The longstanding obsession with property as a means of building wealth in the south of England is increasingly outdated, as today’s house buyers are unlikely to match the gains enjoyed by past generations, a UK wealth and asset manager has found in new research.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 per cent, 2.6 per cent, and 2.8 per cent, per year, on average, respectively between 2016 and 2024. That means 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 benefited from shifting housing preferences after the pandemic, house prices have only risen by 4-4.5 per cent per year over nine years since 2016.

Many of these areas are also popular holiday-home destinations, leaving second-home owners, including those letting holiday properties, exposed to 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 house prices in the South West, South East, and East of England rose by 7.2 per cent, 7.7 per cent, and 7.7 per cent, per year, on average, 

 “The idea that buying additional properties, whether second homes, holiday 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. The huge decline in interest rates from their generational high in the early 1980s is unlikely to be repeated, and we’re working with clients to ensure that nostalgia for a bygone property market doesn’t blind them to the potential of more balanced, modern wealth-building strategies.” 

Simon Foster, Investment Director at Rathbones, says: “Clients with holiday homes have faced an additional 100 per cent council tax surcharge, rising mortgage and utility bills and, for those using a holiday letting company, higher costs as a result of the increase in the minimum wage. In the past, it was acceptable for holiday homes to simply break even, as owners benefited from the capital appreciation of the property. However, with higher running costs, a growing number of second homes failing to sell, and capital gains tax payable on disposal, the appeal of owning such properties for capital return has diminished.”