Mortgages

Rising house prices failing to deter first-time buyers

Rozi Jones
|
25th January 2021
couple children move house first buyer FTB
"Despite the obvious challenges presented by soaring house prices, not least the need to raise an even bigger deposit, first-time buyers still accounted for half of all home purchases"

First-time buyers continued to make around half of all home purchases in 2020, despite rising house prices and the closure of the housing market during the first lockdown, according to research from Halifax.

With sales activity largely grinding to a halt during Spring, the overall number of first-time buyers in 2020 was down by over 46,000 (13%) compared to 2019.

However, the data from Halifax shows that first-time buyer transactions bounced back strongly in the second half of the year, rising by 52% from 121,050 in H1 to 183,607 in H2 once the market reopened.

Comparing the second half of 2020 to the same six-month period in 2019, first-time buyer transactions were down by just 2%.

In total, the number of first-time buyers as a proportion of all homes purchased with a mortgage remained stable last year at 50% (vs. 51% in 2019 and 50% in 2018).

The average price paid by a first-time buyer in the UK last year was £256,057, up by 10% from a year earlier (£233,118). London saw the biggest monetary increase in the average price paid by first-time buyers over the last 12 months, up by £33,486 (7%) from £455,611 to £489,098.

The greatest percentage growth came in the West Midlands, up by 11% from £185,682 to £205,246. The smallest increase came in Scotland, up by just over 1% (£2,133) from £153,278 to £155,411.

The average amount put down by a first-time buyer in 2020 was £57,278, compared to £46,449 the year before, a rise of over 23%.

Burnley in the North West remains the most affordable area for local first-time buyers – calculated by comparing average earnings to average house prices – with a ratio of 3.1.

The vast majority of the top 20 most affordable areas are in Scotland (examples include both East and North Ayrshire at 3.2), with North Down and Ards in Northern Ireland (3.8), Middlesbrough and Doncaster (both 3.9) also making the list.

The list of the top 20 least affordable areas in the country continues to be dominated by Greater London, with Islington recording a house price to earnings ratio of 11.9, followed by Brent (also 11.9) and Hackney (11.8). Many of the other most expensive areas are in the South East, with Oxford (10.3) and Slough (10.0) also in the top 20.

Russell Galley, managing director of Halifax, said: “Whilst these figures confirm the almost inevitable fall in the overall number of first-time buyers in 2020 – with the entire housing market effectively shuttered during the first national lockdown – they also underline just how strong the bounce back was in the second half of the year.

“Despite the obvious challenges presented by soaring house prices, not least the need to raise an even bigger deposit, first-time buyers still accounted for half of all home purchases, a reassuring statistic given their overall importance to the market.

“However, with the economic impact of the pandemic likely to be felt most keenly by the young and those in lower-paid jobs, the need to prioritise improved housing availability and affordability for all those looking to make that first step onto the property ladder becomes ever greater.”

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