For some five decades at dinner tables in London and across the land, one subject has never failed to evoke excitement, greed and envy.
The seemingly inexorable rise in the prices of homes, whether in the grandest mansions or former council flats, has invariably led to fevered talk of hotspots and gazumping and venal estate agents – accompanied by the view that nothing is more important than getting your feet on the property ladder.
Those who have managed to buy – whether ordinary working people on modest incomes or prosperous baby boomers – have in many cases enjoyed double-digit house-price increases each year, rises in value worth more than their entire annual salary.
It has been a win, win situation, a one-way bet, and owners have felt safe and happy in the knowledge that whatever happens, they at least have an asset that will then provide financial security in old age.
Not any more, for this week came a stone-cold dose of reality. The estate agent Hamptons released figures showing that nearly 15 per cent of London homeowners sold property at a loss in 2025. And there is no sign of the situation improving any time soon.
As we shall see, a perfect storm of factors is battering the market with such force there are deep concerns it may never recover.
Huge hikes in mortgage costs have forced many to sell up, and stopped others from buying. The Labour government’s grotesquely incompetent handling of the economy means many don’t dare to invest in property.
Vast numbers of those who might have done so – working-age Britons and EU nationals – are fleeing the country in droves because opportunities look brighter elsewhere. According to the Offices for National Statistics, a staggering 693,000 people emigrated from Britain last year, bringing net immigration figures down dramatically with predictions they could soon reach net zero. And the largest share of those leaving were Britons under the age of 45.
Labour’s Sir Keir Starmer and Rachel Reeves may kill off our love of property and silence those dinner party conversations about house prices for good
Meanwhile, the Chancellor’s withdrawal of concessions on Stamp Duty for first-time buyers at the bottom end of the market and her introduction of a mansion tax at the top end have amounted to a calamitous blow. Matters are made worse by her imposition of higher taxes on buy-to-let owners.
In addition, there has been a dramatic fall in the number of foreign buyers, which has laid waste to entire blocks of new-build flats. Developers and financiers see no point in committing tens of millions of pounds to new projects, when no one wants to buy them.
Some 12 years ago a rich Chinese developer called the Greenland Group spent £600million to buy up the Young’s historic Ram Brewery in fashionable Wandsworth in South London to build what was described as a new town centre with some 600 apartments. The flats were snapped up by excitable middle-class Chinese buyers off plan, before they were built. That would never happen today as prices plummet.
In large areas of the capital, including the City of London, Kensington and Chelsea, Westminster and in Hammersmith and Fulham, as many as a quarter of those homeowners who sold property last year lost money on their investment.
The situation is so dire that researchers and economists at leading wealth managers Rathbones have declared unequivocally that the ‘golden age of UK property investment is over, adding that ‘the longstanding British obsession with property as a means of building wealth is outdated’.
In a note to clients, it cautions that ‘the investment potential of the London property market has ground to a halt, raising concerns for those who have used rising house prices as a central assumption of their financial planning’.
One of Rathbone’s directors, Ade Babatunde, sounds still more doom-laden, warning: ‘Our research should be a wake-up call to anyone relying on property to support their financial ambitions…The idea that property will always deliver is for the birds.’
Anecdotal evidence to support his claim is evident all over the capital, whatever the value of the property. Mary Austin, the former girlfriend of rock icon Freddy Mercury has failed to sell the Queen star’s £30million mansion in West Kensington, even though it’s been on the market for two years.
Developers and financiers see no point in committing tens of millions of pounds to new projects when no one wants to buy them
My own son, who wants to dispose of his maisonette in unfashionable Carshalton in suburban Surrey has been forced into several large drops in price to try to complete a sale – if it can be done at all.
The Land Registry shows that over the last year alone the value of properties in London has gone down by 18 per cent. In upmarket Kensington and Chelsea, average prices are down 17 per cent from £1.15million to £950,000.
A friend who refurbished a mews house in the heart of Notting Hill put her luxuriously appointed home on the market three years ago, and has cut the price of the multi-million-pound property several times. She can count the number of viewings on one hand.
Some of the falls in value are eye-watering. On Tite Street in Chelsea, where Oscar Wilde lived, a house worth £13.95million in 2022 finally sold for £8.3million in 2025, a stonking reduction of £5.7million.
In Hampstead Garden Suburb, once the favoured neighbourhood of Harold Wilson and 1970s Labour politicians, the price of a semi-detached home fell by almost half from £1.3million in 2015 to just £722,750 last year. In hipster East London there have equally startling declines.
And while London has been hit harder than the rest of the country, it has always been a bellwether of the market – what happens in the capital has historically been reflected throughout the land.
There are always going to be properties which for a variety of reasons, such as structural issues or urban blight, drop in value. But historically in Britain they have been the exception.
Worryingly, for those who have chosen bricks and mortar over other forms of investment, this is no longer the case. Because Britain’s love affair with owning your own home or buying another for investment or a hideaway in the country, is spectacularly failing.
