But securing a big enough mortgage is another matter, particularly in the vibrant south east of the country. House prices in the regions may offer greater affordability, but wages are higher in the south east, so one tends to cancel out the other.
Perhaps the most immediate beneficiary of the election results comes at the upper end of the market. Activity in the run-up to the election saw the biggest decline in prime central London property as potential buyers waited to see if a Labour victory would herald the introduction of a mansion tax. So, even while economic growth in London continued to outpace the rest of the country, home sales in January, for example, were unchanged on a year earlier compared with growth elsewhere of 10 per cent.
But there are signs that activity levels are starting to recover, with the balance of new buyers enquiries turning positive in April for the first time in over a year. Progress here might be blunted nevertheless because sales instructions continue to contract. Much depends on the cash buyer; these make up around one-third of all transactions in central London, with a significant proportion made up of overseas investors. For the first-time buyer (FTB) without the benefit of a huge cash lump sum, the prospects look daunting. Lenders are still demanding large deposits. Going back to just before the financial crisis, the average FTB deposit has more than doubled to over £106,000, far outpacing growth in average incomes. In fact, the house price-to-earnings ratio reached a record 11.7 in the first quarter of this year compared with 9.6 during the boom that preceded the financial crash, and a national average of 3.36. This will act as a constraint on house price inflation, which in prime central London is expected to lag the rest of the country. Inevitably, there was a surge in enquiry levels following the general election, but it's too early to establish whether this will be sustained.
One of the primary reasons that house price inflation will continue across most regions of the country is the chronic shortage of supply, not only in new build but also existing homes. In the 1980s, the average house was changing hands every 10 years, but this has since climbed to 21 years. The result of this is that the sale of existing properties as a proportion of all housing transactions has halved to 35 per cent. There are several factors accounting for this dramatic shift; higher moving costs deter some potential sellers, while the low inflation rate means that its long-term erosion effect on mortgage debt is that much lower. In fact, in the first quarter of this year, of the 156,100 loans advanced, a majority went to first-time buyers and buy-to-let investors.
And while housing starts have reversed the dip seen in the second half of last year, they remain woefully short of the 300,000 properties constructed in 1963, admittedly mainly as a result of a collapse in council house construction. Still, on a seasonally adjusted basis, housing starts in the first quarter reached 40,300; that's up 10,000 from the previous quarter and the highest level since the end of 2007. Encouragingly, construction by housing associations was up by more than a third, while local authority construction jumped by two-thirds, although this still leaves private construction accounting for 83 per cent of all housing starts. But progress here has been hampered by a shortage of skilled workers. And while active building sites are now at the highest level since records began in 1997, there is still some way to go before they reach the 48,000 housing starts per quarter seen before the financial crash. The markets' inbalance will not be resolved any time soon.
