Buying property is one of the biggest decisions we ever make in our financial lives. Where you choose to buy that house can have a big impact on how much it will cost you. To give you an idea of what you can get for your money, here’s a breakdown of the cities with the most and least affordable homes.
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How is affordability calculated?
Halifax have looked at every city in the UK and compared average earnings to average house prices.
This leaves us with something called the price-to-earnings ratio. The calculation works quite simply by dividing the average house price in a location by the average wage in that same location.
The lower the resulting figure is, the more affordable a city is. A higher price-to-earnings ratio makes a city less affordable. This is because you need to earn a larger multiple of the average wage in order to afford a suitable mortgage.
Where are the cities with the most affordable homes?
According to recent data from Halifax, these are the cities with the most affordable homes (including the price-to-earnings ratio followed by the average house price):
- Londonderry, Northern Ireland (4.7, £155,917)
- Carlisle, North (4.8, £163,232)
- Bradford, Yorkshire and the Humber (4.8, £164,410)
- Stirling, Scotland (5.4, £208,927)
- Aberdeen, Scotland (5.4, £205,199)
- Glasgow, Scotland (5.4, £196, 625)
- Perth, Scotland (5.5, £203,229)
- Inverness, Scotland (5.6, £191,840)
- Hull, Yorkshire and the Humber (5.6, £156,424)
- Dundee, Scotland (5.8, £181,150)
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Where are the cities with the least affordable homes?
Next up are the least affordable cities for buying homes. You’ll notice that the figure for the price-to-earnings ratio is much higher in this list:
- Winchester, South East (14.0, £630,432)
- Oxford, South East (12.4, £486,928)
- Truro, South West (12.1, £356,788)
- Bath, South West (12.1, £476,470)
- Chichester, South East (10.6, £446,899)
- Cambridge, East Anglia (11.9, £482,300)
- Brighton and Hove, South East (11.6, £449,243)
- London, South East (11.0, £564,695)
- St. Albans, South East (10.2, £604,423)
- Chelmsford, South East (10.2, £424,690)
What does this tell us about how affordable city homes are?
The coronavirus pandemic has created somewhat of a mass exodus from certain cities. Many of us are looking for more space, and that’s something that’s in short supply in the hustle and bustle of a city.
Overall, cities are actually becoming more affordable than average UK figures. This is perhaps due to people’s changing attitudes about where they want to live. However, buying a city home will still cost buyers roughly 8.1 times their average earnings. This is up from 5.6 times their average earnings just a decade ago.
Halifax also calculate that the average house price in UK cities has gone up by 10.3% in the past year. This is compared to an average earnings increase of just 2.1% in the same time period last year. So it looks like house prices are definitely outstripping wage growth and becoming even less affordable for some.
