UK house prices vs inflation

“House prices always go up” — but so does almost everything else. The honest question is whether housing has risen faster than the general cost of living, and how it stacks up against other places people park their money. The first chart sets the average UK house price against consumer-price inflation; the second widens the field to gold and the FTSE 100. Each line is rebased to 100 at the start year, so they are finally comparable, and each chart defaults to a normal (linear) scale — you can switch to log with the buttons. Hover or tap to read off any year.

House prices vs inflation

Both lines start at 100 in 1975, so the gap between them is the whole story. Where the house-price line pulls above the consumer-price line, housing is beating inflation; where the two converge, houses are losing ground in real terms. The dots mark the moments when that gap opened or closed.

By 2024 the average house cost about 26 times its 1975 price in cash, while the same money bought goods that cost only about 8.5 times as much. Dividing one by the other, the average UK house is worth roughly three times as much in real terms as it was in 1975 — a large gain, but a long way from the headline 26×. Most of that eye-watering cash figure is simply the pound losing value; the genuine outperformance is the threefold real rise, and it is the widening gap on the chart.

Reading the two lines together also rewrites the usual story. House prices have not beaten inflation smoothly or always:

• 1989 — the gap first yawns open. The late-1980s “Lawson boom” sent house prices sprinting well ahead of consumer prices for the first time.
• 1990–95 — the gap slams shut. The early-90s crash froze cash house prices while inflation kept marching on, so housing lost real value for several years — by 1995 the two lines had nearly converged again.
• 1996–2007 — the great divergence. A decade of cheap credit more than tripled cash prices while inflation stayed low and stable, blowing the gap wide open. This, not the 1980s, is where most of housing’s real outperformance was made.
• 2008–09 — a partial close. The financial crisis knocked house prices back toward the cost-of-living line before record-low interest rates revived them.
• 2022–24 — inflation fights back. Cash house prices hit records, but the 2022–23 cost-of-living spike lifted consumer prices fast too, so houses slipped slightly in real terms as the consumer-price line caught up.

Is consumer-price inflation the right yardstick?

It is a fair thing to ask. The line above is the official measure of inflation — the cost of a broad, representative basket the ONS prices every month: food, energy, rents, transport, services and goods. RPI was the long-running headline measure, CPI is the Bank of England’s target measure today, and this page splices the two for the longest consistent run. So “vs inflation” here means exactly what economists and the Bank mean by it.

The usual objection is that some things in that basket — televisions, computers, clothing — have got cheaper over time, which can make the cost of living look tame next to the things that squeeze household budgets most. That is exactly why it is worth judging housing not only against the general price level but against other stores of value — assets people actually hold to beat inflation. The next chart adds the two most common: gold, the classic inflation hedge, and the FTSE 100, the headline UK stock index.

House prices vs gold and shares

All five lines are rebased to 100 in 1985 — the first year the FTSE 100 and a clean gold-in-sterling series are both available — so this chart starts a decade later than the one above. Alongside UK housing it pits gold, the FTSE 100 and America’s S&P 500 (both shown in pounds, as a UK saver would feel them). The consumer-price line is the same inflation yardstick, kept in for reference; everything above it has beaten inflation, everything below it has lagged.

Over this 1985–2024 window the league table puts UK housing in its place. Cumulative growth, rebased to 1985:

• S&P 500 — about 28× in pounds, and that is before dividends. America’s tech-led market left every UK asset far behind — on the linear chart its line simply runs off the top, which is why a UK saver who bought a global or US tracker did so much better than one who bought a second home.
• House prices — about 8.7×. The best of the UK options, but a distant second to US shares.
• Gold — about 7.6×. It went almost nowhere for two decades, then rocketed after 2005 as a crisis and inflation hedge, nearly catching housing.
• FTSE 100 — about 5.8× on price alone — and this is the catch: add back reinvested dividends and total returns from UK shares are roughly on a par with housing. The index looks like a laggard mainly because its line, by convention, throws the dividends away.
• Consumer prices — about 3.1×. The cost-of-living floor. Every asset above cleared it — the real debate is the ranking among them, not whether housing “beat inflation.”

The takeaway: UK housing has been a good real-terms store of value, but not a uniquely magical one — and on this measure it was thrashed by US shares. Gold matched it without rent, maintenance or stamp duty. What makes housing feel different is leverage — most buyers put down a fraction of the price and borrow the rest, so even these gains are multiplied on the cash actually invested in a way they rarely are for gold or shares.

Could you actually buy one? House prices vs wages

The charts so far assume you already hold an asset. For most people the prior question is whether their wages can keep up with house prices at all. So this one drops the index and shows hard pounds: the average house price against gross annual pay for a lower-paid (10th percentile), typical (median) and higher-paid (90th percentile) full-time worker.

In 1997 the average house (about £60,000) cost roughly 3.6× a median full-time salary (about £17,000). By 2024 the average house (about £269,000) cost about 7.1× median pay (about £38,000) — the price-to-earnings ratio has roughly doubled. Even a higher earner on the 90th percentile (about £72,000) now makes barely a quarter of the average house price in a year, where in 1997 they earned more than half of it. Wages did rise — but house prices left them far behind, and because a purchase needs a deposit and a multi-decade mortgage, the lived squeeze on lower earners and first-time buyers is harder still than the gap on the chart.

