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City home affordability at worst level since 2008

City home affordability at worst level since 2008

Home affordability in cities is at its worst level since 2008, with average city house prices nearly seven times the average salary.

According to the latest Lloyds Bank’s Affordable Cities Review, city property prices are now at their highest ever levels, with the average home costing £224,926, up 32 per cent from £169,966 in 2012.

However, city earnings have risen by just seven per cent over the same time period, to a UK average of £32,726. This means that the average city home costs 6.9 times the average city salary. 

Oxford is now the least affordable city in the UK, as the average house price is £385,372, more than ten times the annual gross average earnings for the city (£36,033).

Oxford-based IFA Nigel Wearden said that he wasn’t surprised to Oxford at the top of the list, but pointed out that the city’s unique demographic may be to blame. 

“Demographically there are a lot of older people in Oxford,” he said. “And obviously you have people coming and going as students who are only here for three or four years at a time. But there are quite a lot of wealthy retired people around Oxford who are on relatively small incomes but they’re property rich, so that’s likely to distort the figures in terms of affordability."

House prices in Greater London, Winchester, Cambridge and Chichester are also more than ten times the average local salary, while some central London boroughs are significantly less affordable than the Greater London average.  

Stirling was named the UK’s most affordable city, with the average property price of £173,847 just 3.7 times average gross annual earnings.

There is a clear north/south divide in the affordability rankings, with Londonderry, Bradford, Belfast, Hereford, Lisburn, Sunderland, Durham and Glasgow all offering properties for less than five times the average local salary.  

“City living is becoming increasingly expensive with average house prices at least ten times average annual earnings in five of the UK’s cities,” said Andy Mason, Lloyds Bank Mortgage Products Director. “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.”

Lloyds Bank’s Affordable Cities Review measures home affordability as the ratio between average city house prices and average gross local earnings. Over the past five years, this figure has risen from 5.5 in 2012, to 6.9 in 2017. This is the highest level since 2008, when the average ratio of house price to earnings stood at 7.2.