Residential property is no longer a dependable route to building wealth for retirement, according to latest research from wealth manager Rathbones.
Its latest Don’t Bet the House report argues that UK house prices have entered a prolonged period of underperformance, with property delivering lower returns than both inflation and stock market investments.
The analysis found that UK house prices rose by just 1.7% during 2025, around half the rate of inflation. Over the same period, a simple investment portfolio comprising 25% UK equities and 75% international equities returned 11.8% before dividends.
Rathbones also found that, after adjusting for inflation, the average UK home was worth less in real terms in 2025 than it was in 2016.
STRUCTURAL CHALLENGES
The report suggests the challenges facing the housing market are structural rather than cyclical, citing weaker income growth, higher mortgage costs and a tougher tax and regulatory environment for landlords and buy-to-let investors.
London has been particularly hard hit. House prices fell in 17 of the capital’s 32 boroughs during 2025, with Westminster recording a 14% decline and Kensington and Chelsea seeing values fall by 7%.
The research also examined England’s second-home hotspots, finding that 19 of the 25 local authorities with the highest concentration of second homes recorded house price falls during 2025.
Adam Hoyes (main picture, inset), Senior Asset Allocation Analyst at Rathbones and author of the report, says: “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.”
BUY-TO-LET EXIT
Charlie Newsome, Senior Investment Director at Rathbones, adds: “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. But we need to think long term for our clients, helping them navigate economic shifts in order to still meet their goals.”
Rathbones says the strong returns enjoyed by property investors during the housing boom from the mid-1980s onwards should no longer be taken as a guide to future performance, warning that the economic and policy conditions that fuelled those gains have largely disappeared.
