Home affordability in cities at its worst since 2008

27 February 2017

  • Average city house prices outpace earnings growth over last five years – now nearly seven times annual earnings
  • Greater London house prices have recovered the fastest following the downturn with an increase of 57% between 2012 and 2017
  • Oxford tops the list of least affordable cities
  • Stirling is the UK’s most affordable city

Home affordability – as measured by the ratio between average city house prices and average gross local earnings – across UK cities is at its worst level since 2008, according to Lloyds Bank’s Affordable Cities Review.

Over the past five years, the average UK city house price has risen by 32% from £169,966 in 2012 to its highest ever level of £224,926 in 2017. In comparison, average city annual earnings over the same period have risen by only seven percent to £32,796. As a result, average affordability in the nation’s cities has worsened with house prices rising as a multiple of average annual earnings from 5.5 in 2012 to 6.9 in 2017.

Affordability in UK cities is, on average, now at its worst level since 2008 when the ratio of average house price to earnings stood at 7.2.

Oxford is the UK’s least affordable city

The average house price in the famous university city of Oxford is £385,372, which is nearly 11 times (10.7) annual gross average earnings in the city (£36,033), making it the UK’s least affordable city.   There are five cities with average house prices at least ten times average annual earnings. In addition to Oxford, these are Greater London (10.5), Winchester (10.5), Cambridge (10.3) and Chichester (10.0). The London average figure disguises considerable variations across the capital with central boroughs significantly less affordable than the Greater London average.   There is also a notable North – South divide. Lichfield (8.3), York (7.6) and Leicester (7.6) are the only cities outside southern England which appear in the top 20 least affordable UK cities.

20 most affordable cities all from outside southern England – with Stirling at the top

The former Scottish capital of Stirling is the UK’s most affordable city. At £173,847, the average property price in Stirling is 3.7 times average gross annual earnings. Londonderry (3.8) in Northern Ireland is the UK’s second most affordable city.

Two other Northern Ireland cities, Belfast (4.6) and Lisburn (4.8), are placed 4th and 6th respectively within the 10 most affordable cities.

Northern English, Scottish and Welsh cities make up the remainder of the 10 most affordable cities - Bradford (4.4), Hereford (4.7), Sunderland (4.9) and, Durham (5.0) in England, with Glasgow (5.2) in Scotland and Swansea in Wales (5.2).

Andrew Mason, Lloyds Bank Mortgage Products Director, commented:

“City living is becoming increasingly expensive with average house prices at least ten times average annual earnings in five of the UK’s cities.  “Affordability levels have worsened for four consecutive years as average city house prices continue to rise more steeply than average wage growth.

“House prices in the south have generally seen stronger growth than in the north.  St Albans has recorded the biggest gains over the past decade, whilst London has been the top performer during the recovery.”

House price growth highest in St Albans over the past decade

St Albans has recorded the biggest price rise of any UK city over the past decade with a gain of 65% between 2007 and 2017, compared to the UK cities average of 21%.  Winchester is second with a rise of 59% followed by Chelmsford (54%), Brighton & Hove (46%) and Cambridge (46%).

All 10 cities with the largest house price growth since 2007 are in southern England. 

Greater London house prices recover the strongest following the downturn

Over the past five years, London has recorded the highest house price growth with a rise of 57%.

Chelmsford, a newly created city as part of the Queen’s Diamond Jubilee celebrations in 2012, has the second highest increase in average house price (55%), closely followed by St Albans (54%).

Eight of the ten top performers since 2012 are in southern England with the exceptions being Salford in the North West (51%) - home to Media City - and Coventry in the West Midlands (48%).