Investing

Gold versus buying a house – the winner is clear

An analysis by Daily Investor revealed that buying gold was a much better investment over the last fifty years than buying a house in South Africa.

Over the years, many people have punted property as one of the best investments anybody can make.

American business magnate John D. Rockefeller, one of the wealthiest people who ever lived, said, “The major fortunes in America have been made in land.”

Another wealthy American industrialist, Andrew Carnegie, said, “90% of all millionaires become so through owning real estate.”

There is a widely held view that property is a safe investment that appreciates with time. It is, therefore, unsurprising that most people’s biggest asset is their house.

Gold, in comparison, is seen as a speculative asset that provides a safe haven for investors during uncertain times. However, it is not seen as a way to get rich.

Many super-investors, including Warren Buffett, are not keen on gold as it is not a productive asset like a company making profits and paying dividends.

“The problem with gold is that you are betting on what someone else would pay for them in six months. The commodity itself isn’t going to do anything for you,” he said.

To see whether these perceptions hold up, Daily Investor analysed the return on buying an average house in South Africa versus investing that money in gold.

According to the Absa house price index, the average house price in South Africa in 1970 was R15,000. It increased to R2.3 million in 2023.

In 1970, an ounce of gold cost R28.90. Fast forward 53 years, and the price for an ounce of gold increased to R38,000.

That means a R15,000 investment in gold in 1970 would have grown to R19.7 million – significantly more than the R2.3 million for the same property investment.

Put another way, you needed 519 ounces of gold in 1970 to pay for the average house in South Africa. In 2023, you would have needed only 61 ounces to pay for the same house.

The table below compares the growth in property and gold over the last 53 years.

Investment19702023
GoldR15,000R19,723,000
HouseR15,000R2,300,000

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