THE longstanding obsession with property as a means of building wealth in the South and East of England is increasingly outdated, as today’s house buyers are unlikely to match the gains enjoyed by past generations, Rathbones, a leading UK wealth and asset manager, concludes in new research.

Researchers and economists at Rathbones analysed the relative performance of equity investment and housing in those regions, broadly over the past century. The report, ‘Don’t Bet the House’, concludes that the boom years in property investment which lasted from the 1980s to the mid-2010s are now over.

Analysing house prices in the South West, South East and East of England since 2016, researchers at Rathbones found that residential property rose by just 3.7 percent, 2.6 percent and 2.8 percent per year, on average between 2016 and 2024.

This means that the average house price in the latter two regions failed to beat inflation, and in the South West, only kept pace with it.

Even in the best performing local areas such as Gloucestershire, Thanet, Cornwall, Hastings, Bath, and the Isle of Wight, which have benefitted from shifting housing preferences after the pandemic, house prices have only risen by 4-4.5 percent per year over nine years since 2016.

That’s less than one percentage point above inflation and slower than even the worst performing parts of the South over the two decades prior.

Many of these areas are also popular holiday-home destinations, leaving second-home owners, including those letting holiday properties, exposed t the same threat of slowing house price growth as buy-to-let investors.

The analysis found that the golden age of property ownership was between 1995 and 2016, during which housing prices in the South West, South East, and East of England rose by 7.2 percent, 7.7 percent and 7.7 percent per year, on average.

By contrast, equities have continued to deliver returns well above inflation. A simple portfolio of 25 percent UK and 75 percent global stocks grew by 7.2 percent per year on average between 2016 and 2024.

“The idea that buying additional properties, whether second homes, holidy or buy to lets, is an effective strategy to save for later life is now questionable, to say the least,” said Alex Clay, Head of Rathbones’ office in Chichester.

“Our research highlights that the earlier boom in house prices was fuelled by factors which no longer hold. We now are seeing many people asking whether it’s time to sell holiday and buy to let properties.

Simon Foster, Investment Director at Rathbones, said: “Clients with holiday homes have faced an additional 100 percent council tax surcharge, rising mortgage and utility bills and, for those using a holiday letting company, higher costs because of the increase in the minimum wage.

On a long-term view, looking back over more than a century across the UK, Rathbones found the average house price hovered around four times average annual earning between 1910 and the late 1990s. However, after 2000 this more than doubled, with house prices rising to as much as eight-time average earnings, leaving property much more expensive for the typical buyer.