Is the UK housing bubble about to burst? Two years of pain aheadUnited Kingdom House Price Index YoYECONOMICS:GBHPIYYwithout_worriesSince the late 1980s the UK House Price Index (3M YoY) continues to trade within a longterm descending channel of lower highs and lower lows. Growth is shown above the horizontal black line, decline below. Every cyclical bounce has failed beneath the upper band of this trend with 1992 & 2008 marking the two major cycle lows. Each rally since has produced progressively lower peaks (2002, 2022). The recent move in 2024–25 is labelled as a Lower High (Black arrows) within this trend. The last time this happened was back in April 2007, just before the market experienced a significant collapse to -20% YoY returns. The UK property market may be about to re-enter that period. However, there’s more to this picture than first appears. To call it nefarious would be kind. During my research of this idea it is difficult not to feel angered at the situation, speaking as a Gen x. Throughout the first 18 year cycle shown above workers saw relatively healthy wage growth during the housing boom that followed the 1990s until 2007. 1992-2008: You could refer to this as the “Normal” period, not long after my first degree, and entering the workplace we had: 1. A non Inflationary environment, consistent growth 2. Consistent 2% annual real wage growth 3. Low inflation, steady economic expansion 4. Strong productivity growth supporting wage increases 5. 32% total real wage growth over 16 years Compare this with 2008-2025: Let’s call it “The great stagnation”: 1. Financial crisis triggers unprecedented wage decline 2. Longest period of wage stagnation in modern history 3. Productivity growth collapsed post 2008 4. Austerity, Brexit, and inflation crises compounded effects 5. Real wages still below 2008 levels in 2025! The contrast between these two periods represents one of the most dramatic shifts in UK economic history. While workers enjoyed steady improvements in living standards from 1992 to 2008, post 2008 has seen real wages stagnate for over 15 years, a phenomenon unprecedented since modern records began. The period since 2008 is historically noteworthy, not just because of stagnate wages, but the references in history. These levels of wage stagnation were last seen during the interwar period (1919–1939), affordability under pressure just as in the past 15 years. Before that the early industrial revolution stagnation (1790–1830s), wages flat while costs (food, housing) rose. That’s incredible, it is why many economists call this the worst period for UK pay growth in 200 years. Replace price against hours worked per square meter of shelter obtainable to compare past and present times and you discover why most workers today shared similar struggles to the historical examples. It astonishing to be able to make those comparisons. Especially during times of peace. But it doesn’t stop there… Similar to the USA, many folks have seen personal levels of debt grow out of control as markets have soared. The money was still needed in the absence of wage growth so people borrowed, even if it was to purchase groceries. Throughout 2008 to 2025 the FTSE 100 has grown 150% as workers are rewarded with 0% wage increases. Coming from a working class background, those statistics are infuriating. This isn’t a lost decade, it is a lost double decade, 20 years of no wage growth. Why talk about wage growth in a house market forecast? Globally, the real estate market has seen one of the most dramatic growth periods of recent history, especially as measured against medium incomes (when ignoring price). However workers are not seeing wage growth, so why are house prices so high? If you’re not familiar with Garys Economics, I highly recommend you hope over to his channel on Youtube. Throughout his content you’ll be presented with facts on wealth chasing a limited resource. Regardless of the source of this cash, it seeks a return. In normal times house price growth is driven by simple factors like supply and demand, wage growth, productivity. Today none of those factors apply. The core reason for the asset price crisis is that wealthy individuals accumulate billions of dollars and invest this money into assets deemed safe, which drives up prices. That’s the only core reason. The growth in real estate valuations is nothing to do with the conditions seen from 1990 to 2007 and everything to do with money seeking a safe return. It is important to understand that the money that caused the market bubble can equally cause it to deflate just as fast. British 10 year Gilt (Treasury) If there’s one thing the rich hate, it is losing money. Underperforming assets are like a wound to a rich person, growing more painful the longer it is unattended. Right now you can receive a 4.5% yield on the 10 year Gilt. Maintenance free asset management! Many wealthy individuals seek value protection through asset purchases such as housing, as a result, the cost of housing is artificially inflated. However if a similarly safe asset such as a treasury begin to outperform real estate... It is a very real dynamic, wealthy investors often move capital toward the safest asset that still preserves (or grows) purchasing power. Gold is overbought, housing a bubble, the debt markets is the last game in town. If Treasuries (or other government bonds) begin offering yields that are not only safe but meaningfully higher than real estate’s effective returns (after accounting for taxes, maintenance, illiquidity, etc.), capital can and does rotate out of property and into debt instruments. This is especially true when wealthy individuals care less about maximising upside and more about preserving value without headaches. The technical analysis The above monthly chart compares the UK housing market with the 10 year Gilt. Notable observations: 1. The 10 year Gilt breakout from a 42 year downtrend 2. The house price index now prints bearish divergence 3. A failed support channel in price action and RSI. Conclusion You may have once heard “Above all else, the Bond market dictates all”, when treasuries pay more, real estate pays less. Housing isn’t inflated by bricks and mortar, but by capital seeking safety. As such the rich will chase the safest yield, not the prettiest house. If bonds beat homes, money will move faster than you can blink. Especially with the prospect of double digit corrections as treasures return positive yields. The rich will lead this market correction selling to cash buyers long before Mr and Mrs Joe Bloggs read about it. In the end wealth preserves itself by rotation, not loyalty. Bitcoin maximalists whimper at the thought of billions of dollars of Bitcoin sold off over the last several weeks as price action flirts with all time highs. That is wealth rotation, not loyalty in action. The same will happen soon enough with housing, just takes more time. Ww These views are personal and should not be interpreted as reflecting the position of my company or known associates.