Property prices fall but first time buyers are left out in the cold - Emerging Real Estate

Property prices fall but first time buyers are left out in the cold

10/01/2012

 UK property prices continue to fall but first time buyers are left out in the cold

The ongoing fall in property prices in the UK has led to homes for first time buyers reaching their most affordable level since 2003. While this should be seen as good news, it is making little difference to the market as the number of first time buyers continues to fall to an all time low. The First-Time Buyer Review recently published by Halifax deems a home to be affordable when it costs less than four times average annual earnings and houses bought by first time buyers in November were found to be priced at affordable levels in 44% of local authority districts in the UK. This is the highest proportion for 8 years, and at the peak of the property market in 2007 the figure was just 5%.

However, Halifax’s report showed that in 2001 the number of first time buyers was 568,200 and in 2011 this fell to just 187,000 – the lowest figure since records began in 1974. The lender confirmed that despite properties now being more affordable, with many properties in the North of England and the Midlands requiring a mortgage of just £80,000 - £95,000, the problem with getting finance to buy still remains. In fact in the third quarter of last year 64% of first time buyers were only able to purchase a property with significant help from parents or other relatives, a figure that has more than doubled in the last 5 years. 

Martin Ellis, housing economist at Halifax, confirmed that “Housing affordability for those looking to get onto the property ladder for the first time has improved significantly over recent years, largely as a consequence of the decline in house prices since 2007. Nevertheless conditions for potential first time buyers remain tough – difficulties raising the necessary deposit and concerns over the economic climate are preventing many from entering the market”.

The situation in the South of England for first time buyers is even more difficult. Some boroughs of London have average property prices of 9 times the average local income, with Oxford similarly expensive at 7.75 times the average local income.

However, there may be some good news and signs that the situation may improve throughout 2012. Halifax hope that the size of the deposit required by first time buyers to be given a mortgage may finally be coming down as the occasional 95% LTV (loan to value) is appearing back on the market, with the average deposit needed lowering from £31,905 to £27,032 – although they admit this still prohibitive to most.

For cash buyers, or those with the ability to get a good mortgage deal, investing in buy to let property in the UK is still a wise move with the rental market offering high yields to landlords. To discuss any of our off market UK investment properties please do not hesitate to contact us.