First-time homebuyers shut out

THE number of first-time house buyers has sunk to its lowest in a generation, sparking fears of price stagnation for years to come, according to mortgage lenders.

Nationwide said some 86,000 first-timers bought in the first quarter of the year, 29% of the total number of house moves involving a mortgage.

That would mean their total number, if the recent slowdown reported by estate agents and housebuilders was extended, is on course to hit an annual low not seen since 1973.

Nationwide's figures form part of those published by the Council of Mortgage Lenders, which said first-timers accounted for just 30% of homebuyers in the first five months.

The figures could undermine recent claims from the housing industry that signs of a summer slowdown in house sales is just seasonal.

Without a regular injection of new buyers at the bottom of the ladder, there is a danger fewer houses will come on to the market while completion times will take longer.

Assuming a steady rate, 2004 is on course for a low in absolute numbers of first-timers not seen since 1980 when 317,000 joined the market.

Nationwide group economist Alex Bannister said: 'The message is that people will have to get used to that fall in first-time buyers.'

The figures will stoke the debate about whether a house-price crash is on the horizon - fears raised by Bank of England Governor Mervyn King but dismissed by most economists and property pundits who say a 'soft landing' is under way.

'First-time buyers are being priced out of the market, existing owners will not want to take on more debt and so those wanting to move will find properties harder to find and considerably longer to complete with chains that could be exceptionally long,' Bannister added.

The proportion of first-time buyers in the market has been falling gradually since 2001 and is way short of the 50% to 60% seen in the housing boom of 1982-1990, Nationwide data shows.

Figures out today from 220 estate agents via their jointly-owned property website Primelocatio.com show upmarket London home prices fell 1.3% in June after remaining static in May and rising 0.4% in April.

Housebuilders Persimmon and Wimpey warned last week that sales of new homes from the South East to the Midlands were stalling over the summer and forecast little upward price movement for the rest of the year.

Today, housebuilder Bovis said the market had slowed in the past two months to a 'more-normal level of activity', chiming with trading statements of its rivals.

Recent interest rate rises had 'dampened the level of price improvements to one that is more sustainable', Bovis said after an 8% rise in average selling prices in the first half of the year. It promised a successful 2004.