Is property a good hedge against inflation? Over the long run, yes. Since 1987, UK house prices have risen 6.6 times while the cost of living has risen 4 times. But the long run hides stretches where it simply wasn't true.
Reading the chart
The video puts both on the same scale, with 1987 set to 100. House prices use the Nationwide UK house price index, first quarter of each year. The cost of living uses the ONS Retail Prices Index, all items.
- 1987, 100. The starting point, the year of the Black Monday stock market crash.
- 1992, 128. After the late-80s boom, the ERM crisis pushed prices down. House prices fell behind the cost of living and stayed behind for most of the 1990s.
- 2003, 293. Prices had nearly tripled since 1987 and were pulling well ahead of inflation.
- 2008, 439. The peak before the global financial crisis. Prices fell the following year and didn't get back above that level until the mid-2010s.
- 2020, 533. Covid, with interest rates cut to 0.1%.
- 2022, 638. Prices were still climbing as inflation hit 11%.
- 2025, 663. House prices at 6.6 times their 1987 level.
Mostly, not always
Over the long run, bricks won. Adjusted for inflation, a typical home is worth about 65% more than it was in 1987: 6.6 times the price, divided by 4 times the cost of living.
Timing matters. Someone who bought at the late-80s peak waited more than a decade for their home to beat inflation.
The last few years have gone the other way. Since 2022, house prices have barely moved, from 638 to 663, while the cost of living kept rising. In real terms, homes have lost ground over the last three years.
Sources
- House prices: Nationwide UK house price index, first quarter of each year.
- Inflation: ONS Retail Prices Index, all items.
- Both rebased to 1987 = 100, latest point 2025. Analysis by Bricksmart.