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Owning a city home is more affordable

The dream of home ownership has become more attainable for city dwellers, according to the Lloyds Bank Affordable Cities Review. This has revealed that home affordability has improved in the majority of UK cities over the past five years.

The average price for a city home in the UK now stands at £184,215 – 5.8 times gross annual average earnings, and down from 6.1 in 2009 and nearly 20% below the peak of 7.2 in 2008.

However, the Review warns that in the past year there has been a deterioration in affordability in cities, driven by rising house prices across the country. The average UK city house price has risen by just over 5%, from £175,060 in 2013 to £184,215 in 2014. This has resulted in overall affordability slightly worsening in the last 12 months from 5.6 to 5.8 times gross average earnings.

There is still evidence of a clear north-south divide when it comes to UK house prices. The top 15 most affordable cities for homebuyers are in Scotland, Northern Ireland or the North of England, and the next five on the list are in the Midlands or Wales. At the other end of the spectrum, the 17 least affordable cities are all in southern England, with Lichfield, Leicester and York completing the top 20.

Living in the city has also become more affordable than across the UK as a whole, as the UK average house price to earnings ratio stands at 5.9, compared to 5.8 in UK cities. This is driven by higher wages earned in UK cities, as house prices in UK cities are on average 7% (£12,730) higher than their respective county averages.

“Over the last five to ten years, affordability has marginally improved in most UK cities, as increases in earnings have kept up with house price rises in that time,” explained Marc Page, Lloyds Bank mortgages director. “However, the economic and lifestyle benefits often associated with residing in cities are continuing to drive demand, especially in the south of England.”

“With city house prices continuing to rise, affordability deteriorated slightly last year, but the trend since 2009 is positive for the majority of UK cities,” he added.

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