"This is not a one-off, rather it extends a poor run for UK house prices going back almost a decade"
- Adam Hoyes - Rathbones
People hoping to fund their retirement through property investment have been warned not to rely on bricks and mortar, after new research found UK house prices lagged behind inflation and significantly underperformed the stock market last year.
The annual "Don't Bet the House" report from Rathbones, one of the UK's leading wealth and asset management groups, compares returns from residential property with those of typical investment portfolios. It concludes that property is no longer a reliable option for those seeking growth over the short to medium term.
UK house prices grew by just 1.7% over the past year, only half the pace of inflation. By contrast, a portfolio made up of 25% UK equities and 75% international equities rose by 11.8% before dividends, according to Rathbones' analysis.
This isn't simply a one-year blip. Once adjusted for inflation, the average UK home was worth less in 2025 than it had been in 2016, meaning the proceeds from a typical house sale would buy less now than they would have done almost a decade ago.
"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," said Adam Hoyes, senior asset allocation analyst and author of the research.
"This is not a one-off, rather it extends a poor run for UK house prices going back almost a decade."
The report builds on Rathbones' 2025 analysis, examining recent housing market performance alongside fresh pressures on prices. These include slower growth in real incomes, higher mortgage costs, and a tougher tax and regulatory environment for buy-to-let investors.
London has seen a particularly sharp downturn. House prices fell across 17 of the capital's 32 boroughs in 2025, contributing to an overall fall of 1.7% across London. The picture varies considerably by area, however:
- Kensington and Chelsea saw prices plunge by 14%
- Westminster recorded a fall of 7%
- Other boroughs saw smaller declines or modest growth
"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," said Charlie Newsome, senior investment director at Rathbones. "Right now, residential property isn't seen as a driver of wealth for later life and retirement for most people."
He added that the cultural attachment to housing remains strong, but that long-term thinking is essential. "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."
The research also looked at house prices across the 25 local authorities in England with the highest concentration of second homes, given their frequent role in retirement and financial planning. Of these, 19 recorded price falls in 2025, compared with a national figure of 26%. By the first quarter of 2026, that number had risen to 20 of the 25 areas.
Last year's inaugural "Don't Bet the House" report identified a golden era for property investment stretching from the mid-1980s, during which housing returns exceeded those of other asset classes over a thirty-year period.
However, both before and after that period, returns have been more sluggish, lacking the policy and economic conditions that drove that earlier growth.
