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Homes 'unaffordable' in 96% of UK

Monday, 24 December 2007 12:00 AM

The average property is now unaffordable for first-time buyers in 96 per cent of UK towns, according to new research.

The Halifax First Time Buyer Review reveals homes are unaffordable in 466 out of 483 towns and levels of first-time buyers are now at the lowest level since 1980 with only 300,000 making a purchase in 2007.

The average price paid by a first-timer now stands at £175,000 - up 82 per cent on five years ago.

Brits climbing onto the property ladder are further under pressure as in eight of the 12 UK regions they are facing stamp duty.

"Rising property values have priced many potential first time buyers out of the housing market. 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," said Martin Ellis, chief economist at Halifax.

However, despite the rising property prices, the research shows little evidence of first-time buyers overstretching themselves.

Mr Ellis said: "The financial position of the majority of first time buyers is sound and they, on average, put down a 20 per cent deposit, which is equivalent to more than a year's earnings.

"There is no quick fix to the first-time buyer problem. A more subdued housing market over the next few years is a positive step for potential new entrants. Lower than average earnings house price growth together with more government initiatives may, in time, address the issue."

Responding to the Halifax report, the Royal Institution of Chartered Surveyors (Rics) predicts an easing of pressures in 2008.

Rics chief economist Simon Rubinsohn said: "While first-time buyers continue to struggle to access the housing market, the conditions should start to gradually thaw throughout 2008.

"However many are still struggling to raise the upfront costs of purchasing a property as banks remain reluctant to accept lower deposits. Those on lower quartile income would have to save almost 100 per cent of their take home pay to have a chance of raising a deposit for the average priced house."

He added: "However, 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."

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