Have UK House Prices Crashed in Real Terms? My Inflation Argument
July 11, 2026
When somebody asks whether UK house prices have crashed, my first question is: measured against what? A price written in pounds tells you one thing. The purchasing power of those pounds tells you something else.
That was the argument in my video published on 11 July 2026. I wasn’t predicting that every house was about to lose 20% of its asking price. I was arguing that a quieter adjustment had already happened through inflation, with some expensive markets also suffering falls in their actual selling prices.
The distinction matters if you’re trying to understand value rather than waiting for a dramatic headline to tell you when to buy. It also matters if you own property and assume an unchanged valuation means your investment has stood still.
You can watch the original real-terms house-price discussion on YouTube. The figures below explain the historical comparison I used, rather than describing today’s prices.
A flat price can still mean a fall in value
Imagine that the pound price of a house hardly changes while food, labour, insurance and other goods and services become more expensive. The house now buys less of everything else. In that sense, its value has fallen even if the estate agent writes a similar number on the valuation.
This is what people mean by nominal prices and real prices. Nominal is the amount in pounds. Real means adjusted for a chosen measure of inflation over a specified period.
In the video, I joked about measuring a house in loaves of bread. It sounds ridiculous to offer a seller several thousand loaves, but it makes the underlying idea easier to understand. Money is a measuring tool whose own purchasing power changes.
That doesn’t make the nominal price irrelevant. Your mortgage balance and purchase contract are in pounds. It means you need both views to understand what has happened to the investment.
The national example I used
I compared a rounded UK average of £265,000 in August 2022 with around £270,000 in April 2026. In pounds, that is a modest increase of approximately 1.9%.
The official April 2026 UK House Price Index release reported a £270,000 average and annual growth of 3.8%. That annual growth figure measures a different period from my August 2022 comparison. Mixing the two would give you the wrong picture.
In my inflation-adjusted illustration, the earlier £265,000 would have needed to become roughly £306,000 to retain its purchasing power. Comparing £270,000 with that inflation-adjusted benchmark gives a shortfall of about 11.8%, which I rounded to 12%.
The calculation is £270,000 divided by £306,000, minus one. It isn’t simply the difference between two unrelated percentage headlines. You need the same start and end dates and an appropriate inflation measure.
I also discussed a larger fall using RPI. CPI and RPI are different measures, so the adjustment changes depending on which one you choose. My video used rounded historical comparisons; it shouldn’t be read as a fresh calculation from today’s revised data.
The lesson doesn’t rely on treating any one rounded percentage as perfect. A small increase in a property’s pound price can coexist with a meaningful fall in its inflation-adjusted value.
Why London looked different
The London comparison in the video used approximately £581,000 in August 2022 and £553,000 in 2026. That is already a fall of nearly 5% in nominal terms, before considering inflation.
Once inflation is included, the decline becomes larger. I discussed roughly 18% using CPI and around 21% using RPI. Again, those are the historical estimates presented in the video, with the choice of dates and inflation series affecting the result.
This is why I don’t accept the idea that London property is automatically safe simply because it is London property. A prestigious location doesn’t remove the need to assess rent, borrowing costs, service charges and the price you pay.
An expensive asset with a weak yield can be uncomfortable to own when finance becomes dearer. If the investor has relied on capital growth to make the overall return attractive, a flat or falling valuation exposes that reliance very quickly.
That doesn’t mean London has no good investments. It means the label on the location is not a substitute for the numbers on the particular property.
Be especially careful with the Westminster example
Westminster was the most striking comparison in the video, but it also needs the most care. Local authority data can move around more than national figures because fewer transactions, and changes in the types of homes selling, can have a large effect.
The worked example compared roughly £1.1 million in April 2020 with around £815,000 in 2026. If the earlier amount had risen to an inflation-adjusted £1.44 million, comparing £815,000 with that benchmark gives a fall of approximately 43% in real terms.
There is an important date distinction here. The video’s opening refers to three years, but the detailed Westminster comparison starts in April 2020. Those are not the same period. The detailed calculation must not be presented as evidence of a 43% fall over three years.