What if you’d invested instead? £10,000 since 2013

The flip side of “should I buy a house?” is “what if I put the money somewhere else?” This chart follows the value of a £10,000 lump sum invested at the start of 2013, in concrete pounds, across the things people actually buy — a one-fund global tracker (Vanguard LifeStrategy 100% Equity), the S&P 500 and FTSE 100, gold, UK gilts and global bonds — and, for comparison, the same £10,000 tracking average house prices. It starts in 2013, the first full calendar year after Vanguard’s LifeStrategy range launched. The two bond funds have no clean record that far back (the global bond fund only opened in 2014), so rather than estimate them, their lines are left blank until 2016 and shown from there on their own fresh £10,000 — honest about what can and can’t be measured.

Where £10,000 ended up by 2024:

• S&P 500 (in £) — about £67,000. US shares plus a weak pound turned £10,000 into nearly seven times as much: the runaway winner by a distance.
• Vanguard LifeStrategy 100% Equity — about £35,700. One ordinary global index fund more than tripled the stake.
• FTSE 100 — about £21,800, just ahead of gold (about £20,600) — gold was dragged down by a brutal 2013 (it fell roughly a quarter) before recovering.
• House prices — about £16,600. Tracking the average house, capital only, turned £10,000 into about £16,600 over twelve years — one of the weakest of the group, well behind shares.
• Bonds — behind everything. Shown only from 2016 (their funds lack a clean 2013 record), £10,000 in global bonds reached about £10,900 and in UK gilts about £9,100 — gilts actually lost money, the 2022 crash (a single −27% year) erasing years of gains. A reminder that “safe” assets are not risk-free.

Two honest caveats keep this fair. First, the house line is capital only — a landlord would also collect rent (after costs, voids and tax), while the fund lines already include reinvested income; on a like-for-like total-return basis housing would sit higher, though still behind global shares. Second, almost no one buys a house with cash: a mortgage means putting down a fraction and borrowing the rest, so the gain (and the risk) on the cash you actually invest is geared up in a way these unleveraged lines don’t show. The honest summary is that housing has been a decent asset, made to feel extraordinary by leverage — not because the bricks themselves outran shares.

Why some charts use an index and others use pounds

Concrete pounds are easier to feel, so the wages and “£10,000 invested” charts use them directly — their y-axis is just £. But pounds only work when the things compared share a unit. House prices are in pounds, gold is per ounce, the FTSE is in index points and inflation is a percentage, so the multi-asset growth charts above can’t share a pounds axis. Rebasing fixes that: set every series to 100 at the start and each line becomes “how many times its starting level,” pure growth, directly comparable — which is what their y-axis says, Index (1975 = 100) or (1985 = 100). The x-axis throughout is simply the year.

Every chart defaults to a linear scale — actual pounds or actual index levels, the most intuitive view. Tap Log to switch to a logarithmic scale, where equal percentage moves take equal vertical space: that view stops the latest years from dwarfing the earlier ones, and on the index charts lets you read the gap between any two lines directly as a real (inflation-adjusted) difference. It is especially handy on the asset chart, where the S&P 500 otherwise runs off the top.

How the series are built

The house-price line is the Nationwide average UK house price (year-end), the longest consistent series available. Inflation is a cumulative price level chained from annual rates — RPI before 1989 and CPI from 1989 — the same series used for the “real” prices on the house-prices page. The FTSE 100 is the year-end close (the same data behind the FTSE 100 page); the S&P 500 is its year-end close (the same data behind the US stock-indices page). Gold and the S&P 500 are quoted in US dollars and converted to sterling — gold at each year’s average exchange rate (it is an LBMA annual average), the S&P at the same rate against its year-end level.

On the wages chart, pay is ONS ASHE gross weekly earnings for full-time employees at the 10th, 50th and 90th percentiles, multiplied by 52 to put them in annual pounds alongside house prices. On the £10,000 invested chart (£10,000 from the start of 2013), the fund lines — Vanguard LifeStrategy 100% Equity, the UK Government Bond Index (gilts) and the Global Bond Index (GBP-hedged) — use each fund’s published GBP total return (income reinvested, net of fees). The two bond funds have no clean record before 2016, so their lines simply start in 2016 rather than being estimated backwards. The S&P 500 uses its US-dollar total return converted at year-end exchange rates; the FTSE 100 uses its total-return index; and gold and house prices are capital only.

A few honest caveats: splicing RPI and CPI is pragmatic, and the exact gap shifts a little with the inflation measure you pick; on the long index charts the dollar series are converted at annual-average exchange rates and both stock indices exclude dividends; the £10,000 chart, by contrast, uses total-return fund data but the house line stays capital-only (no rent, costs or leverage); annualising weekly pay by ×52 slightly overstates measured annual earnings; and all of this is UK-average — London and the South East have run far further ahead of both wages and inflation than much of the North and Northern Ireland.

Related

• House prices — the average UK house price on its own, in cash and in today’s money.
• Inflation — the annual rate of consumer-price inflation behind the cost-of-living line.
• FTSE 100 — London’s blue-chip index in full.

Sources

• Nationwide House Price Index — long-run average UK house prices.
• ONS — Inflation and price indices (RPI and CPI), for the consumer-price level.
• World Gold Council — gold price averages (LBMA annual average, USD/oz).
• US stock indices — S&P 500 year-end closes (price index); total returns via S&P 500 annual total returns.
• ONS — ASHE gross weekly earnings percentiles (full-time employees), for the wages chart.
• Vanguard fund factsheets — LifeStrategy 100% Equity, UK Government Bond Index and Global Bond Index (GBP Hedged) — for the £10,000 chart.
• ONS — average Sterling/US-Dollar exchange rate and FRED AEXUSUK, for converting dollar series to sterling.
• House of Commons Library — inflation: economic indicators.