The so-called golden age of UK property investment, where buyers saw strong yearly gains, ended in 2016, research by Rathbones found.
The report, ‘Don’t Bet the House. Why the Golden Age of Property is Over: The Long View’, looked at data going back to 1900.
It found that the strong gains from property seen between 1980 and 2016 have not continued, with tougher conditions for landlords and investors since 2016.
Between 1980 and 2016, average house prices rose 6.7% a year across the UK and 8.5% in London, mostly driven by a long-term drop in interest rates and not enough new homes being built.
Since then, London house prices went up just 1.3% a year, lagging inflation by 2.2 percentage points.
Across the rest of the UK, house prices only just kept up with inflation.
Equities outperformed property over the same period.
A simple portfolio of 25% UK and 75% global stocks delivered 3.4 percentage points a year above inflation since 2016.
Someone who put £100 into London property in 2016 would now have £111, but the same amount in shares would be worth £174.
Buy-to-let (BTL) and second homes have been hit hard by high interest rates, stricter rules and weaker price growth, with many no longer seen as viable businesses.
Oliver Jones, head of asset allocation at Rathbones, said: “The idea that you can’t go wrong with bricks and mortar just isn’t true.
“The data shows that diversified global investment has put to shame returns from housing over the last decade – and we believe this trend will continue.
“The earlier boom in house prices was fuelled by factors which no longer hold.”
Jones added: “The huge decline in interest rates from their generational high in the early 1980s won’t be repeated.
“Homebuilding is rising after decades of very low rates. And government policy has become progressively less favourable to investors in residential property since the mid-2010s.
“The idea that money is safest in houses simply is not true any more.”
Ade Babatunde, associate financial planning director at Rathbones, said: “We’re being asked by many people who own second properties and buy-to-lets whether the time has come to sell up and invest their money instead.
“This research should be a wake up call to anyone relying on property to support their financial ambitions, especially when thinking about retirement or succession planning.
“The old idea that property will always deliver is for the birds and we strongly recommend taking advice.”