Nor does a borough average tell you that every Westminster flat lost that amount. One lease, building or street can have a very different experience. A large service charge or a problematic lease can make an individual flat behave differently again.
For that reason, I would use the example to illustrate how inflation and nominal falls can combine, rather than applying its percentage to a property I was considering buying. Exact local figures should be checked against the relevant dated data and any subsequent revisions.
A cheaper property is not automatically a better investment
My preference is for ordinary homes where working people need to live and the rent makes sense relative to the purchase price. That often leads me towards more affordable areas, but it doesn’t mean I buy anything just because it is cheap.
A £120,000 house with weak demand, expensive defects or a difficult location can still be a poor investment. A more expensive property can work if its income and costs justify the price. The useful comparison is the whole deal, not a simple north-versus-south slogan.
I want to understand what tenants will realistically pay, what the mortgage will cost, what maintenance is likely and how much room remains after allowing for management and empty periods. If the deal depends on rates returning to 1%, I don’t consider that a sound starting position.
The point of buying well is to give yourself some margin. It cannot eliminate downside risk. Values can fall further, repairs can surprise you and refinancing can be harder than expected. The property needs to remain affordable while you wait.
Inflation can help debt and hurt cash flow at the same time
Property investors often talk about inflation eroding debt. A fixed nominal mortgage balance can become smaller relative to prices and earnings over a long period. But the bank doesn’t reduce the amount you owe simply because inflation has occurred.
If you owe £150,000, you still owe £150,000 unless you repay some of it. Interest-only borrowing requires an eventual repayment plan. Inflation is not that plan by itself.
At the same time, inflation can increase repairs, insurance and other running costs. It can also contribute to higher interest rates. Rents may rise over time, but you cannot assume they will rise quickly enough, or that a particular tenant can afford every increase your spreadsheet would like.
That is why I keep coming back to cash flow under stress. A potentially favourable long-term relationship between assets and debt is useful only if the business can meet its obligations in the meantime.
If you want the borrowing side explained in more detail, read my comparison of interest-only and repayment mortgages.
What my first London purchase taught me
I bought my first London property in 2010, and I remember plenty of people telling me not to buy. In the July 2026 video, I described its value as roughly three times what I had paid.
That is my experience of one purchase over a long period. It isn’t proof that any property bought in a nervous market will produce the same result. The price I paid, the property itself and the time I held it all mattered.
What it taught me was that the market rarely announces an obviously comfortable buying moment. People can remain frightened after prices have adjusted, and a buyer can miss an opportunity while waiting for complete certainty.
I still wouldn’t use that lesson as a reason to rush. I would use it as a reason to investigate actual opportunities when sentiment is weak. Being prepared to look is different from being determined to buy regardless of the evidence.
How I would use this information before making an offer
First, I would separate the broad market story from the local evidence. National data helps explain the environment. Recent comparable sales, achievable rent and the condition of the property help decide the offer.
Second, I would test the deal without assuming immediate growth. Can it cover its costs if values stay flat? What if the next mortgage is more expensive? How much cash remains after completion and an unexpected repair?
Third, I would ask why the seller might accept my price. A genuine discount is measured against realistic value, not an optimistic asking price. Paying less than an inflated listing doesn’t automatically create equity.
Finally, I would consider the time horizon. If I might need the invested money back quickly, a property that depends on several years of rental income and eventual refinancing could be the wrong fit. The plan needs to match my circumstances as well as my view of the market.
Don’t wait for a headline to do your thinking
My argument was that inflation had already changed the housing market more than the pound-price headlines suggested. Some areas had also repriced more visibly. Neither observation means every property is a bargain or that further falls are impossible.
I still favour sensible property, sensible debt and a price supported by rent. You are buying one property, with one mortgage and one set of costs. That is where the decision has to work.
If you’d like help thinking through your next move, book a free 30-minute call with me. You can also explore Starter Club or read about Done For You. The aim is to turn a market opinion into a properly assessed decision.