Zoopla’s UK Cities House Price Index for July 2019 focuses on trends in housing affordability as measured by the ratio of house prices to average earnings at a city and national level.
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 (9.9x).
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 7.5x to 9.7x, 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.
| City | Current price – July 2019 | %yoy Jul-19 | Average annual earnings – single earner | Price to earnings ratio 2019 Q2 |
| London | £483,100 | 0% | £37,100 | 13.1 |
| Cambridge | £427,900 | 0% | £34,900 | 12.2 |
| Oxford | £405,600 | 0% | £33,900 | 11.9 |
| Bournemouth | £293,100 | 1% | £30,000 | 9.7 |
| Bristol | £280,300 | 1% | £30,500 | 9.2 |
| Portsmouth | £238,200 | 1% | £30,400 | 7.9 |
| Southampton | £228,500 | 1% | £30,500 | 7.5 |
| UK | £220,500 | 2% | £33,000 | 6.7 |
Richard Donnell, Research and Insight Director at Zoopla said, “Housing affordability is slowly starting to improve in London as earnings growth outstrips house price inflation. There has been a clear downward trend in the ratio of house prices to average earnings over the last 2-years.
“However, the scale of improvement is relatively modest. While welcome news, the gap between earnings and prices needs to close further in order to make a material difference to would be purchasers. The changing picture is not limited to London.
“There are 12 cities where the annual growth in house prices is below the growth in average earnings which is running at 3.7%. Lower-priced cities in northern England are actually getting less affordable than their southern counterparts when you consider that the annual percentage growth in house prices is outstripping earnings growth.”
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