Aug
16

Price to Earnings ratio increases for city homes

It has been widely reported that house prices have been steadily increasing, with an average rise of over 10% in the last year alone. However, the rate of earnings growth has been much lower at around just 2% and this has significantly impacted affordability for many UK city areas. To give some perspective to this gap, it equates to a price to earnings (PE) ratio of 8.1, in simple terms, this means that an average UK city home costs over eight times the average salary. This gap has been growing wider for some time and 10 years ago, the average house cost 5.6 times more than the average salary. The least affordable UK city is now Winchester, with homes costing 14 times the average salary, and conversely, Londonderry (N Ireland) is the most affordable, having a PE ratio of 4.7. This is closely followed by Carlisle and Bradford with a ratio of 4.8. To add some context, the average house price in Winchester is £630,432 and in Londonderry it is £155,917. Across the UK, the average house price is £327,691 and the average salary is £38,600.
Read more from Lloyds Banking Group here.