UK house prices lose value in real terms as property trails investment returns, says Rathbones – The Intermediary
UK house prices lost value in real terms during 2025 and continued to underperform equity investments, according to new research from wealth and asset management group Rathbones.
Its latest report, Don’t Bet the House, found that average UK house prices increased by 1.7% over the past year, around half the rate of inflation.
By comparison, a portfolio comprising 25% UK equities and 75% international equities delivered growth of 11.8% before dividends.
The report argues that the weakness in house price growth reflects longer-term structural changes rather than short-term market volatility.
Rathbones said that, after adjusting for inflation, the average UK home is now worth less than it was in 2016, meaning homeowners have seen the real value of their property decline over almost a decade.
Adam Hoyes, senior asset allocation analyst at Rathbones and author of the report, 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 identified slower real income growth, higher mortgage costs and a more challenging tax and regulatory environment for buy-to-let investors as key factors weighing on the housing market. London was highlighted as a particular area of weakness, with house prices falling across 17 of the capital’s 32 boroughs during 2025.
Overall prices in London declined by 1.7%, with Westminster and Kensington and Chelsea recording falls of 14% and 7% respectively.
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.”
He added: “Houses have a special role in British attitudes to wealth. But we need to think long term for our clients, helping them navigate economic shifts in order to still meet their goals.”
The report also examined the 25 English local authorities with the highest concentration of second homes and found that these areas have experienced disproportionately weak performance. Nineteen of the 25 recorded house price declines during 2025, rising to 20 of 25 by the first quarter of 2026.
