Between 1970 and 1999, according to ABSA, residential prices lost a total of 43 per cent in real terms that is, from the start of that period to the end. This averages to less than a 2 per cent loss to inflation each year. As some home-owners, who had squatter camps mushroom across the road, discovered, unexpected developments can have a profound effect on property ownership. An investor might engage in considerable research and pick a good buy in selecting a house, but its value could plummet overnight if the local council decided to erect a home for indigents in the street. People who invest a large portion of their money in a single piece of real estate are, therefore, exposing themselves to very high risk.
Property is also less liquid than other asset classes.
While it is relatively easy to dispose of a few shares or bank bills, selling a house or office building is a major undertaking. However, the securitisation of property, both domestically and internationally, provides a way of getting around many of the problems associated with direct investment. In this regard, it is worth bearing in mind that the only real difference between owning property and owning shares in companies is scale. The idea that a house is a different sort of investment when it is occupied as a home can distort rational investment decisions. While home ownership has distinct attractions, it is important to separate the residency component from the investment component.