Property returns lag long term: Study

Although house prices have been skyrocketing over recent years, residential property falls behind all other investment classes in the longer term except cash, according to Assirt.

Assirt's Housing Price Index does what no other index attempts: to work out the true net gains of investing in residential property, taking into account the often large sums of money put into home improvements. The index takes in average rental income but takes out the costs involved: repairs and maintenance, insurance charges, floor coverings, additions and alterations, and agents' fees.

If $1,000 had been invested in 1991, housing would have returned $2,489, international shares $3,198, Australian shares $3,033 and listed property trusts $3,118. International shares were the best performers on an annualised basis, with 12 per cent, followed by listed property trusts with 11.7 per cent, Australian shares with 11.4 per cent and residential property at 9.2 per cent.
Assirt's Phil Waterfall said that the index doesn't take volatility into account, however. Although residential property underperformed all other asset classes except cash, it did so with less risk than shares or bonds.