Graham Norwood Journalism

Taking The First Step: The Best (And Worst) Towns For First Time Buyers

Daily Telegraph

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Large swathes of the Midlands and northern England housing markets - until recently amongst the lowest-priced areas in the UK - are now officially classed as unaffordable for first time buyers.

Figures show the crisis at its worst in west Yorkshire, where Ilkley and Wetherby are ranked amongst the UK's 10 least affordable towns for first time buyers by the Halifax/Bank of Scotland, the country's biggest lender of mortgages to first timers.

HBOS calculates an 'affordability ratio' by dividing the average local property price by the average local first time buyer income. Ilkley (where an average home is £353,557 and a first timer receives £29,699 pay) has a ratio of 11.9:1. The Wetherby ratio is 9.6:1.

The bank says in Yorkshire and Humberside, and in the East Midlands, no town or city has what it classifies as an 'affordable' average price for local first time buyers.

At the same time in the north west of England, as well as in both the East and West Midlands, typical first time buyers now have to pay stamp duty because their average home is over the £125,000 threshold.

At the other end of the scale Bootle, with a ratio of 3.4:1, and Nelson on 3.6:1, both appear in the 10 most affordable locations. So does Ashington in Northumberland with a ratio of 3.9:1. Surprisingly the south of England now has five entries in the 10 most affordable first time buyer locations - Newham in east London, St Leonards On Sea, Clacton on Sea, South Ockenden and Gosport.

Until recently the least affordable locations were predictably in southern England, while the north dominated the list of most affordable areas. But the much more varied results of recent years show how the North-South divide has been eroded by more than a decade of strong price rises until the downturn towards the end of 2007.

"Rising property values have priced many potential first time buyers out of the housing market. When they do enter the market they are more likely to be in their 30s than their 20s and buy a flat rather than a terraced house" claims Martin Ellis, chief economist at HBOS.

"There is no quick fix. A more subdued housing market over the next few years is a positive step. Lower-than-average house price growth together with more government initiatives may, in time, address the issue" he insists.

That is little consolation to Emma Cook, 22, a receptionist working in Harrogate.

Since graduating from university last year, Emma has been saddled with £12,000 in student loans to repay and now finds that even on a 100% mortgage she could borrow no more than £120,000 towards a first home. Land Registry data shows an average flat in the town costs £199,535 while a terraced house - at one time a reliably cheap type of home - is well over £200,000.

"I want to stay in Harrogate and ideally find a place needing work, so I can then improve it and sell it on. But there's literally nothing available. In any case, with the housing market so unpredictable it's clearly risky to get a 100% mortgage" she says.

"So I'm renting in a flat with two friends and I've ruled out buying for the indefinite future. I'm having to ask myself whether I really want to be on the property ladder."

Even in traditionally lower priced regions like the Midlands, first time buyers are finding the going tough.

Graphic designer Simon Hall, 28, and marketing executive Clare Nester, 25, work together at a public relations agency in central Birmingham.

"It's not only that properties are expensive, but they're also not that good. Some of the new developments are quite tragic in their design and individual properties are a very small size" explains Simon, who currently lives in Tamworth.

"We've got a good mortgage deal and we can afford somewhere between £150,000 and £180,000 based on borrowing 100%, so there are places in our price range. But from that we need to deduct legal fees and purchasing costs, and there's a worry that if we buy now and prices then drop, we're immediately into negative equity" he says.

On the face of it, the situation appears to be worsening.

Data issued last month (January) by the Royal Institution of Chartered Surveyors suggests affordability for first time buyers in northern England and across the Midlands worsened from October to the New Year, for the fourth successive quarter. Likewise, stricter lending criteria introduced by most lenders means first timers may have difficulty in borrowing as much as previously anticipated.

But there is some light at the end of the tunnel, especially for those first timers willing to take a less orthodox approach.

For example, enter the word 'co-buying' into Google and you will find a host of websites explaining how first timers can pool their finances and thus afford a home which they could not even dream of if relying on their own individual incomes.