The question is whether it will continue to do so. To answer that, we first have to examine why the British people are so wedded to property ownership.
Residential property has long been the asset in which Britons have preferred to invest their money. Perhaps this harks back to feudal times when owning land and property signified power.
In parliamentary elections in the 18th century, voting rights were tied to property ownership and only with the Reform Act in 1832 was the tie broken.
So maybe our obsession with property is imbued in the British psyche. But stock markets are too volatile for most people’s taste while keeping cash under the mattress is a mug’s game as waves of inflation and a steady fall in the pound on the currency markets erode its value.
Investing in government bonds, the debt built up from state borrowing, is too specialised and frightening for most investors.
Leading wealth managers Rathbones have declared unequivocally that the ‘golden age of UK property investment is over’
So ‘safe as houses’ has been the watchword – and until now as good as it sounds. There has always been demand for decent housing, but it was in the 1950s ‘you never had it so good’ era of posh Tory Prime Minister Harold Macmillan, that there was suddenly a substantial provision for aspirant owners, with a record 354,130 residences built in 1954 alone. Sites for new-build homes in London and big Midlands cities such as Coventry were easy to find because of Nazi bomb damage.
Three decades later a boom was ushered in by Margaret Thatcher’s dream of a property-owning democracy in which people would be inclined to vote Tory. It was oiled by the ‘Right-to-Buy’ sell-off of council homes, and radical change to a previously rationed mortgage market, which gave consumers scores of home loan options.
The icing on the cake, until it was abolished by Chancellor Gordon Brown in 2000, was tax relief on mortgage-interest payments known as Miras. Little wonder those council-house tenants took full advantage of Right to Buy. Three-bedroom apartments on the fringes of the City acquired in 1981 for just £16,000 sold two decades later for £240,000 – a whopping 1,400 per cent increase. Over the years some two million council homes passed from public into private ownership.
But the lending criteria were still tight. When I began the climb up the housing ladder in London in the 1970s my lender, the now forgotten Bristol & West, was restricted to offering a maximum loan of two-and-half times salary and required the borrower to have built up a substantial cash deposit with the building society.
By 2007, the year before the Great Financial Crisis, no deposit was needed and Northern Rock –the lender whose implosion signalled the forthcoming crash – was prepared to lend 120 per cent of the value of a property. Such easy money had driven prices higher and higher.
And when the financial crisis came in 2008, and property looked like it was going through the floor, the Bank of England dramatically lowered interest rates from 5 per cent to 2 per cent as it sought to head off a national depression. Reviving housing was seen as a key to recovery and Chancellor George Osborne introduced a series of schemes – Help to Buy with interest-free credit and Stamp Duty relief – to shore it up.
Better still for house-buyers, at the start of the pandemic in 2020 the Bank of England’s base rate was cut to its lowest level in more 325 years to just 0.1 per cent.
But then the window of opportunity closed. Shortages of goods caused by supply bottlenecks unleashed the genie of inflation, which accelerated after Russia’s brutal war on Ukraine. The Bank responded by raising interest rates, and mortgage rates soared.
Soon after came Liz Truss’s unaudited budget in the autumn of 2022 which caused the cost of government debt to soar, and the cost of home loans with it. Prices began to fall and uncertainty hovered over the housing market.
Covid and working from home saw middle-class homeowners retreat to the country and many never returned, causing prices to fall further in London. Hesitancy stopped buyers from spending.
Yet just when the market needed succour and support, along came Rachel Reeves with her class-war policies on property owners, her higher taxes on businesses and workers and her creation of an environment in Britain where those with money, who might have bought flats or mansions, just wanted to leave the country.
All the props of support for the property market set up by previous governments have been dismantled, while penalties have been imposed in the form of higher taxes. Stamp Duty relief for first time buyers has been axed and Tory ‘Help to Buy’ initiatives allowed to whither.
Adding to the problem is the Renters Rights Act of last year which forbids landlords to implement ‘no-fault’ evictions and gives tenants greater rights.
This has dealt a fatal blow to the rental market causing landlords to sell up and discouraging investment. And, of course, as
rents soar, people are paying landlords too much to be able to save for a deposit.
The enormous consequence of an implosion in the national residential market should not be underestimated. As the value of properties fall there is a negative ‘wealth effect’ which discourages owners from spending and investing, putting the brakes on growth and living standards.
Nor should it be forgotten that most houses are bought on mortgages stretched over 30 years or 40 years. So as house prices tumble the equity – the money put in by homeowners – shrinks and the loans loom ever larger.
The concern must be that this will lead to a cascade of foreclosures, with owners moving into negative equity and dropping the keys of their homes through the letterboxes of lenders – a frightening thought which will further undermine the market.
By imposing onerous new burdens with unprecedented insensitivity just as the market is at its most vulnerable, Labour may kill off our love of property and silence those dinner party conversations about house prices for good.
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