Golden age of house price growth is over, economists claim
The wealth manager Rathbones assessed the performance of stocks and shares versus house prices over the past century, and concluded that the boom years of bricks and mortar are now behind us.
Since 2016 it found the price of residential property had barely kept up with inflation, rising at an average of 3.7 per cent per year.
In London, where buyers previously enjoyed the biggest gains, housing did even worse, with house prices rising at just 1.3 per cent a year.
This meant they under-performed inflation by 2.2 percentage points each year.
Those who bought property between the 1980s and early 2010s have benefited from the biggest gains.
Between 1980 and 2016, house prices rose at a rate of 6.7 per cent annually, and 8.5 per cent in London - well ahead of inflation.
End of the boom? Average house prices outside London have only just kept pace with inflation since 2016, in contrast to the preceding three decades
How do stocks and shares compare to property?
Since 2016, stock markets have risen significantly faster than property prices, according to the research.
The Rathbones economists found that £100 invested in UK property in 2016 would have been worth £134 in 2024.
If the same amount had been invested in an indicative portfolio of 25 per cent UK and 75 per cent international equities, that would rise to £174.
Meanwhile, £100 invested in London property in 2016 would have increased to just £111 in 2024 on average.
'The idea that you can't go wrong with bricks and mortar just isn't true,' said Oliver Jones, head of asset allocation at Rathbones.
'The data shows that diversified global investment has put to shame returns from housing over the last decade – and we believe this trend will continue.'
This, he said, is largely down to rising interest rates in recent years.
'The earlier boom in house prices was fuelled by factors which no longer hold,' Jones continued.
'The huge decline in interest rates from their generational high in the early 1980s won't be repeated.
'Homebuilding is rising after decades of very low rates, and government policy has become progressively less favourable to investors in residential property since the mid-2010s. The idea that money is safest in houses simply is not true any more.'
Looking back over more than a century, Rathbones found the average house price hovered around four times average annual earnings between 1910 and the late 1990s.
However, after 2000 this more than doubled, with house prices rising to as much as eight times average earnings, leaving property much more expensive for the typical buyer.
The old idea that property will always deliver is for the birds, and we strongly recommend taking advice
Further, after decades of low interest rates, global instability has created volatility in financial markets and fuelled inflation, pushing up mortgage interest rates.
This has further impacted affordability for most first-time buyers and reduced the appeal of buy-to-lets and second homes used for holiday lettings bought using mortgages, acting as a drag on house prices.
Ade Babatunde, associate financial planning director at Rathbones. added: 'We're being asked by many people who own second properties and buy-to-lets whether the time has come to sell up and invest their money instead.'
'This research should be a wake up call to anyone relying on property to support their financial ambitions, especially when thinking about retirement or succession planning.
'The old idea that property will always deliver is for the birds and we strongly recommend taking advice.'
How to find a new mortgage
Borrowers who need a mortgage because their current fixed rate deal is ending, or they are buying a home, should explore their options as soon as possible.
Buy-to-let landlords should also act as soon as they can.
Quick mortgage finder links with This is Money's partner L&C
> Mortgage rates calculator
> Find the right mortgage for you
What if I need to remortgage?
Borrowers should compare rates, speak to a mortgage broker and be prepared to act.
Homeowners can lock in to a new deal six to nine months in advance, often with no obligation to take it.
Most mortgage deals allow fees to be added to the loan and only be charged when it is taken out. This means borrowers can secure a rate without paying expensive arrangement fees.
Keep in mind that by doing this and not clearing the fee on completion, interest will be paid on the fee amount over the entire term of the loan, so this may not be the best option for everyone.
What if I am buying a home?
Those with home purchases agreed should also aim to secure rates as soon as possible, so they know exactly what their monthly payments will be.
Buyers should avoid overstretching and be aware that house prices may fall, as higher mortgage rates limit people's borrowing ability and buying power.
What about buy-to-let landlords
Buy-to-let landlords with interest-only mortgages will see a greater jump in monthly costs than homeowners on residential mortgages.
This makes remortgaging in plenty of time essential and our partner L&C can help with buy-to-let mortgages too.
How to compare mortgage costs
The best way to compare mortgage costs and find the right deal for you is to speak to a broker.
This is Money has a long-standing partnership with fee-free broker L&C, to provide you with fee-free expert mortgage advice.
Interested in seeing today's best mortgage rates? Use This is Money and L&Cs best mortgage rates calculator to show deals matching your home value, mortgage size, term and fixed rate needs.
If you're ready to find your next mortgage, why not use L&C's online Mortgage Finder. It will search 1,000's of deals from more than 90 different lenders to discover the best deal for you.
> Find your best mortgage deal with This is Money and L&C
Be aware that rates can change quickly, however, and so if you need a mortgage or want to compare rates, speak to L&C as soon as possible, so they can help you find the right mortgage for you.
Hashtags
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
Finextra
13 minutes ago
- Finextra
How ISO 20022 is Aiding a Frictionless Future
Attending EBAday 2025 in Paris, Vitus Rotzer, Chief Product Officer - Financial Messaging, Bottomline, took some time out to speak to FinextraTV about the state of the payment industry in 2025. Referring to ISO20022 as "the glue in the middle of everything", Rotzer describes an industry that is evolving, rather than just changing, with a focus on better compliance, reduction of friction, and a progression towards a cashless society. Rotzer also describes how, in finding an answer to their current challenges, customers are looking for a SaaS solution that allows them to manage multiple rails and fraud initiatives from a more holistic, interconnected position.
