Inflation wipes out 24 years of house price growth
Inflation wipes out 24 years of house price growth
Melissa LawfordSat, November 14, 2026 at 5:00 PM UTC
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The downturn is most pronounced in London, where foreign buyers have dried up and stamp duty rates have become increasingly punitive - EPA/Shutterstock/Andy Rain
The average value of a British home is now less than it was 24 years ago as inflation eats away at nationwide property wealth.
New data show that the average property has shed nearly £63,000 in value over the past five years after adjusting for inflation.
Real-terms property prices fell to £276,157 between July and September, according to Nationwide Building Society, down 2pc compared to the previous three months and 19pc lower than the most recent market peak in 2021.
In today’s prices, this was the lowest value recorded since the end of 2002 and was down by nearly £98,000 compared to the record level set in 2007, just before the financial crisis.
While the figures show that homes are still worth more than they were 24 years ago in cash terms, rising inflation means the value of that cash does not stretch as far.
It comes after inflated mortgage rates, which have more than doubled in the last five years, have hit buyer demand just as the Government’s buy-to-let crackdown pushes landlords to sell up.
Economists have warned that the fall in value signals the end of residential property as an asset class.
Paul Cheshire, an emeritus professor at the London School of Economics and a former government adviser, previously told The Telegraph: “Houses are not in any decent sense assets.
“They are certainly not investment assets. [That idea] is a bit of a self-deception.”
Dwindling property values mean many homeowners face no longer making a profit, and are instead burdened by a financial millstone.
The downturn is most pronounced in London, where foreign buyers have dried up and stamp duty rates have become increasingly punitive.
Chris Sykes, co-founder of mortgage brokerage MSP Financial Solutions, warned that many former first-time buyers were stuck in flats they cannot sell.
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Mr Sykes said: “Generally it is people who bought five to 10 years ago who are the ones getting caught out by this.”
He noted a couple who were trying to sell a studio flat in east London that has fallen by 20pc since they bought it six years ago.
“It seems like half the people in the block want to sell at the same time so it is a race to the bottom,” he added. “They are pretty much in zero equity on it. By the time they have covered fees, they will be paying money to get out of it.”
Particularly in the capital, buyers are able to negotiate large discounts on flats.
“Some people are desperate to sell,” Mr Sykes said.
He noted a flat in north-east London that was first listed at £550,000 but had gone under offer at £480,000 – a 13pc price cut.
Theoretically, lower house prices in proportion to earnings should mean that homes are becoming more affordable to buy.
However, rising mortgage rates caused by a recent spike in inflation mean that, for anyone who is not buying with cash, homes have become more expensive to buy.
Figures from the Bank of England show that the average rate on a new two-year fixed-rate mortgage taken out in September was 4.72pc, up from 4.07pc.
This has added £888 to the annual cost of taking out a typical £200,000 loan.
Nationwide’s house price index is based on the lender’s own mortgage approvals data and tracks the price of a representative “typical” property over time.
This means its index is not skewed by changes in the types of properties sold in a given month. Its real house price index is adjusted in line with the Office for National Statistics’ retail price index (RPI).
Source: “AOL Money”
