Latest analysis from Lloyds Bank shows affordability in UK cities is the worst since 2008 and now require 6.6 times annual earnings.
The report from Lloyds Bank shows average affordability in UK cities has worsened over the last 12 months from 6.2 to 6.6 times average annual earnings making it harder for first time buyers and home movers to buy their homes.
The latest figure is slightly lower than at the height of the housing boom in 2008 when average house prices were 7.2 times earnings.
Figures reveal a significant North-South divide with 17 out of 20 least affordable cities located in the South East of England. This compares to the 20 most affordable cities all of which are located to the north.
According to the report the city house prices have also increased by an average of 8% over the year from £196,225 in 2015 to £211,880 in 2016.
Most unaffordable cities
The most unaffordable city in the UK is Oxford where average house prices are 10.68 times local average earnings.
Average house prices in Oxford are £364,429 and prices are inflated partly due to the attractiveness to commuters to live here and work in London.
The top ten most unaffordable locations locations showing multiples of average earnings are as follows:
| City | Area | Multiple of Earnings |
|---|---|---|
| Oxford | South East | 10.68 |
| Winchester | South East | 10.54 |
| London | Greater London | 10.06 |
| Cambridge | East Anglia | 9.90 |
| Bath | South West | 9.77 |
| Brighton and Hove | South East | 9.60 |
| Truro | South West | 9.11 |
| St Albans | South East | 8.66 |
| Chichester | South East | 8.58 |
| Exeter | South West | 8.36 |
After Oxford is Winchester with house prices at 10.54, London with 10.06, Cambridge with 9.9 and Bath 9.77 times average earnings.
For London there are wide variations across the capital with central London being significantly less affordable than boroughs further out of the city.
Family members can help home movers where equity release buyers access cash with a lifetime mortgage for a child or grandchild as an extra deposit to buy their second home.
The most affordable cities were Swansea in Wales and Sunderland where house prices for both are 5.28 times local average earnings.
House price rise higher than wages
Andrew Mason, Lloyds Bank Mortgage Products Director has said house prices in the last three years have risen more steeply than average wage growth.
This has made homes in the majority of cities more expensive to buy. For first time buyers this means they would require a larger deposit or higher earnings to purchase their first home.
The top ten rise in house prices for 2011 to 2016 are as follows:
| City | House Prices 2016 |
5-Year Increases |
|---|---|---|
| Greater London | £437,825 | 53% |
| Salford | £161,144 | 48% |
| Cambridge | £378,465 | 46% |
| Chichester | £355,958 | 44% |
| Oxford | £364,429 | 39% |
| Portsmouth | £190,981 | 38% |
| Chelmsford | £323,274 | 37% |
| Gloucester | £203,102 | 36% |
| St Albans | £458,404 | 34% |
| Newcastle Upon Tyne | £177,577 | 33% |
Eight of the top ten are in Southern England with Greater London the highest increasing 53% in five years. Only two were from Northern England, Salford up 48% and Newcastle Upon Tyne up 33%.
For buy-to-let landlords with existing properties the rise in house prices creates more equity which they can benefit from if they sell in the future.
Over a longer time period from 2006 to 2016 the highest increase is Winchester higher by 79% followed by Cambridge up 66% and Brighton and Hove up by 63%.
One advantage of higher prices for remortgage buyers is that it gives them an opportunity to release capital which they can use to improve their home such as a new bathroom or kitchen.
The gap between the North-South divide has increased over this time as house prices in the south have generally been stronger than the north.
What are your next steps?
Speak to our LCM mortgage advisers if you are planning to move home, buying your first home, remortgaging your existing home to a new cost effective mortgage deal or are a buy-to-let investor.
For equity release buyers our London City Mortgage brokers can recommend lifetime mortgages allowing you to receive cash from your property to help maintain your standard of living as costs rise.
Learn more by using the mortgage cost calculators, equity release mortgage calculator and property value tracker chart. Start with a free mortgage quote or call us and we can take your details.
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