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Housing delivers lower returns than shares

23 Feb 2018


New LBS research challenges the common view that property is more lucrative

Housing makes less than shares

Investors and financial experts who believe that residential property provides better returns than shares have been challenged by new London Business School (LBS) research. 

Elroy Dimson and Paul Marsh, Emeritus Professors of Finance at LBS, and the School’s Dr Mike Staunton have dispelled the idea that houses are more lucrative and pose fewer risks than shares.  


Their 2018 Credit Suisse Global Investment Returns Yearbook shows that since 1900, residential property has generated a -2% quality-adjusted real capital gain. The report also reveals a 36% real terms drop in US house prices between 2005 and 2012. 

The research covers the long-run returns and risks of equity and fixed interest investments on 23 national stock and bond markets between 1900 and the present day. 

Global equities have delivered the biggest returns to investors for more than a century, outperforming cash (Treasury bills) and bonds by 4.3% and 3.2% respectively a year. 

“Over the long run, equity returns still dominate bond and bill returns,” the report said. 

Meanwhile, Gold, silver and diamonds generated lower returns than US Treasury bills, making precious metals a costly and ineffective hedge against inflation. Collectibles such as art, wine and musical instruments performed better than cash and government bonds over the same period. 

Emerging markets performed strongly in 2017, providing 38% returns on equities compared to developed markets (23%). But established economies have typically delivered more to investors in the past 118 years, outperforming developing markets by 1% per year.  

Marsh, Dimson and Staunton said that their research highlights the difficulty in predicting periods of volatility. They added that such phases, as experienced in early 2018, tell economists little about future returns and appear to be “mere blips in the long secular rise of equities”.  

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