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.
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)
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.