The premium that homebuyers are required to pay to live in one of the UK’s cities has risen to its highest level on record, according to new Halifax research.
It found that house prices in cities across the UK are, on average, 7% (£14,462) higher than their county average, the highest premium since its records began in 1983.
56% of UK cities have a higher average house price than their county average. Seven of the 10 cities with the highest premium are in the south. Winchester has the largest premium with houses trading at 77% above the average house price in Hampshire. Westminster has the next highest premium with prices 74% above the Greater London average. Lichfield in Staffordshire has the highest premium (58%) outside southern England.
However, there are some notable exceptions to this with the three cities that are most affordable relative to their county average also located in southern England (Portsmouth, Gloucester and Plymouth). The city with the biggest discount to its county average is Portsmouth, where the average house price of £141,871 is 31% (£63,344) below the Hampshire average.
The average house price across the tracked UK cities rose by 65% (£68,236) over the past decade, moving from £104,681 in August 2001 to £172,917 in August 2011- equivalent to a weekly increase of £131. House prices across the UK as a whole increased by 56% over the same period.
Inverness – awarded city status in 2000 to mark the new millennium – recorded the highest rise in house prices over the decade (148%), followed by Truro (121%) and Hull (119%). Nine of the 10 cities with the strongest house price growth are outside southern England.
House prices in city locations also experienced smaller house price falls during the downturn in the housing market. City property prices fell, on average, by 17% between 2007 and 2009 compared to an overall fall of 24% across the UK. Over the past year, city house prices have declined by 2.5%, lower than the 4.3% drop in the average UK house price.
The typical city home is 5.2 times average gross annual earnings in 2011, up from an average multiple of 4.8 in 2001, demonstrating how prices have risen more rapidly than earnings. There has, however, been a recent improvement in affordability with the average price to earnings ratio falling from a peak of 7.4 in 2007.
Suren Thiru, housing economist at Halifax, said: “With the housing demand and supply imbalance that characterises the UK property market often more acute within our major urban conurbations