Bricks and mortar do not always deliver real returns. Did house prices rise faster than inflation between January 2016 and January 2026? The chart below tells the story.
Source: Nationwide, ONS
Nationwide Building Society reports that the average UK house price in January 2016 stood at £196,829. Ten years later, by January 2026, this had risen to £270,873, an increase of 37.6%. Over the same period, however, inflation ran slightly ahead, with the Consumer Prices Index (CPI) rising by 40.2%.
If that outcome comes as a surprise, it may be because memories are dominated by the sharp and unexpected surge in house prices during, and immediately after, the Covid‑19 pandemic, overshadowing the far more subdued performance that followed. In the three years from January 2023, average house prices rose by just 4.9%, while CPI increased by 10.4%.
Ironically, the recent slowdown in house price growth is itself partly a consequence of elevated inflation. One of the most significant brakes on the market has been the series of interest rate increases introduced by the Bank of England in an effort to curb inflation, which peaked at over 11% in October 2022. Prior to June 2022, the Bank Rate had not exceeded 1%. As many homeowners approaching the end of a five‑year fixed‑rate mortgage are now discovering, higher interest rates, compounded more recently by the Iran war, have made borrowing far more expensive than it was five years ago.
A period of near‑flat house prices, combined until recently with falling mortgage rates, offered some modest relief for first‑time buyers. However, the picture has been far less favourable for buy‑to‑let investors. Property website Zoopla reported that at the start of the year, average enquiries per rental property were at their lowest level since 2019, and around 20% lower than in January 2025. Weaker demand has fed through into slowing rental growth, with annual rents rising by 3.1%, down from 7.8% a year earlier, according to the Office for National Statistics. In England, buy‑to‑let landlords are also preparing for the introduction of the Renters’ Rights Act, which from 1 May 2026 will abolish so‑called “no‑fault” evictions under section 21.
Buying and owning your own home generally remains a sensible long‑term decision. However, it is worth being cautious about treating property as the only investment you will ever need.
The value of investments and the income from them can fall as well as rise, and investors may not get back the full amount they originally invested.
Past performance is not a reliable indicator of future performance.
8th May 2026
