Lloyds Bank Affordable Cities Review: Oxford is UK’s least affordable city; home affordability worsens in the last 12 months

Home affordability in UK cities deteriorates to 2009 levels

•    Affordability 15% better than in 2008
•    Oxford is the UK’s least affordable city; Stirling is the most affordable
•    Aberdeen records highest house price growth since 2005; London since 2010

LONDON, 27-3-2015 — /EuropaWire/ — The past year has seen a deterioration in affordability in UK cities, driven by rising house prices across the country, according to the Lloyds Bank Affordable Cities Review. The average UK city house price has risen by 7%, from £181,667 in 2014 to £195,107 in 2015. This has resulted in affordability in the nation’s cities worsening in the last 12 months from 5.8 to 6.1 times gross average annual earnings; the second successive annual decline in affordability.

Affordability in UK cities is, on average, now at the same level as in 2009 but is 15% lower than the peak of 7.2 times earnings in 2008 at the height of the last housing market boom. The overall improvement in affordability across UK cities as a whole over the past seven years has been caused by a combination of an average house price decline of £12,630 (-6%), and an increase in the gross average annual earnings in UK cities of £3,058 (+11%).

Oxford is the UK’s least affordable city [Table 1]
Oxford’s average house price is 11 times (10.89) the gross average earnings in the city. At an average price of £361,469, houses in Oxford are more expensive compared with local average earnings than any other UK city. This is partly due to Oxford’s attractiveness to commuters working in London.

Winchester (10.11), Cambridge (9.76), Chichester (9.19) and Brighton and Hove (9.10) make up the top five least affordable cities. Greater London is not far behind with average property prices 8.75 times average gross annual earnings. This average figure disguises considerable variations across the capital with central boroughs being significantly less affordable than the Greater London average.

Lichfield (6.95), York (6.83) and Leicester (6.54) are the least affordable cities outside southern England.

Stirling is the most affordable city [Table 2]
Stirling remains the UK’s most affordable city despite a deterioration in affordability over the past year. The average property price in the Scottish city of £158,645 is 3.9 times gross average annual earnings.

Four of the ten most affordable UK cities are in Northern Ireland due primarily to the relatively low house prices in the country: Londonderry (3.92), Belfast (4.49), Newry (4.51) and Lisburn (4.63). Lancaster (4.03) and Bradford (4.17) are the most affordable cities in England.

Andy Hulme, Lloyds Bank mortgages director, commented:
“House price rises in the past two years have resulted 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. The UK’s most successful cities economically have tended to see the strongest property price rises. Aberdeen, the country’s oil and gas capital, has recorded the biggest gains over the past decade whilst London has been the top performer during the economic recovery.”

Significant north-south divide in city affordability
A clear north-south affordability divide remains among UK cities. Seventeen of the 20 least affordable cities are in southern England1 with Lichfield, Leicester and York completing the top 20.

At the other end of the spectrum, nineteen of the 20 most affordable cities for homebuyers are outside southern England with the exception being Ely in East Anglia.

House price growth highest in Aberdeen over the past decade…[Table 3]
Aberdeen has recorded the biggest price rise of any UK city over the past decade with a gain of 88% as a result of rising housing demand due to the strong performance of the oil and gas sector over most of the period. Cambridge (55%) and Brighton & Hove (52%) saw the largest increases in England.

…but strongest in London since 2010 [Table 4]
More recently, London has recorded the highest house price growth with a rise of 40% during the past five years followed by Winchester (39%) and Cambridge (37%). Eight of the ten top performers since 2010 are in southern England with the exception being Aberdeen (26%) and Durham (25%).

Full list of cities

Notes to Editors:

1 Defined as comprising Greater London, the South East, the South West and East Anglia

• 62 cities surveyed.
• Wells, Armagh, Ripon, St Davids, St Asaph and Bangor have been excluded from the analysis due to an insufficient sample size.
• Westminster and City of London are included as part of Greater London and have not been identified separately.

A city is typically defined as ‘a large town’ or ‘any town in the UK which has a cathedral’. However, there are notable exceptions to this including towns that were awarded city status to mark special occasions. For example, Chelmsford, Perth and St Asaph were awarded city status as part of Golden Jubilee celebrations. For more information please visit: http://www.ukcities.co.uk/

The prices used in this research are simple arithmetic (‘crude’) averages. These prices are not standardised and therefore can be affected by changes in the sample from period to period. The data used in the release largely refers to the 12 months to February.

Data sources: This research is based on data from the Lloyds Banking Group’s own housing statistics database and ONS data on average earnings.

1. House Prices The prices used in this research are simple arithmetic (‘crude’) averages. These prices are not standardised and therefore can be affected by changes in the sample from period to period. The data used in the release largely refers to the 12 months to February. Source: Halifax House Price database.

2. Average Earnings Average earnings figures are estimated from the ONS’s “Annual Survey of Hours and Earnings” (ASHE) and refer to the means for full-time employees. At a city level, figures for the relevant local authority (residence based) are used in the majority of cases. Where this has not been possible due to data unavailability, the nearest local authority average has been used.

For further information
Eve Speight
T: 020 7356 2162 | M: 07585965319
Eve.speight@lloydsbanking.com

“This report is prepared from information that we believe is collated with care, however, it is only intended to highlight issues and it is not intended to be comprehensive. We reserve the right to vary our methodology and to edit or discontinue/withdraw this, or any other report. Any use of this report for an individual’s own or third party commercial purposes is done entirely at the risk of the person making such use and solely the responsibility of the person or persons making such reliance. © Lloyds Bank plc all rights reserved 2015.