership on hold.
There are now nearly 2.8 million rental properties in the country – up 600,000
on 2001 – a recent report published by the Department for Communities and
Local Government says.
An increasing number of young adults are also continuing to live at home with
their parents. According to the Office for National Statistics, just under
60 per cent of men and 39 per cent of women aged between 20 and 24 still
live at home, a rise of 8 per cent since 1991.
Grant Shapps, the Conservatives’ housing spokesman, criticised government
policy for the falling number of new homeowners. “First-time buyers are the
lifeblood of the market yet Labour’s meddling has left them unable to get on
to the property ladder,” he said.
“Gordon Brown’s stealth tax rises, from stamp duty to inheritance tax to
council tax, are all making home ownership harder and harder for more and
more people.”
Labour defended its record, saying that a million more people have become
homeowners since 1997. Yvette Cooper, the Housing Minister, said: “These
figures reflect the fact that for 30 years this country has not been
building enough homes to keep up with rising demand.
“That’s why we need three million more homes by 2020. Those who are still
opposing more homes need to recognise the deeply unfair consequences for
first-time buyers and young families if we don’t do more.”
Merseyside may become the destination of choice as Bootle is the most
affordable town for aspiring homeowners. The average price tag of a home in
the town is 3.4 times higher than the average income of a new buyer there.
The next most affordable towns are Gosport in Hampshire and Lerwick in
Scotland, at 3.5 times average income.
However, those eyeing up real estate in Henley-on-Thames should think twice.
The town is the least affordable as the average property costs 13.1 times
the average income of a first-time buyer.Ilkle,y in West Yorkshire, was the
second least affordable town with average home values 11.9 times that of
income.
Some estate agents forecast that house prices will stall next year, but
experts gave warning that this will not be enough to help. Mr Morea said:
“They need to come down to bring more buyers into the market.”
Martin Ellis, Halifax chief economist, said that the average age of new buyers
was also rising steadily. “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,” he said.
He said the financial position of most new buyers was sound, with purchasers
typically putting down a deposit of 20 per cent – equivalent to a year’s
earnings.
The Royal Institution of Chartered Surveyors said that there may be some hope
on the horizon. “While first-time buyers continue to struggle, the
conditions should start to gradually thaw throughout 2008,” Simon Rubinsohn,
RICS chief economist, said.
“There is huge pent-up demand from first-time buyers and should house prices
drop in the early part of the year, many will be ready to pounce, especially
if more repossessions filter through into the market.”
Put an end to the lunacy of planning regulations. We already have the ugliest country in the world. What use have all the regulations been? Alll they do is create housing shortage. Let people build what they want wherever they can buy a plot to do it. And the 'hello trees hello sky brigade' can go and live in their second homes in Tuscany permanently if they don't like it.
eric campbell, harrogate, uk
There's a cure for this problem blighting the UK; and it's just around the corner - the bursting of what The Economist has called the biggest bubble in history.
The noughties housing bubble is going to be up there with Tulip mania and The South Sea Company!
Ian Atkins, Geneva, Switzerland
i bought my first house 6 months ago for 70,000 and yes it may be a rabbit hutch in a not so great area but it's mine and it's my first step on the ladder. Its all about getting what you can afford and unfortunately some people want the best straight off
Chris, bootle, uk
Schedule A tax, I think, was a tax on rental incomes.
Restore that, and sort out CGT so that it properly distinguishes between entrepreneurs in employment creating businesses and speculative investors in property and the problem of housing supply / demand, capital and rental costs can be brought back into line.
G Dyson, Yorks,
There is no right to own a home. Britons have become stupid in expecting that they can buy and sell property and make a profit every time. Like any other asset, property is subject to supply and demand, bubbles and crashed.
Mark, London, uk
john, nottingham. But, how many European countries provide tenants with only six months security of tenure? The government should reinstate strong tenants' rights. Genuinely professional BTL investors wouldn't be troubled by this, but those who are simply in it for their pension would - not much of a pension if you can't release the capital at will. Problem solved, BTL investors rush to sell, market crashes FTB can once again buy and sanity returns to the property market. The crash is here anyway, this would just be a good way to speed it up.
