Although, we are beginning to see the script flip here in the more recent history. The alarming stat is the median wage in the UK is now £39,039 as of April 2025 according to the ONS. A very crude calculation shows that even if someone was able to save up 1 year of their gross pay - which is incredibly difficult and get a mortgage for 4.5 times their gross income, this would equate to £214,714.50 for a theoretical affordable house price, assuming minimal debts and extremely frugal living, which is highly unrealistic for a large proportion of modern society with rising costs. At the same time, the average UK house price is £270,259 as of December 2025 according to land registry data. This shows a widened affordability gap for first time buyers and an increased barrier for those looking to independently buy a home. This gap is even wider for London with incomes only being around £10k higher but house prices being closer to £500k.
The above data insinuates that we are moving back towards a rental market economy. Moving into the 2000s, it was common in the UK to own your home and each generation tended to upgrade the housing situation of the generation before them. Although, ask most young professionals now and they will say it feels like you are moving backwards in this system. It seems they are no longer becoming more prosperous but instead going in the opposite direction and staying reliant on their families for longer. So how has financial markets influenced this?
With most of UK housing being primarily funded by mortgages - these mortgages would be bundled into Residential Mortgage Backed Securities (RMBS), essentially allowing banks to sell these on as financial products for investors. These were always seen as safe investments but the financial crash of 2007 proved otherwise. Following the recovery of the crash, interest rates were at an all time low and this was a stimulant to the economy and buyers were able to buy homes at a massive discount. However, now interest rates have massively increased following the COVID pandemic and we are moving into a world where homeowners who did not lock in long term rates when mortgage deals were favourable, are having to find extra funds which they never would have planned for. This has caused less residential home owners to enter the market and means the residential backed RMBS model is becoming increasingly more difficult to sustain. At the same time, one may assume that even land-lords are being punished - but when we dive deeper it is only the ‘sole-trader’ landlords who directly invest in properties that are affected by taxation rules effectively abolishing any net profits and putting them at a net loss. At the same time, corporations can escape these rules all the while out-competing buyers with lowered affordability to buy up these homes. This suggests we are moving back towards a rental only economy where the only chance of ownership for future generations would be owning REITs - Real Estate Investment Trusts. Corporations would often leverage other people’s funds in addition to their own investor’s funds to buy up these homes. Part of this would come from the issuance of REITs in return of a small share of the profits for the investor buying the REIT.
Although, one may assume home prices are stagnating as seen in the recent house price index. The real cost for the average homeowner is their monthly mortgage payment, which is the purchase method for the vast majority of home owners. This means that although it seems wages will catch up with home prices, it seems more likely that interest rates will stabilise around a new higher rate and affordability will continue to reduce for the Joe Bloggs home buyer. At the same time Real Estate corporations can leverage far more favourable rates and have access to masses of finance options - meaning they can continue to outcompete the residential home buyer. This creates a bleak monopolisation of the future housing market and could move us into the same state as developing countries where the norm is to rent.
When we extrapolate by area, we can see that traditional metro city hubs like London have a falling housing market while newcomers such as Cities in the North are growing at much faster rates. It is these areas which are attracting far more investment and suggests London has been saturated.
The only way for a ‘sole trader’ type of landlord to compete with the large corporations would be to use more innovative methods to invest in property and set-up their own corporate entities, which is incredibly easy to do in the UK market. At the same time, they can understand that renting where they live may not be such a bad thing starting out since this frees up capital to invest into their housing projects. In this new market, small land-lords need to be more meticulous in purchasing below market value deals and can leverage short term high interest loans to enable them to access cash deals. To enable this to work, they need to ensure they have a trusted and effective building team who can resourcefully refurbish the home and push the value up. This is when the landlord can take out a second mortgage which will be 75% of the homes new value - this can be used to pay of the old high-interest bridging loan and leave them (if cards are played right) with a house they own but none of their own money left in the deal. Now if we combine this with the concept of REITs, instead of a high interest loan to the bank - they can leverage private investors’ funds for this purpose to ensure all profits go back into the common person’s pocket rather than line the profits of a bank. IF enough land-lords engage in home development and stay strong against corporations buying up UK housing stock, this can still mean prosperous home-living for future generations.