The noughties saw first-time buyers priced out by soaring house values, crowded out by buy-to-let landlords and finally locked out by mortgage lenders. Will things be any better this decade?
There are signs of hope in the first-time buyer annual review just published by the Halifax. The bank says that thanks to the housing market downturn prices are now affordable for first-timers in 39% of local authority districts compared to only 6% in 2007. ‘Affordable’ in this context is defined as the average price for a first-timer being lower than the price someone on average earnings in the area can pay based on an average house price to income ratio of 4.0 (the average over the last 20 years).
That national figure masks considerable regional variation, with no districts affordable in London and Northern Ireland and more than three quarters in the North East, North West and Yorkshire & Humber.
Meanwhile mortgage payments are looking much more affordable for those who can get a loan thanks to record low interest rates. The proportion of disposable earnings devoted to mortgage payments by a first-time buyer on average earnings has fallen from 50% in June 2007 to just 27% in November 2009.
And the Halifax says there are also signs that lenders are beginning to loosen up. The average deposit put down by a first-timer has stopped rising and the number of mortgage products available has risen 33% since April.
So far, so good except that the backdrop still looks pretty gloomy for anyone looking to get on the ladder. Yes, house prices are more affordable but they are now rising again. The Nationwide puts the increase in 2009 at 5.9% - way ahead of increases in earnings - and although 55 out of 70 economists polled by the FT believe that prices are still overvalued few believe that they will fall. Yes, mortgage payments look cheap but any recovery in the economy and in earnings will trigger an increase in interest rates.
The Halifax estimates first-time buyer numbers fell 4% in 2009 to 185,000. The annual average over the noughties was 388,000. The average mortgage advance now is 75% compared to 90% for most of the decade meaning that few can buy without family help with a deposit. Interest payments as a percentage of income may be much lower than in 2007 but they are still higher than they were between 1998 and mid-2004.
The fact that prices have started rising again without any growth in the number of first-time buyers - something that until recently would have been seen as impossible - suggests that the housing market and existing owner-occupiers have learned to get along without them. The teens look like being another decade of frustration for first-timers - and opportunity for landlords.
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