Finextra
13 minutes ago
- Finextra
LHV becomes first UK bank to join RT1 platform directly
LHV Bank SEPA Instant participation begins as it becomes the first UK bank to join the RT1 platform directly. 0 This milestone enhances LHV's cross-border payment offering and makes real-time euro payments possible through SEPA Instant. While other UK institutions facilitate access to euro payments through the RT1 scheme, they do so via indirect access, limiting them to serving end users without the ability to offer payment services to other financial institutions. LHV's new direct integration with the SCT scheme sidesteps those constraints and allows it to offer seamless connection to the SEPA network. This direct participation reaffirms LHV Bank's position in the European payments landscape and enhances its cross-border capabilities, allowing it to offer more efficient, cost-effective, and scalable payment services by removing the need for correspondent banking relationships or third-party intermediaries. Erki Kilu, CEO of LHV Bank, commented: 'This is a technical upgrade and strategic step forward. We're helping to shape the next generation of cross-border payments, and direct participation in SCT Instant strengthens our standing as a trusted partner for fintechs and internationally focused businesses.' The announcement follows a series of recent milestones for LHV Bank, including launching retail banking to the UK market in May, and being selected as one of the Sunday Times' Best Places to Work and winning two awards at the ICA Compliance Awards in June. With LHV Bank SEPA Instant integration via RT1, the bank maintains its position as a leader in European real-time settlements while providing scalable, effective payment services.
The Independent
13 minutes ago
- The Independent
Are you among the 82% of self-employed people who don't pay into a pension? Here's how to take charge
If you're self-employed, when was the last time someone talked to you about pensions? Chances are, probably not very recently. However, research from NEST Insights shows that more than half of self-employed people in the UK - which includes freelancers, sole traders and limited company owners - are on track to experience retirement poverty. This compares to just a quarter of full-time employees. According to the Pensions and Lifetime Savings Association, the new state pension (£11,973 a year) isn't enough to meet the minimum standard of living of £13,400 a year for a single person, and only just meets the minimum standard for a couple (£21,600 a year) living outside London. Why have self-employed people been left behind with pensions? There has been a dramatic drop in pension saving among the self-employed in the last few decades. Back in 1998, 60 per cent of self-employed people earning at least £10,000 a year were paying into a private pension. By 2025, that figure had collapsed to just 18 per cent, despite almost 75 per cent of this group saying they want to save for retirement. Meanwhile, auto-enrolment has consistently boosted pension savings among employees. When it launched in 2012, around 47 per cent of employees were enrolled in workplace pensions. By 2024, that figure had grown to about 80 per cent. Would auto-enrolment participation be anywhere near 80 per cent if employees had to do it all manually? It seems unlikely. For the self-employed, there are no monthly contributions quietly being deducted from your earnings before you even notice them. You need to manually save into your pension by transferring money from your bank account, or setting up direct debits. However, other NEST research has found 57 per cent of self-employed people would prefer putting money into a mix of illiquid savings (funds locked away until retirement) and liquid savings (cash that is easily accessible) when saving for retirement. This type of hybrid account structure isn't currently available within one product. Self-employed people can still make a difference to their futures, though - without jeopardising their short-term money needs. For example, £2 invested every day into a private pension could become just under £12,000 after 10 years, about £31,000 after 20 years, and about £62,000 after 30 years (for basic-rate taxpayers). An additional £60,000 can give you £250 more to live on each month for 20 years, on top of the State Pension (discounting inflation and other economic factors). The main pension options for self-employed people at present are: 1. SIPP (Self-Invested Personal Pension) - This is a DIY pension that gives you access to a wide choice of shares, funds and ETFs. You get 20 per cent tax relief on contributions as a basic rate payer. 2. Managed or personal pension - If managing your own investments sounds like a chore, go for a provider that does it for you. These pensions, which are usually marketed as 'personal' or 'managed' pensions, adjust your portfolio based on market conditions and other macroeconomic factors. It's a great 'set-it-and-forget-it option' for busy freelancers and small business owners. You get the same tax relief as with SIPPs and can often choose your personal risk tolerance level. 3. Lifetime ISA (LISA) - If you're under 40, opening a LISA is an option. This includes a 25 per cent government bonus on top of every contribution you make until you turn 50. That means there's up to £1,000 up for grabs each year with a maximum contribution of £4,000. Unlike a pension, LISA withdrawals after age 60 are tax-free but there are factors to be aware of including withdrawal penalties. For a more detailed LISA vs personal pension comparison, read here. 4. Paying through your limited company - If you run a limited company, you can make pension contributions directly from your business as an allowable expense, which can reduce your corporation tax bill. This is often the most tax-efficient way for company directors to save for a pension, especially if you pay yourself with dividends. Expert pensions tips for the self-employed Sarah Pennells, consumer finance specialist at Royal London, has four key tips. Firstly, treat your pension contributions as a must-pay. 'Set aside a regular sum every month to pay into a pension. If it helps to motivate you, treat the money you pay into your pension like any other bill,' Ms Pennells says. It's also important to understand the tax benefits, especially if you're a higher-rate taxpayer: 'If you run a limited company, making pension contributions through the limited company will reduce your company's taxable profits.' You also don't have to stop with monthly payments - bulk dropping a bonus can supercharge your pension. 'If regular saving is tough, aim to make one-off contributions after higher-earning periods, such as at the end of a project, or as you're approaching the end of the tax year,' she adds. Finally, do set a clear retirement goal. 'Knowing what you want your retirement to look like makes it easier to plan. Use online pension calculators to check if you're on track- it can help keep you motivated. The key question to ask yourself is: what will you live on when you retire if you don't have a pension?' When investing, your capital is at risk and you may get back less than invested. Past performance doesn't guarantee future results.
