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Affordability Improving in The Most Expensive Cities

Zoopla’s UK Cities House Price Index for July 2019 revealed that weak house price growth and continued growth in average earnings means housing affordability is starting to improve across the highest value markets where affordability levels have been most stretched.

This trend has accelerated as areas register localised price falls and earnings growth accelerates, reaching +3.7% in June 2019 according to the Office for National Statistics.

In London the average house price (£483,100) now stands at 13.1x the average Londoner’s earnings, a return to levels last seen in June 2015. This is down from a high of 14.1x two years ago (June 2017). Despite this modest improvement, the London ratio today remains well ahead of the 20-year house price to earnings ratio average of 9.9. With average annual earnings in London now £37,100, to reach a ratio of 9.9, average house prices would need to fall by around 24% to £367,300.  

In other expensive cities, Cambridge and Oxford, where house prices now sit at 12.2x and 11.9x average earnings respectively, there has been a similar improvement, with affordability levels back to those seen in mid-2015. The southern cities of Bournemouth, Southampton, Portsmouth and Bristol, which have the next highest affordability ratios of 7.5 to 9.7, have recorded a small decrease in the house price to earnings ratio since 2016 as price growth has dropped below the growth in average earnings.

Across the UK, the average house price to earnings ratio is 6.7, with the current average property price being £220,500 (up 2% in the past 12 months) and average annual earnings of £33,000.

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