Where to live: Most expensive and least affordable UK cities in 2021

Highlights 

• Halifax, the UK’s leading mortgage lender, revealed the list of most and least affordable cities in the UK.
• Winchester was named as the least affordable city in the UK to buy a house with PE ratio of 14, replacing Oxford.
• The most affordable city to live is Londonderry in Northern Ireland, retaining its position for the three years in a row

The UK’s least and most affordable cities out of 61 cities this year was revealed by Halifax, the country’s leading mortgage lender, analysed the average house prices and earning for a year ending June 2021. The report suggests some of the cities actually become more affordable in the pandemic. 

Winchester has become the least affordable city in UK to buy a house, replacing Oxford. In Winchester, the property prices average 14 times people’s annual earning. A house in Winchester will cost buyers an average £630,432, up by 8% as compared to 2020, while the average earning, though notably higher than for the UK, is £45,059.

The second most expensive city in 2021 was Oxford, which saw the average house prices rise to £486,928 up by 2%, with a Price-to-earning (PE) ratio of 12.4. PE is the number, which is based on the average house price in that city compared to the average annual earnings.  The Oxford was the most expensive city in 2020. Truro and Bath, both with PE ratios of 12.1, were at third after the average house prices rose by 18% and 17%, respectively, over the past year.

Also read: Top 10 FTSE real estate investment trusts stocks to hold for long term

The fifth most expensive city, Chichester saw the average house prices to £446,899 with PE ratio of 10.6.

For the first time in six years, London was listed in the top five most expensive places to live but in 2021 it secured eighth position with the average house prices rose by 5% to £564,695, with a PE ratio of 11.0. While earning increased by 4% to £51,257.

Most affordable place

The most affordable place to live is Londonderry in Northern Ireland, retaining its position for the three years in a row, where the average house price was £155,917 and a Price-to-earning (PE) ratio was 4.7, while earnings was recorded at £33,138.

Most Expensive And Least Affordable Cities In the UK

The ranking has been done according to the cities Price-To-Earnings ratio (PE)

The top 20 most affordable cities in UK

Top 20 least affordable Cities of UK

With the PE ratio of 4.8, both Carlisle and Bradford secured the second position for the most affordable cities in UK with 13% increase in average earning last year to £34,087 and £34,219, respectively. The fourth position is secured by Stirling, Aberdeen and Glasgow, all with a PE ratio of 5.4. 

Of the most reasonably priced cities to live in, all have median house prices below £287,440, except for Hereford, where the house prices were £316,929.

Hereford is the most expensive cities out of the 20 most affordable cities in UK with PE ratio of 6.6 and average earnings of £48,048, almost £10,000 above the UK average.

Research also showed that the city house prices in 2021 have increased by 10.3% to £287,440, but the earning in the same cities only increased by 2.1% to £35,667.

Also read: Halifax launches 0.83 per cent mortgage rate amidst heated price war

In the UK, homebuyers now have to spend 8.1 times more than their average salary, from 7.5 in 2020, according to Halifax’s findings. This is a sharp increase compared to last 10 years ago, when buyers have to spend just 5.5 times of their earning to purchase a house.  

Overall cities are marginally more affordable than the average for the UK as a whole, which has a PE ratio of 8.5 (UK average house price: £327,691, average earnings: £38,600).

Russell Galley, Managing Director of Halifax, said that affordability in North UK is significantly better while in south UK there are only two cities, Plymouth and Portsmouth, with better than average affordability. 

In 2021, the gap between PE for cities and all UK homes increased to its widest point, of 0.43.

This widening over the last 12 months may reflect home-movers looking for more space to accommodate homeworking during the pandemic.

In a nutshell

Seven cities saw housing affordability improve in the last year. Oxford and Carlisle saw the greatest PE improvement, with falls of 0.79 and 0.73, respectively. Portsmouth, Durham, Salford, Inverness, and Glasgow also had falls in PE ratio, compared to 2020. Additionally, both Carlisle and Aberdeen are now more affordable than five years ago, with their PE ratios easing from 5.7 to 4.8 and 5.4, respectively.

Inverness is the only city to be more affordable than 10 years ago. The Scottish city’s average home now costs 5.6 times average earnings (6.2 in 2011) thanks to wage growth (28%) outstripping its low house price growth (15%).