Home affordability in UK cities improves by nearly a quarter since 2008

The marked improvement in affordability in cities over recent years has been driven by the significant fall in city house prices. Since 2008, the average city house price has fallen by 17% (£34,831) from a peak of £207,387 in 2008 to £172,556 in 2013. Over the same period average earnings in cities have increased by 7%. However, the trend of declining house prices reversed in 2012, with the average city house price increasing slightly (1.7%) between 2012 and 2013, preventing any further improvement in affordability.  

North-south divide in city affordability
City living generally remains less affordable than the UK average (5.4). There is also a substantial north-south divide among UK cities. All 10 of the most affordable cities for homebuyers are in the North. At the other end of the spectrum, the 12 least affordable cities are all in southern England.

City affordability still worse than 10 years ago
City house prices remain higher than a decade ago as a multiple of earnings, at 5.6 times gross annual average earnings compared with 5.3 in 2003. In addition, there has been a remarkable degree of stability in those towns that are the most and least affordable compared with a decade ago. Of the 20 least affordable UK cities in 2013, 19 were also among the 20 least affordable a decade ago. Similarly, 14 of the 20 most affordable UK cities in 2013 were also among the 20 most affordable in 2003.

Londonderry is the most affordable UK city
Londonderry in Northern Ireland is the most affordable UK city with an average property price (£94,776) that is 3.38 times gross average annual earnings. The two next most affordable cities are also in Northern Ireland: Lisburn (3.50) and Belfast (3.67). Affordability in Northern Ireland has improved considerably over the past few years as a result of substantial price declines, which have been sharper than elsewhere in the UK. Stirling is the most affordable city outside Northern Ireland (3.81).

In 2003, Bradford was the most affordable UK city (2.88), followed by Stirling (3.13) and Durham (3.26).

Oxford is the UK’s least affordable city
The least affordable city in the UK is Oxford where the average property price (£299,459) is nearly ten times (9.66) gross average earnings in the area. Prices here are relatively high compared with local earnings partly due to the city’s attractiveness to commuters working in London. Three cities in the south west are the next least affordable: Salisbury (8.6), Bath (8.2) and Truro (8.2).

Lichfield (6.75) and Leicester (6.08) are the least affordable cities outside southern England.

The average price in Greater London, at £300,412, is 6.9 times gross average earnings in the capital.  Whilst house prices in London are higher than in most other cities so are earnings.  As a result, the capital is only the 11th least affordable city in the country.

However, there are considerable differences in affordability within the capital. The most affordable boroughs are Greenwich and Bromley with house price to earnings ratios of 5.7 and 5.9 respectively. At the other end of the spectrum, home prices are particularly high in relation to local earnings in the central boroughs of Kensington & Chelsea (13.3) and the City of Westminster (13.7).

Nitesh Patel, housing economist at Lloyds TSB, commented:
“There has been a significant improvement in housing affordability in many of our major urban conurbations over the past five years, largely reflecting the general decline in house prices since 2008. There is a very clear north-south divide to the locations of the most affordable UK cities with significantly better affordability in the north in general. There has also been remarkably little change in the identity of the most and least affordable cities over the past decade.

“Looking forward, the marked improvement in city affordability is likely to help support demand for those able to raise the necessary funds to enter the housing market.”

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