Sites like www.sharedspaces.co.uk, www.buyingtogether.org.uk and www.co-buywithme.co.uk are like property versions of online dating, except instead of finding a new soulmate the objective is to end up with a co-owner of a home.

"First timers don't even have to buy together. I know a father and mother who owned in Manchester, then combined with their daughter and her partner buying for the first time. They bought a huge farmhouse in Lancashire, so have a far better property with far more space than they'd ever have as separate couples" says James Cartlidge of www.sharetobuy.com which specialises in finding mortgages for co-buyers.

His company now has space on social networking website Facebook to try to reach first time buyers who are disenchanted with orthodox ways of purchasing property.

"Co-owning inevitably appeals to younger people - our average first time buyer is 27 compared to 34 in the wider market - and it tends to happen more in big urban centres like Manchester, Leeds and Birmingham" says Cartlidge.

For prospective buyers on council housing waiting lists, designated as key-workers or living in specific regeneration areas where shared-ownership schemes operate, there are now several government-inspired schemes to help get on the first rung (see box).

Meanwhile those reliant on the wider open market at least have a chance of nabbing one of the special offers now appearing as developers and estate agents attempt to resuscitate demand ahead of the start of the traditional spring buying season.

For example Bellway Homes is slicing up to £36,000 off the price of some homes on the Heritage Rise development in Bagworth and up to £9,000 off homes in Manver Gardens, Nottingham (www.bellway.co.uk). In Yorkshire, George Wimpey is offering a range of first time buyer incentives including paying 50% of your mortgage for a year on some schemes (www.georgewimpey.co.uk). Rival builder Miller Homes offers to waive the deposit, underwrite some mortgage payments and cut prices on selected Yorkshire properties aimed at young buyers (www.millerhomes.co.uk).

Are these sustainable solutions to the affordability problem? Of course not.

That will only happen with purchasing power catches up with prices, a position likely to be reached in anything from one to five years according to different property market analysts.

But in the meantime there are at least some opportunities to get on that first rung - even if you have to be brave to take that initial step.

Grim Statistics

Average price paid by first time buyers:

Region	2002	2006	2007	Five-year change
North of England	£52,665	£109,565	£116,223	121%
Yorkshire/Humber	£59,483	£113,164	£120,468	103%
North West England	£63,459	£118,968	£126,815	100%
East Midlands	£75,859	£119,902	£126,392	67%
West Midlands	£81,709	£126,463	£133,967	64%

Average first time buyer's deposit:

Region	2002	2006	2007
West Midlands	£15,103	£22,103	£23,315 (17%)
East Midlands	£12,924	£18,468	£21,295 (17%)
North West	£8,947	£18,741	£20,392 (16%)
North of England	£6,527	£17,743	£19,341 (17%)
Yorkshire/Humber	£8,931	£18,177	£19,326 (16%)

Government schemes to help first timers:

First Time Buyers' Initiative - you pay 50% or more of the market price of a property and English Partnerships, a government-funded regeneration body, contributes the rest. After three years, buyers can sell on the open market and repay EP its share, or conversely can buy-out EP.

Open Market Homebuy - a housing association offers an 'equity loan' up to 25% of a property's value to 'subsidise' your purchase. When you sell 25% of the sale price goes to the association, whether the value has gone up or down.

New Build Homebuy - A new name for Shared Ownership, this allows you to buy 25% to 75% of the property's value and pay rent (usually to a housing association) on the remaining share. If you can afford it you then buy more shares until you own it outright. You can then sell the home on the open market, although you may be obliged to give the association first refusal.

Social Homebuy - existing council and housing association tenants can buy a share of the home they live in. Some tenants may be entitled to discounts but these must be repaid in full if the property is sold within five years.

Key Worker - public sector employees in the more expensive parts of the Midlands and north of England may be entitled to assistance in buying their first home.

Details of first time buyer schemes are available on local authority websites plus:
www.direct.gov.uk;
www.englishpartnerships.co.uk;
www.housingcorp.co.uk;
www.housingoptions.co.uk.

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