The average UK city house price has risen by 7%, from £181,667 in 2014 to £195,107 in 2015, resulting in affordability in the nation’s cities worsening in the last 12 months from 5.8 to 6.1 times gross average annual earnings - the second successive annual decline in affordability.
Affordability in UK cities is, on average, now at the same level as in 2009 but is 15% lower than the peak of 7.2 times earnings in 2008 at the height of the last housing market boom. The overall improvement in affordability across UK cities as a whole over the past seven years has been caused by a combination of an average house price decline of £12,630 (-6%), and an increase in the gross average annual earnings in UK cities of £3,058 (+11%).
Affordability in Scottish cities is, on average, now at the same level as in 2006 but is 14% lower than the peak of 6.12 times earnings in 2008 at the height of the last housing market boom.
A clear north-south affordability divide remains among UK cities. Seventeen of the 20 least affordable cities are in southern England with Lichfield, Leicester and York completing the top 20.
At the other end of the spectrum, nineteen of the 20 most affordable cities for homebuyers are outside southern England with the exception being Ely in East Anglia.
Oxford’s average house price is 11 times (10.89) the gross average earnings in the city. At an average price of £361,469, houses in Oxford are more expensive compared with local average earnings than any other UK city. This is partly due to Oxford’s attractiveness to commuters working in London.
Winchester (10.11), Cambridge (9.76), Chichester (9.19) and Brighton and Hove (9.10) make up the top five least affordable cities. Greater London is not far behind with average property prices 8.75 times average gross annual earnings. This average figure disguises considerable variations across the capital with central boroughs being significantly less affordable than the Greater London average.
Stirling remains the UK’s most affordable city despite a deterioration in affordability over the past year. The average property price in the Scottish city of £158,645 is 3.9 times gross average annual earnings.
Aberdeen has recorded the biggest price rise of any UK city over the past decade with a gain of 88% as a result of rising housing demand due to the strong performance of the oil and gas sector over most of the period. Cambridge (55%) and Brighton & Hove (52%) saw the largest increases in England.
More recently, London has recorded the highest house price growth with a rise of 40% during the past five years followed by Winchester (39%) and Cambridge (37%). Nine of the ten top performers since 2010 are in southern England with the exception being Durham (25%).
Four of the ten most affordable UK cities are in Northern Ireland due primarily to the relatively low house prices in the country: Londonderry (3.92), Belfast (4.49), Newry (4.51) and Lisburn (4.63). Lancaster (4.03) and Bradford (4.17) are the most affordable cities in England.
Andy Hulme, Lloyds Bank mortgages director, commented:
“House price rises in the past two years have resulted in a deterioration in home affordability in the majority of UK cities, and generally widening the north / south affordability divide as the market has been strongest in the south. The UK’s most successful cities economically have tended to see the strongest property price rises. Aberdeen, the country’s oil and gas capital, has recorded the biggest gains over the past decade whilst London has been the top performer during the economic recovery.”
Nitesh Patel, housing economist at Bank of Scotland, commented:
"Although we have seen an 7% decrease in home affordability in cities in Scotland, the average price for a city home is significantly below the peak of 2008 and is more affordable than the UK city average. As the UK’s oil and gas capital, Aberdeen has recorded the biggest gains over the past decade while Stirling has retained the title of the UK’s most affordable city for the second year in a row."