Clint, Stafford, UK
So WHEN will the Bank of England address this??
I'm disgusted with those people -all they care about is city profits so maybe they should be re-named Bank of City, representing the interests of those who ride the markets and want more, more, more.
Joe, Manchester,
Johnny Norfolk - you obviousy know little about social housing. Do you know that the amount given to social housing has historically been on the decline, including under Labour rule? Do you know that smaller esates are still built by housing associations, and that a number of these tenants will be two income households who just can't afford to get on the ladder?
Grant Shapps seems to have missed the point as well. The threshold for inheritance tax and stamp duty have at least finally risena little, unlike under Tory rule. Renters pay council tax too.
And no, I'm not a labour supporter, I'm a housing officer...
Eleri, Wales,
Yvette Cooper's comments sum up the problem for me; namely that there is a serious misunderstanding of the situation. The demand>supply is due almost entirely to speculative demand and cheap money*. If we actually had an acute housing shortage like we are told would rents not be also sky high?!
If the government wants to help first time buyers they should tax investment property like other assets and let the market correct. * It obviously does not occur to them esp. Gordon Brown that by changing the inflation benchmark, removing housing costs, interest rates have been far too low.
There have been 4 times that housing has been grossly overvalued (1948, 1979, 1989, 2007?) and in the previous three the market has fallen by around 30% in real terms.
My guess is that by this time next year we will not be talking about the poor first time buyers struggling to get on the housing ladder.
Howard, London,
I bought a townhouse in the early nighties at a time when I thought that the housing market had just bottomed out. I purchased the townhouse for $80K and they were going for a hight of $120K 5 years earlier. I thought to myself surly the market has bottomed out. You can imagine how I felt when I woke up one day to find the townhouses were selling for $25K and now that's what I call a bottom.
I had a business at the time and it went bankrupt and my lawyer advised me to dump the townhouse in the bankruptcy. He told me that if I ever wanted to own a house and not live in the townhouse I should dump the place, which I did.
I went out and got a cheap rent on a huge townhouse and my wife went back to work. We saved her complete income for about 2 years and we went on and purchased a house. We put down over 30% on the house, we had gotten a sub prime mortgage because of the bankruptcy but within a year I refinanced at competitive rates, with a 15 year mortgage.
Paul Bahre, Granby, CT
Two main contributing facts are being missed or omitted from this report. The two great stealth tax manipulators of all times Mr Brown & Mr Blair under the banner of New Labour have ruined the economy by building it on a pyramid of housing, which is now collapsing. They have stolen our pensions, therefore lots of folk turned to investing in the property to secure future retirement funding, thus caused house price increases. Blair & Brown have disenfranchised the young from owning their own home because of their policies which included, imposing in 98’student tuition fees, resulting in 1000’s of future young professionals leaving uni with massive debts. The negative effect and repercussions of these two policies alone will be with us for long time.
Our system hinges on 1st time buyers affording to buy their own home, when approx 27yrs, but now because of having to pay back these loans it makes saving impossible. It takes several years to establish themselves in their chosen professions and start to receive the salary that permits saving, then to get started on the property ladder. It’s now too expensive for many to venture on the property ladder without parental support and parents can themselves become vulnerable if they provide financial assistance.
The full ramifications of these policies are still to unfold and be felt within society, because when you’ve removed the possibilities of fulfilling your aspirations from the young they could possibly turn against you.
All this stops the naturals flow we’ve experienced in the years prior the Labour’s New idealistic project. Please remember your house is worth nothing if you don’t give the young the opportunity buy. Most people used start their careers with nothing not like today where many 21yrs olds are indebted to the banks for tens of £1k’s. I’ve not even mentioned the lasting effect of the Northern Quicksand diabolical affair!
