Housing affordability improves but north-south divide remains

The Momentum UK Team 18 March 2014

Since a price peak in 2008, housing affordability has improved in 51 of 62 UK cities, according to a new study.

According to the Lloyds Bank Affordable Cities Review, the average price for an urban home stands at £184,215 which is 5.8 times bigger than annual average gross earnings. This is down from 6.1 in 2009 and just under 20% below the peak of 7.2 in 2008.

This is despite a rise in house prices over the past year, deteriorating the level of city affordability. The average city house price has risen by just over 5% from £175,060 in 2013 to £184,215 in 2014. Over the last five years, a slight increase in the affordability of housing in UK cities overall has been caused by an average house price decline of £827, and an increase in the gross average annual earnings of those living in the 62 cities of £1,292.

City house prices are now lower than they were ten years ago, at 5.8 times the annual average gross earnings, compared to 5.9 in 2004. Over the course of the decade, average city house prices have increased by 22%, but average earnings in these cities have increase by 23%.

While Stirling is now the most affordable city in the UK (with average property prices 3.3 times gross average earnings), Oxford continues to be the least affordable (with average house prices 11.25 times gross average earnings).

The north-south divide in city affordability is clear. The top 15 most affordable cities for homebuyers are in Scotland, Northern Ireland or the North of England, with the next five in the Midlands and Wales. However, of the top ten cities with the highest house price growth over the last ten years, eight are in Scotland or the north. Carlisle, Hull and Bradford have seen their house prices rise by more than 40% over the last decade.

Marc Page, Lloyds Bank Mortgages director, commented:

“Over the last five to ten years, affordability has marginally improved in most UK cities, as increases in earnings have kept up with house price rises in that time. However, the economic and lifestyle benefits often associated with residing in cities are continuing to drive demand, especially in the south of England. With city house prices continuing to rise, affordability deteriorated slightly last year, but the trend since 2009 is positive for the majority of UK cities.”