Home affordability in British cities is at its worst level since 2008, with properties typically costing nearly seven times average earnings, a report has found.
The Lloyds Bank study found that the average house price in a UK city has surged by nearly a third (32 per cent) over the last five years, with the average home costing £224,926 in 2017.
Over the same period, average annual earnings in a city have seen only a 7 per cent increase, rising to £32,796. As a result, the average home in a city now costs around 6.9 times the average annual wage, which is the least affordable house price-to-earnings ratio since 2008, when a city home typically cost 7.2 times annual wages.
The study also revealed a pronounced North-South divide with the 20 most affordable cities all outside southern England. The study, which looked at 61 cities across the UK, identified Oxford as the UK’s least affordable city. The average house price in Oxford is £385,372, which is nearly 11 times annual gross average earnings in the city.
Five cities have average house prices commanding at least 10 times typical annual earnings. As well as Oxford, these cities are London, Winchester, Cambridge and Chichester.
York is 18th in the table of least affordable UK cities, where the average house costs £244,728, a price to earnings ratio of 7.6. York is the highest placed northern city on the list.
Stirling in Scotland was identified as the UK’s most affordable city. Stirling’s average house price is £173,847, which is just 3.7 times average local earnings.
Bradford comes third in the table of most affordable UK cities. The average Bradford house costs £130,497, which gives it a price to earnings ratio of 4.4.
Hull comes 14th in the affordable cities table. In Hull, the average home can be bought for £136,864, which gives it a 5.4 price to earnings ratio.
St Albans in Hertfordshire, a popular city with London commuters, recorded the biggest price rise of any UK city over the past decade, with a 65 per cent gain over the last 10 years. The average house price in St Albans is now £515,899.
London has seen the fastest house price growth over the last five years, with a 57 per cent rise taking average prices to £467,001. Lloyds said the average house price-to-earnings ratio in London disguises considerable variations across the borough, with central London boroughs being significantly less affordable than Greater London as a whole.
Andy Mason, Lloyds Bank mortgage products director, said: “City living is becoming increasingly expensive with average house prices at least 10 times average annual earnings in five of the UK’s cities. Affordability levels have worsened for four consecutive years as average city house prices continue to rise more steeply than average wage growth. House prices in the South have generally seen stronger growth than in the North.”
Lloyds used house prices from its banking group’s database as well as Office for National Statistics average earnings figures for the research. Ripon was one of seven cities excluded from the analysis due to an “insufficient” sample size.