City home affordability

'Home affordability' has reached its worst point since 2008, with certain UK cities pricing homes at as much as ten times the average earnings of local residents.

The report, released by the Lloyds Bank's Affordable Cities Review, measures the growth of average city house prices across the UK compared to each city's average gross annual earnings. It found that, while the average city house price rose by 32% over the last five years, average city earnings increased by just 7%. This has left home affordability in UK cities at a critically low point, making it much more difficult for potential homeowners to buy their way onto the property ladder.

This news comes mere weeks after Communities Secretary Sajid Javid admitted that the UK property market was "broken", ahead of the release of a government white paper.

"Walk down your local high street today and there's one sight you're almost certain to see. Young people, faces pressed against the estate agent's window, trying and failing to find a home they can afford,” Javid said.

With an average house price of £385,372, compared to gross average earnings of just £36,033, Oxford was named as the UK's least affordable city. Fellow university city Cambridge came fourth, with a price to earnings ratio of 10.3 compared to Oxford's 10.7.

Greater London came a close second with a ratio of 10.5, though the report admitted that the London average hid "considerable variations" between its boroughs. 

“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 Mortgage Products Director at Lloyds Bank, Andy Mason. "Affordability levels have worsened for four consecutive years as average city house prices continue to rise more steeply than average wage growth."

The southern city of St Albans saw the highest average property price growth in the country over the last decade with an average of 65%. This is partly because, like many areas outside of London, St Albans has become a popular commuter town in recent years, driving its property values skywards.

The report also praised London, which saw an increase of 57% between 2012 and 2017. This marks the fastest property price recovery of anywhere in the country since the economic downturn. 

While the national average is discouraging, it hides strong regional variations in home affordability. Of the top ten 'least affordable cities', nine were in the south of the UK. 

In contrast, southern cities failed to make a single appearance in the table listing the UK's ‘20 most affordable cities’. With a ratio of just 3.7, the former Scottish capital of Sterling earned the top spot as the most affordable city in the UK. Londonberry in Northern Ireland came second with a runner-up-ratio of 3.8, while Bradford in Yorkshire & Humberside came third with 4.4. 

“House prices in the south have generally seen stronger growth than in the north," Mason continued. "St Albans has recorded the biggest gains over the past decade, whilst London has been the top performer during the recovery.”