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Number of first-time buyers falls amid tougher housing market conditions: Halifax

by | Sep 27, 2023

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  • First-time buyers account for over half (53%) of all home loans
  • Number of first-time buyers down 22% between January andAugust 2023, compared to same period last year
  • Average price of first home now £288,030 – down just 2% in thepast year
  • First-time buyer deposits fall 12%, although still averaging £54,116
  • Scotland is the UK’s most affordable place for first-time buyers toget on the property ladder

The number of first-time buyers fell 22% between January and August this year, compared to the same period in 2022, according to the latest Halifax First-Time Buyer Review.First-time buyers still accounted for over half (53%) of all home loans agreed in the first eight months of this year, a similar proportion as during the same period in 2022 (52%), as activity in the wider housing market slowed.

Kim Kinnaird, Director, Halifax Mortgages, said:

“Getting the keys to your first home is a significant milestone in anyone’s life – we’ve lent £5.5 billion to first- time buyers in the first six months of the year, helping people make their home-owning dreams a reality.“While lenders are ready to help people get on the property ladder, the growth in house prices over the past decade means raising a suitable deposit remains a significant hurdle. There is then finding the right property in a housing market with limited supply, coupled with the sharp rise in interest rates more recently, meaning there is lots to consider for any first-time buyer.“The average age of those buying their first property is now 32, rising by two years over the past decade, most likely reflecting that increasing costs are making the road to home ownership longer. Also, when people are ready to buy a home, most are doing so in joint names which helps both in terms of costs and affordability.

 
 

The expected further fall in house prices this year – alongside stronger income growth – may somewhat offset higher interest rates, which will be welcome news to many. Further, there are some areas which continue to be great options for first-time buyers – the average cost of a first property in Scotland, as an example, comes in at almost £100,000 less than the UK average.”

Various challenges in the housing market, including increases to mortgage rates and periods of lower availability of mortgage deals – will have impacted many first-time buyers in recent months. Inflation has become a further barrier to saving a deposit – an aspect of new home ownership that was already difficult for many, considering the average deposit needed is now £54,116.

While the number of first-time buyers has fallen between January and August of this year compared to the same time last year, a record number got on the ladder over the previous two years as, post-pandemic, buyers took advantage of low interest rates and government help available at the time, including Stamp Duty relief. This means that the number of people entering the property market for the first time is 17% higher than ten years ago.

 

Further, strong income growth in recent months means the house price to income ratio for first-time buyers has fallen from 5.8 in June last year, to 5.1 currently, meaning house prices for those getting on the housing ladder are at their most affordable since June 2020.

Table 1: Number of first-time buyers in the UK

Year (January – August)Number of first- time buyersAnnual % changeFirst-time buyers as % of all home purchase loans
2013158,69017%44%
2014196,52024%46%
2015186,960-5%46%
2016210,36013%48%
2017225,7507%49%
2018229,4902%50%
2019229,2600%51%
2020170,220-26%51%
2021269,98059%46%
2022239,690-11%52%
2023*186,015-22%53%

Sources: UK Finance and *Halifax estimates for 1st January – 31st August 2023

 
 

Regional movement

The South East – which has the second most expensive average property prices in the UK – had the biggest decline in the number of people buying a first home between January and August this year (-25%), although the number of first-time buyers was still much higher in the region (16%), than 10 years ago.

London and East Anglia had the second biggest decline in first-time buyers entering the property market so far this year (-24%).

 
 

London was the only region to see a decline (-9%) in the number of people entering the property market for the first time, compared to 2013.

Price tags and deposits

Halifax data shows that first-time buyers now pay an average £288,030, down 2% in the 12 months to August 2023, in line with wider falls in national property prices.

 

The average deposit put down on a first home is now £54,116 – around 19% of the property price (in 2013, the average deposit was £31,060, around 21% of the property purchase price at the time.)

First-time buyers in London are coming up with the biggest deposit (average £113,078) while those in the North East are putting down the lowest amount, at an average of £29,184.

Older first-time buyers

 
 

The average age of a first-time buyer is now 32; two years older than a decade ago.

Affordability

Nine of the top 10 most affordable places for new buyers are in Scotland.

 
 

Inverclyde, in the West of Scotland, is the most affordable. Based on average earnings of £39,485 in the area, compared to the average first-time buyer price £112,112, those buying a first home in Inverclyde need to borrow just under three times the average salary.

The least affordable area in the country is Newham, London, where first-time buyers face an average property price of £448,435 – nearly 11 times average annual earnings in the area.

 

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