Home affordability in cities in the UK is at its most favourable in nearly a decade, according to the latest Lloyds TSB Affordable Cities Review.

The average price for a city home in the UK is £173,202, some 5.5 times gross annual average earnings, the lowest ratio since 2003 when it was 5.3.

This is an improvement on 5.7 times gross annual average earnings a year ago and is significantly below the peak of 7.2 in 2008.  But despite these gains in affordability, city living remains less affordable than the UK average of 4.3.

The marked improvement in affordability in cities over recent years has been driven by the significant fall in city house prices. Since 2008, the average city house price has fallen by 18% (£37,403) from £210,605 in 2008 to £173,202 in 2012.

Salford in the North West of England is the most affordable UK city with an average property price of £102,391, some 3.81 times gross average annual earnings. The report says that this partly reflects a 32% fall in house prices in this part of Greater Manchester since 2008. The next most affordable cities are Londonderry at 3.87 and Bradford at 3.98.
 
Seven out of the eight most affordable cities are in Northern Ireland and the north of England. Ely in Cambridgeshire is the most affordable city in the south of England at 4.6.

The least affordable city in the UK is Truro in the South West of England where the average property price of £250,489 is 9.71 times gross average earnings in the area. The quality of life benefits associated with living in this picturesque part of Cornwall have supported prices here over the past decade.

Oxford at 8.8 is the second least affordable city, followed by Winchester at 8.76. Inverness at 5.97 and York at 5.95 are the least affordable cities outside southern England.

The report reveals that there is a substantial north/south divide among UK cities. All sixteen of the most affordable cities for home buyers are in the North. At the other end of the spectrum, the fifteen least affordable cities are all in southern England.
City house prices, as a multiple of earnings, remain higher than a decade ago at 5.5 times gross annual average earnings on average compared with 4.7 in 2002.

In 2002, Bradford was the most affordable UK city at 2.73, followed by Hull at 2.86 and Durham at 3.02. In contrast, Oxford was the least affordable UK city at 8.61.

Thirteen of the 20 most affordable UK cities in 2012 were also among the twenty most affordable in 2002. Seventeen of the 20 least affordable UK cities were among the 20 least affordable a decade ago.

‘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,’ said Suren Thiru, housing economist at Lloyds TSB.

‘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,’ Thiru added.

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