Home affordability hits nine-year high according to Lloyds TSB
The average price for a city home in the UK stands at 5.5 times gross annual average earnings - the lowest ratio since 2003, Lloyds has revealed.
According to the most recent Lloyds TSB affordable cities review, the average price of a city home is £173,202. The latest ratio is an improvement on the 5.7 times gross average earnings in 2011 and significantly below the peak of 7.2 in 2008.
Lloyds said the main driver of the improvement in affordability is the fall in city house prices. Since 2008, the average city house price has fallen by 18 per cent, from £210,605 in 2008 to £173,202 in 2012.
The data highlighted the “substantial” north/south divide among UK cities. All sixteen of the most affordable cities for homebuyers are in the north and the 15 least affordable cities are all in southern England.
The data showed that Salford, in the north-west, is the most affordable UK city with an average property price of £102,391 which is only 3.8 times gross average annual earnings. Lloyds said this partly reflects a 32 per cent fall in house prices in this part of Greater Manchester since 2008.
The next most affordable cities are Londonderry with an earnings ratio of 3.87 and Bradford with a ratio of 3.98. Seven out of the eight most affordable cities are in Northern Ireland and the north of England.
Truro and Oxford are the UK’s least affordable cities. Truro has an average property price of £250,489 which equates to 9.71 times gross average earnings in the area and Oxford has an earnings ratio of 8.8.
Suren Thiru, housing economist at Lloyds TSB, said: “The improvement in housing affordability within many of our major urban conurbations has been significant during the past few years and reflects the decline in house prices over the period. There is, however, a distinct north-south divide to the locations of the most affordable UK cities.
“Looking forward, the marked improvement in city affordability is likely to help support demand for those able to enter the housing market. Much of this benefit, however, maybe offset by the continuing difficulties many households face in raising a deposit and uncertainty over the outlook for the UK economy.”
The Bank of Scotland recently released its own home affordability review, which reported that the average price for a city home in Scotland is £158,706. Standing at 4.96 times gross average earnings, this represents the lowest ratio since 2004. Stirling and Inverness emerged as Scotland’s most and least affordable cities, respectively.
Edward Gilbert, Managing Director at Moreland said: “This report again highlights the significant regional variances in both prices and market activity.
Whilst this report focuses on cities, in the Home Counties, prices have held up strongly during difficult economic times and are now at higher levels than were seen in 2006.”