Property beats other investments over 25 years

The expression “safe as houses” rings true when comparing UK residential property to stocks and commodities
Written By:
Tom Bill, Knight Frank
1 minute to read
Categories: Covid-19

It is 25 years since the Land Registry began to collect data for residential property transactions in England and Wales.

Knight Frank has marked the occasion by analysing how prices have changed since 1995 for property and a range of other investments. It is a long-term view in an era of unprecedented short-term volatility.

During the Covid-19 pandemic we have heard investment mantras repeated often, including “cash is king”, “buy the dip” and “never invest in something you don’t understand”. The last one is admittedly less snappy but is one Warren Buffett’s key investment criteria.

A look back over the last 25 years demonstrates how the expression “safe as houses” also rings true during times of great uncertainty.

Between the start of 1995 and 2020, prime central London (PCL) property prices fared better than stocks and a range of commodities – and this is before the full impact of the turbulence of recent weeks is taken into account.

An increase of 458% meant it was the best performing asset class, followed by property in England and Wales, which grew by 357% over the last quarter-century.

Gold, another traditional safe haven asset, was third with growth of 323%.

The reason residential property has performed so strongly is tied to demographics as well as economics, something my colleague Oliver Knight will be analysing in more detail.

In very broad terms, demand has outweighed supply and that balance appears unlikely to tip back the other way any time soon. By applying such fundamentals to decision-making, people will have a better chance of seeing beyond the current period of uncertainty.