In the first instalment of this Nethouseprices series about the latest Lloyds Bank Affordable Cities Review, we looked at the cities recording the fastest house price growth during the past decade. Predictably enough, the South of England was especially well-represented, with Salford in the North West and Coventry in the West Midlands being the only cities preventing the South from taking a clean sweep. Today, we turn to the issue of housing affordability in our cities. In other words, where are house prices and average earnings most closely aligned? It won't come as a great surprise to readers that the more northerly parts of the UK feature most heavily in this particular league table, with cities in Scotland, Northern Ireland and the North East of England enjoying some of the most affordable homes to be found in these islands. What is perhaps more striking is the sheer size of the gap between affordability in the most expensive cities and in such places as Stirling, Durham, Lancaster and Belfast.
Lloyds Bank Affordable Cities Review: most affordable cities
General UK headlines
To put the statistics relating to the most affordable cities into context, we first set out the salient findings for the UK at large. In preparing the review, Lloyds used its own housing database and the Office for National Statistics (ONS) house price index, which is based on Land Registry sold prices and Registers of Scotland data. Information about average earnings are taken from the ONS Annual Survey of Hours and Earnings. The headlines are as follows:
- Average city house price rises have outpaced wages growth during the past five years.
- Property prices in cities are now almost 6.9 times higher than average annual earnings, slightly lower than the ratio of 7.2 recorded in 2008, but significantly higher than the 5.5 multiple reported as recently as 2012.
- Greater London has recovered most quickly of all UK cities since the global financial crisis, and its property prices have risen by 57 per cent since 2012.
- Oxford is the least affordable city, having housing which typically costs 10.7 times average annual earnings.
- Cities, where the cost of a home has risen by an average of 32 per cent since 2012, boast some of the highest house prices in the UK.
- Earnings since 2012 have increased by just seven per cent to £32,796.
- The average cost of a house or apartment in a city was £169,966 in 2012. The current average city house valuation is £224,926.
So, some unquestionably startling overall figures. But which are the cities which buck this trend and remain relatively affordable for house-hunters?
League table: top twenty most affordable cities
1. Stirling, Scotland: Price to earnings ratio = 3.7.
2. Londonderry, Northern Ireland: Price to earnings ratio = 3.8.
3. Bradford, Yorkshire and Humberside: Price to earnings ratio = 4.4.
4. Belfast, Northern Ireland: Price to earnings ratio: 4.6.
5. Hereford, West Midlands: Price to earnings ratio = 4.7.
6. Lisburn, Northern Ireland: Price to earnings ratio = 4.8.
7. Sunderland, North East England: Price to earnings ratio = 4.9.
8. Durham, North East England: Price to earnings ratio = 5.0.
9. Glasgow, Scotland: Price to earnings ratio = 5.2.
10. Swansea, Wales: Price to earnings ratio = 5.2.
11. Newcastle upon Tyne, North East England: Price to earnings ratio = 5.3.
12.. Lancaster, North West England: Price to earnings ratio = 5.3.
13. Liverpool, North West England: Price to earnings ratio = 5.3.
14. Hull, Yorkshire and Humberside: Price to earnings ratio = 5.4.
15. Inverness, Scotland: Price to earnings ratio = 5.5.
16. Salford, North West England: Price to earnings ratio = 5.5.
17. Dundee, Scotland: Price to earnings ratio = 5.5.
18. Preston, North West England: Price to earnings ratio = 5.6.
19. Derby, East Midlands: Price to earnings ratio = 5.6.
20. Perth, Scotland: Price to earnings ratio = 5.7.
Arguably the most striking feature of the league table is the conspicuous absence of any southern cities. On the surface, this makes complete sense: it's hardly a revelation that these areas are host to some of the highest house prices in the UK. You might expect, though, that the higher wages offered in cities across the south would go some way to compensating for the inflated cost of residential property. This apparently isn't the case. That no city south of Hereford should appear in the most affordable league table underlines the ongoing existence of a North-South divide but, even more crucially, it might reveal the reason why house prices are rising more slowly in the South. Housing has reached an affordability threshold and there is simply little space for growth until real incomes start to rise appreciably. This being said, the Stamp Duty relief being offered to first time buyers might make the housing markets in southern cities a little more accessible.
Scotland's superb representation in the table is great to see. True, existing homeowners might wish that property prices in the country were higher, but that housing in so many Scottish cities is so affordable is a real positive for aspiring first time buyers. It would seem that the market is more universally accessible north of the border than in parts of England and Wales. Going forward, we would expect prices to rise and affordability to be stretched a little further. Why? Well, investors - disenchanted with London and other southern cities - are looking closely at Scotland, with Edinburgh and Glasgow both expected to attract significant investment in the coming year. The Scottish government has also abolished Land and Buildings Transaction Tax for first time buyers of properties costing less than £175,000, which might well stimulate prices.
We hope you have found this feature useful. Visit us again for Part Three, looking at the least affordable UK cities. Also coming up this week: the Halifax house price index for January.
The team here at Nethouseprices hopes that you have found this guide useful.
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