UK house prices are currently climbing at a lower rate than inflation for only the 19th year since 1972, new research by Octane Capital shows.

The property lender analysed historic house price inflation data from the last 51 years and found that house prices have increased by an annual average of 6.9%, compared with an average annual inflation rate of 2.7%. The research also showed that house prices increased at a higher rate than inflation in 32 of the 51 years sampled.

This year, however, inflation climbed to 8% between January and July versus a 7.1% increase in property values.

“There’s generally no safer place to put your money than UK property and the strength of this avenue of investment is clear, with house prices outperforming inflation in 32 of the last 51 years,” said Jonathan Samuels, CEO of Octane Capital. “But despite the resilience shown in 2022, the cost-of-living crisis has driven inflation to a 40-year high, exceeding the current rate of house price growth.

“This is, of course, bad news for homeowners, with things certainly set to get worse before they get any better. However, the cyclical nature of the market has proven that historically, any property market downturn will inevitably be reversed as market confidence returns,” Samuels added.

According to the research by Octane Capital, the current dip in house price performance compared with inflation remains some way off the lows of 1975 when inflation climbed 24.2% in a single year, which was 17.4% higher than the 6.9% average rate of house price growth.

The study found property market performance was at its strongest in 1971 when house prices increased by 35%, which was around 28% more than the inflation rate of 7.1%. In 2002, house prices outperformed inflation by 27.3%, with the difference also exceeding 20% in 1988 (23.3%).