Equities have performed six times better as house price growth slows
Residential property is no longer a reliable investment for people seeking short or mid-term growth, with UK house prices lagging inflation and invested portfolios in the past year and equities performing six times better, according to research from Rathbones.
It says that second-home hotspots and London were disproportionately hit, leaving investors reliant on properties for their retirement income vulnerable.
Its report, “Don’t Bet the House”, compares gains from investing in residential property with typical stock market portfolios. It found that UK house price growth has risen only 1.7% – half the pace of inflation. However, a simple investment mix of 25% UK equities and 75% international equities rose by 11.8% before dividends, according to its analysis.
The research also showed that after adjusting for inflation, the average UK home was worth less in 2025 than in 2016, with the proceeds of a typical house sale buying less than they would have nearly a decade earlier.
A structural shift
Adam Hoyes, senior asset allocation analyst at Rathbones and the report’s author, said: “We believe there’s been a structural shift, with recent performance reflecting weakness in the drivers of UK house prices rather than short-term volatility. This is not a one-off; rather it extends a poor run for UK house prices going back almost a decade.”
The report built on Rathbones’ 2025 analysis and examined recent performance of the UK housing market and fresh factors shaping UK house prices, including slower real income growth, higher mortgage costs and a more demanding tax and regulatory environment around buy-to-let investments.
In London, house prices fell in 17 of the 32 boroughs in 2025, a total 1.7% fall across the capital. Prices fell 14% and 7% in Westminster and Kensington and Chelsea respectively.
Landlords selling up
Charlie Newsome, senior investment director at Rathbones, said: “We’re seeing many people selling their buy-to-let and other rental properties because they no longer make sense as short to medium-term investments, and they are putting that money into invested portfolios instead. Right now, residential property isn’t seen as a driver of wealth for later life and retirement for most people.”
“Houses have a special role in British attitudes to wealth,” he continued. “But we need to think long term for our clients, helping them navigate economic shifts in order to still meet their goals.”
Rathbones’ new research also examined house prices in the 25 local authorities in England with the highest density of second homes. It found that areas with high concentrations of second homes have also seen prices fall disproportionately, with 19 of the 25 recording declines in 2025, compared to 26% nationally. This had risen to 20 of 25 by the first quarter of 2026.