Twentysomethings priced out of housing market

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The Independent Online

The seemingly unstoppable boom in house prices has driven young people out of the property market, according to research published today that shows the average age of a first-time buyer has reached 34.

The seemingly unstoppable boom in house prices has driven young people out of the property market, according to research published today that shows the average age of a first-time buyer has reached 34.

Halifax, Britain's largest mortgage lender, said the proportion of people under 25 who are buying their first home had tumbled from one-third of all sales in 1988 to just one in 10 last year.

This means the average age of a first-time buyer has jumped from 29 during the property boom of 1974.

The scale of the New Year property boom, which was first highlighted by The Independent, was reinforced yesterday by Halifax's monthly survey, which showed prices rose last month at their fastest rate in 12 years.

The struggle for young workers to get a toe on the property ladder was even more pronounced in London, where just 5 per cent of first-time buyers are aged below 25 compared with a quarter in 1988. The average age for a first-time buyer in the capital is now 35.

Halifax said prospective buyers are forced to wait until later in life before they can build up a cash deposit and sufficient earning power to apply for a mortgage.

Gary Styles, Halifax's head of group economics, said the problem was worst in London and the South-east, where prices have doubled over the last five years.

"Many first-time buyers in the south are finding it very difficult, if not impossible, to get onto the property ladder," he said. Only 568,000 people entered the housing market last year, compared with 900,000 first-time buyers in 1988.

Although falling interest rates – currently at a 38-year low – and strong growth in average pay and bonus levels have made mortgages affordable, the big issue for first-time buyers is the deposit.

Halifax said the size of the average deposit put down by first-time buyers had leapt 12-fold over the last three decades. Last year the average buyer put down £13,300 in cash compared with £1,100 in 1972, while the average Londoner entering the market had to find £34,000.

The survey is the latest to highlight a growing crisis in the capital and other boom towns where high house prices make it hard for key workers, such as nurses and teachers, to live near their work.

Many private-sector companies struggle to hire staff in areas where they are unable to afford to live. Anecdotal evidence suggests some employers are even buying homes to house their workers.

A report this month from the Joseph Rowntree Foundation, a social research think-tank, is expected to say the number of homes built each year must rise 60 per cent annually until 2016 to avert a crisis.

The House Builders Federation blamed the planning system for restricting the number of new homes built to a 70-year low. A spokesman, Pierre Williams, said: "It is this shortage, particularly in London and the South-east, that is pushing prices beyond the reach of the young and moderately paid. Legions of nurses, teachers and other key workers cannot get a foot on the housing ladder."

Halifax's price survey showed the price of the average home jumped £1,531, or 1.5 per cent, to £101,980 in February. Although the figure is actually lower than the rises seen in the three previous months, the annual growth rate of 16.9 per cent is the highest since the peak of the last boom in 1989.

But Halifax doubted there would be a repeat of the crash that followed the 1980s boom, thinking instead that hikes in interest rates and rising dole queues will put the brakes on the market. But the lender has raised its estimate for house price growth this year to 7 per cent from 5 per cent.

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