The number of first-time buyers entering the housing market is on track to hit its lowest level for a generation, Britain's largest building society warned yesterday.
Nationwide said the number of people buying their first home had slumped by almost a third last month compared with a year ago.
The building society blamed the recent surge in prices that has made buying a home unaffordable for thousands of young people, particularly in London and the South-east.
It said it expected just 375,000 new buyers to step on to the property ladder this year, the lowest figure for at least two decades and probably the smallest since the 1970s.
First-time buyers in the capital are, on average, putting down a deposit of almost £30,000 in order to get a foot on the ladder.
The figures are the latest evidence that young people are forced to find alternatives to buying their home such as renting, living with their parents, buying as a collective or simply moving to a cheaper part of the UK.
Alex Bannister, Nationwide's chief economist, said it meant those who did buy were "more well-heeled" than in the past. "To get hold of a deposit of £30,000 is no mean feat," he said.
A shortage of willing buyers at the bottom end of the market could act as a brake on house price inflation across the market. "First-time buyers add impetus to the housing market as they constitute new demand," Mr Bannister said.
"House prices can continue to rise but the pace of growth slackens as existing homeowners take longer to sell their homes and chains tend to lengthen."
But he doubted there would be a repeat of the crash of the early 1990s as it was unlikely the UK would suffer a surge in either unemployment or interest rates that historically provided the trigger.
Nationwide's latest survey showed annual price inflation fell for the fourth month in a row to 17.9 per cent, its lowest level since May last year. It said there was a split across the UK with prices rising fastest in the northern regions but stagnant or even falling in London and the South. However, on a monthly basis, prices rose 1.0 per cent or about £1,000 in July to take the value of the average home to £128,251.
Prices have now risen 7.7 per cent in the first seven months of the year, putting the Nationwide's forecast for 10 per cent growth in 2003 as a whole under threat.
Mr Bannister said if the strength of the housing market continued he would have to raise his forecasts next month.Reuse content