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UK houses lost value in real terms in 2025 and significantly underperformed equities, according to new research by Rathbones, one of the UK’s leading wealth and asset management groups.
Its annual report, “Don’t Bet the House”, which compares gains from investing in residential property with typical stock market portfolios, warns property is no longer a reliable investment for people seeking short or mid-term growth.
Over the past year, UK house price growth has continued its slump, rising just 1.7% - only half the pace of inflation. Whereas a simple investment mix of 25% UK equities and 75% international equities rose by 11.8% before dividends, Rathbones analysis showed.
This is not a one-year wobble. 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.
Adam Hoyes, Senior Asset Allocation Analyst and author of the research, 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.
It notes a particular collapse in London, where house prices fell in 17 of the 32 boroughs in 2025, a total 1.7% fall across the capital. This masks dramatic falls in some places, such as Westminster, Kensington and Chelsea, where prices plunged 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.”
“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, given their common role in financial planning. 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.
In its first “Don’t Bet the House” analysis of investment in residential housing versus invested portfolios last year, Rathbones concluded that there was a golden age of property investing in the UK, from the mid 1980s, when returns exceeded other investments over thirty years. Longer-term trends however, before and since, lacked the policy and economic drivers of this growth, resulting in more sluggish growth.
