The golden age of property as an investment is over, according to economists at a major finance firm. 

The wealth manager Rathbones assessed the performance of stocks and shares versus house prices over the past century, and concluded that the boom years of bricks and mortar are now behind us. 

Since 2016 it found the price of residential property had barely kept up with inflation, rising at an average of 3.7 per cent per year.

In London, where buyers previously enjoyed the biggest gains, housing did even worse, with house prices rising at just 1.3 per cent a year. 

This meant they under-performed inflation by 2.2 percentage points each year. 

Those who bought property between the 1980s and early 2010s have benefited from the biggest gains.  

Between 1980 and 2016, house prices rose at a rate of 6.7 per cent annually, and 8.5 per cent in London - well ahead of inflation. 

How do stocks and shares compare to property? 

Since 2016, stock markets have risen significantly faster than property prices, according to the research.

The Rathbones economists found that £100 invested in UK property in 2016 would have been worth £134 in 2024. 

If the same amount had been invested in an indicative portfolio of 25 per cent UK and 75 per cent international equities, that would rise to £174.

Meanwhile, £100 invested in London property in 2016 would have increased to just £111 in 2024 on average.

'The idea that you can’t go wrong with bricks and mortar just isn’t true,' said Oliver Jones, head of asset allocation at Rathbones. 

'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.'

This, he said, is largely down to rising interest rates in recent years.  

'The earlier boom in house prices was fuelled by factors which no longer hold,' Jones continued. 

'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.'

Looking back over more than a century, Rathbones found the average house price hovered around four times average annual earnings between 1910 and the late 1990s. 

However, after 2000 this more than doubled, with house prices rising to as much as eight times average earnings, leaving property much more expensive for the typical buyer.

Further, after decades of low interest rates, global instability has created volatility in financial markets and fuelled inflation, pushing up mortgage interest rates. 

This has further impacted affordability for most first-time buyers and reduced the appeal of buy-to-lets and second homes used for holiday lettings bought using mortgages, acting as a drag on house prices.

Ade Babatunde, associate financial planning director at Rathbones. added: '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.'