The average price for a city home in the UK of £173,202 stands at 5.5 times gross annual average earnings; the lowest ratio since 2003 (5.3). This is an improvement on 5.7 times gross annual average earnings a year ago and is significantly below the peak of 7.2 in 2008. Despite these gains in affordability, city living remains less affordable than the UK average (4.3).
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 18% (£37,403) from £210,605 in 2008 to £173,202 in 2012.
Salford is the most affordable UK city
Salford in the North West is the most affordable UK city with an average property price (£102,391) that is less than four times (3.81) gross average annual earnings. This partly reflects a 32% fall in house prices in this part of Greater Manchester since 2008. The next most affordable cities are Londonderry (3.87) and Bradford (3.98).
Seven out of the eight most affordable cities are in Northern Ireland and the north of England. Ely in the East of England is the most affordable city in the south of England (4.60).
Truro and Oxford are the UK's least affordable cities
The least affordable city in the UK is Truro in the South West where the average property price (£250,489) is nearly ten times (9.71) gross average earnings in the area. The quality of life benefits associated with living in this picturesque part of Cornwall have supported prices here over the past decade. Oxford (8.80) is the second least affordable city, followed by Winchester (8.76).
Inverness (5.97) and York (5.95) are the least affordable cities outside southern England.
North - south divide in city affordability
There is a substantial north - south divide among UK cities. All sixteen of the most affordable cities for homebuyers are in the North. At the other end of the spectrum, the fifteen least affordable cities are all in southern England.
Suren Thiru, housing economist at Lloyds TSB, commented:
"The improvement in housing affordability within many of our major urban conurbations has been significant during the past few years and reflects the decline in house prices over the period. There is, however, a distinct north-south divide to the locations of the most affordable UK cities.
"Looking forward, the marked improvement in city affordability is likely to help support demand for those able to enter the housing market. Much of this benefit, however, maybe offset by the continuing difficulties many households face in raising a deposit and uncertainty over the outlook for the UK economy."
Other Key Findings:
- City house prices, as a multiple of earnings, remain higher than a decade ago at 5.5 times gross annual average earnings on average compared with 4.7 in 2002.
- In 2002, Bradford was the most affordable UK city (2.73), followed by Hull (2.86) and Durham (3.02). In contrast, Oxford was the least affordable UK city (8.61).
- Thirteen of the twenty most affordable UK cities in 2012 were also among the twenty most affordable in 2002. Seventeen of the twenty least affordable UK cities were among the twenty least affordable a decade ago.
