"Many buy-to-let and additional rental properties, where yields were already razor-thin, have now become unviable as businesses due to the twin pressures of rising interest rates and increasingly burdensome regulation—set against a backdrop of stagnating property prices"
- Charlie Newsome - Rathbones
London’s long reputation as a guaranteed wealth-builder is under pressure, with new research from Rathbones showing that house prices across the capital have failed to keep pace with inflation since 2016.
Between 2016 and 2024, London’s residential property prices grew by just 1.3% a year on average—well below the current 3.8% inflation rate. By comparison, a mixed equity portfolio of 25% UK and 75% global stocks returned an average of 7.2% annually over the same period.
Inner London stagnates
Rathbones’ analysis highlights that in several inner London boroughs, house prices have barely moved in eight years. Wandsworth, Lambeth, Tower Hamlets, Kensington and Chelsea, and Westminster all recorded annual growth of less than 0.5%, while Southwark saw prices fall by 2%.
Outer London fails to outperform
Outer boroughs performed slightly better but still lagged behind inflation. Bexley emerged as the strongest performer with annual growth of 2.8%, a sharp contrast to its earlier position as one of the weakest boroughs. Yet this remains far slower than the 8% growth rate Bexley experienced between 1995 and 2016.
By contrast, London’s golden era of property appreciation stretched from 1995 to 2016, when prices across the capital rose by 9.1% annually—higher than any other UK region and well above the national average of 6.5%. Some boroughs, including Hackney, Southwark, Lambeth, and Westminster, recorded more than 10% growth per year during that period.
Investors reconsider holdings
“Once a haven for property investment, the London property boom is well and truly over. Our research shows that the key factors which once fuelled the meteoric rise in house prices no longer apply,” said Rebecca Williams, Divisional Lead of Financial Planning at Rathbones.
She added: “We’ve also seen a growing number of clients with substantial property portfolios looking to disinvest, amid speculation that a new property tax, such as national insurance on rental income, could be introduced in the upcoming Budget. Such a measure could be the final nail in the coffin for London property as a viable investment.”
The end of an era
Rathbones’ July report, Don’t Bet the House, examined UK property prices over the past century. It found that from 1910 until the late 1990s, house prices typically hovered around four times average annual earnings. From 2000 onwards, that ratio doubled to as high as eight times earnings, stretching affordability to historic limits.
Shifts in the broader economic climate have also weighed on the market. Years of low interest rates have given way to higher borrowing costs, while landlords face greater pressures from rising taxes, stamp duty surcharges, and new legislation, including the forthcoming Renter’s Rights Bill.
“Many buy-to-let and additional rental properties, where yields were already razor-thin, have now become unviable as businesses due to the twin pressures of rising interest rates and increasingly burdensome regulation—set against a backdrop of stagnating property prices,” said Charlie Newsome, Divisional Director at Rathbones.
“It’s no surprise that several of our clients have opted to sell their buy-to-let properties and use the proceeds in ways that better align with their long-term plans—including gifting assets for inheritance tax planning.”
