Home affordability gap widens to worst level in 8 years

29 March 2016

Home affordability – the ratio between average city house prices and average gross local earnings – across UK cities has hit its worst level in eight years, according to Lloyds Bank’s Affordable Cities Review.

The report shows that the average UK city house price has risen by 8% from £196,229 in 2015 to its highest ever level of £211,880 in 2016. This has resulted in average affordability in the nation’s cities worsening in the last 12 months from 6.2 to 6.6 times gross average annual earnings; the third successive annual decline in affordability.

The latest figures from Lloyds Bank also reveal a significant North – South divide, with 17 of the 20 least affordable cities located in southern England – with only Lichfield, Leicester and York appearing in the Top 20 outside of the South.

By contrast, all of the 20 most affordable cities for homebuyers are outside of southern England.

Affordability in UK cities is, on average, now at its worst level since the average house price to earnings rose to 7.2 at the height of the last housing market boom in 2008.

Andrew Mason, Lloyds Bank Mortgage Products Director, commented: "House price rises in the past three years have risen more steeply than average wage growth, making it more expensive to buy a home in the majority of UK cities. This has also widened the North – South divide, as house prices in the South have generally seen stronger growth than in the North. Winchester has recorded the biggest gains over the past decade, whilst London, not surprisingly, has seen the largest growth during the economic recovery of the last five years."  


Oxford is the UK's least affordable city

Oxford’s average house price is nearly 11 times (10.68) the gross average earnings in the city. At an average price of £364,429, houses in Oxford are more expensive compared with average earnings in the city than in any other UK city. This is partly due to Oxford’s attractiveness to commuters working in London.

Winchester (10.54), London (10.06), Cambridge (9.9) and Bath (9.77) make up the top five least affordable cities. The London average figure disguises considerable variations across the capital with central boroughs being significantly less affordable than the Greater London average.

Lichfield (7.53) and York (7.50) are the least affordable cities outside southern England.

Londonderry is the most affordable city

Londonderry is now both the UK’s most affordable and least expensive city. The average property price in the Northern Ireland city of £113,302 is 3.8 times the gross average annual earnings.

Northern Ireland cities Belfast (4.42) and Lisburn (4.64) are the 4th and 6th most affordable cities respectively, due primarily to the relatively low house prices in the country.

Northern English and Scottish cities make up the remainder of the top 10 most affordable cities. Bradford (4.31), Hereford (4.55), Durham (4.73), Lancaster (4.89) and Carlisle (5.03) in England. Stirling (4.11) and Glasgow (5.07) in Scotland.

House price growth highest in Winchester over the past decade

Winchester has recorded the biggest price rise of any UK city over the past decade with a gain of 79%. Aberdeen is the only city outside the southern counties of England in the top 10 of cities to see large house price growth, with a gain of 58%.

…but strongest in London since 2011

More recently, London has recorded the highest house price growth with a rise of 53% during the past five years followed by Salford (48%) and Cambridge (46%). Eight of the ten top performers since 2011 are in southern England with the exception being Salford (48%), which has seen significant investment for regeneration, and Newcastle Upon Tyne (33%).