Michael, Sheffield,
Geo, Glasgow, UK
You are boring mate change the record. Immigrants are a driver of the London economy. The London economy sustains villages like your own.
Anthony, London,
Heres a radical idea ... stop letting hundreds of thousands of immigrants into the country who take houses and jobs from british people (thats from the govts own statistics). You might find there might be less pressure on housing in the UK that way.
Geo, Glasgow, UK
Richard Morea [a mortgage broker]: “In most cases, first-time buyers just can’t afford the mortgage repayments.â€
He forgot to mention that it is also, usually, much cheaper to rent; and, with the market on the turn, why risk losing your deposit to negative equity when there are huge numbers of 'investors' to do this for you?
Simon Rubinsohn [RICS chief economist]
“There is huge pent-up demand from first-time buyers and should house prices drop in the early part of the year, many will be ready to pounce, especially if more repossessions filter through into the market.â€
Would this expert care to point to any time in history when this has happened. All previous housing booms have been followed by an extended wait (say 5 years) for confidence to return. But, it's different this time, I hear you cry; you could be right, it might take 7-10 years this time.
Imogen Thwaite, London,
The present situation should never have arisen.
It should have been stopped years ago by upping interest rates and,most importantly,by severely restricting borrowing.
The government and the Bank of England are to blame
England is in one heck of a mess between those who have and those who have not,and it is not going to get better.Not everyone works in the city,or has well off parents.
Quite frightening to see how little one gets for a lot of money.If I were young I would hate to live in a "rabbit hutch",in a depresssing area.
That is all I would be able to afford.
nic, royan, france
Louis - that must be Midland towns, because if you want a 2 bed terraced house in Chorlton, Manchester, you'll need £200,000.
Andrew, Manchester,
The Labour Government has been treating us like Cows that give Milk ,they have over the years taken away the grass (Taxes) bit by bit So we have reached the point that the cash Cow has no grass and there fore no milk, and then wonder why.
People need incentives not stelth taxes, the Younger generation now suffer from Apathy and blow all there money on Booze and a good time.
Talk to reasonably well off young workers and they will tell you we cant afford a house or a decent pension so why bother at all.
The homes are unaffordable and they have seen there parents Pensions depleted to a poultry sum that they can not live on.
Look out third world here we come.
Terry, newtownards, Down
Bob Tomlin, Scottsdale, AZ USA.
How can you save when property is going up £20,000 a year?
Steve Golding, Billericay,
The very idea that we should expect to be able to buy our own house would be alien in many european countries where it is normal to rent and exceptional to buy. This story is more about expectations than anything else. Shifting paradigms.
john, nottingham,
Time for people to emigrate to Northern Towns where you get more for money.
Louis Blanc, Walsall, UK
This is just what Labour want then they can start building council estates again. Keep their voters down so they will be anti Tory council house dwellers just like in Wales and Scotland.
Johnny Norfolk, Mileham Norfolk,
Does no-one find it in any way odd that they can perfectly well afford to rent, but not to buy? The implication is that you cannot buy and then rent it out at a profit.
How has this happened? Could it be anything to do with the governmental promotion of excessive credit and constant ministerial talk about this mythical creature the 'housing ladder'?
If you make everyone believe that houses can only ever go up, if you manipulate the financial structure to ensure ever increasing amounts of credit to enable purchase of them, the result will be houses priced at more than 4 x incomes.
The sober fact is that when there is this disparity between purchase and rental costs, they are better off by far renting. Anything else is a route to lifelong debt slavery. They should buy when it is cheaper to buy than to rent.
Yes, that time is going to come, and sooner than you think.
George Johnson, London, England
Enough of the sob stories. Today's "got to have it now" breed need to buckle down and save for their first house like I did at 33.
Most of my pals and I in England were lucky IF we could find somewhere to rent in the 50s. I'm fed up with hearing the belly aching. Get a life! It's no different here in the good old USA unfortunately.
Bob Tomlin, Scottsdale, AZ USA