Home affordability deteriorates to pre-financial crisis levels

27th March 2015

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Rising property prices have meant home affordability has deteriorated over the past year to levels not seen since before the financial crisis.

Analysis by Lloyds shows buyers are struggling to keep up with rising prices and that Oxford is the least affordable city to buy a home as a multiple of the local average salary.

The average home in Oxford costs £361,469, which is 11 times the local annual wage.

Home affordability in UK cities has deteriorated over the last 12 months to levels not seen since 2009 as buyers struggle to keep up with rising prices, a new report has showed.

Conversely, the Scottish city of Stirling is the most affordable, with an average home costing £158,645, or just 3.9 times earnings.

In the past 12 months homes have become more unaffordable, with the average house now costing 6.1 times the average annual pay in the year to February – up from 5.8 times the previous year.

Home affordability in UK cities is still 15% lower than at the peak of the financial crisis in 2008, when a home cost an average 7.2 times annual earnings.

The report reiterated the continuing North-South divide in property price growth, with 17 out of the 20 least affordable cities located in the South of England.

‘House price rises in the past two years have results in a deterioration in home affordability in the majority of UK cities, and generally widening the North-South affordability divide as the market has been strongest in the South,’ said Andy Hulme, Lloyds Bank mortgages director.

Cities which are commercially successful, such as London and Aberdeen, have seen the strongest increases in prices.

House prices in the capital have grown 40% in the past five years, making it the seventh least affordable city with the average home costing £387,336 or 8.75 times annual gross local pay.

Winchester saw the second biggest increase in prices, at 39% over the past fives years and is second in the least affordable cities’ table, with the average house priced at £444,661 or 10.11 times earnings.

Aberdeen, which is home to the country’s oil and gas businesses, has seen the fastest growth in house prices over the last five years as a typical home soared 88% to £219,177.

Top 10 least affordable cities

Oxford – 10.89 times earnings
Winchester – 10.11 times earnings
Cambridge – 9.76 times earnings
Chichester – 9.19 times earnings
Brighton and Hove – 9.10 times earnings
Bath  – 8.83 times earnings
Greater London – 8.75 times earnings
Truro – 8.61 times earnings
Salisbury – 8.43 times earnings
Exeter – 8.04 times earnings

 

Top 10 most affordable cities

Stirling – 3.85 times earnings
Londonderry – 3.92 times earnings
Lancaster – 4.03 times earnings
Bradford – 4.17 times earnings
Hereford – 4.42 times earnings
Belfast – 4.49 times earnings
Newry – 4.51 times earnings
Salford – 4.56 times earnings
Lisburn – 4.63 times earnings
Durham – 4.70 times earnings

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