An assumption of ever-lasting favourable conditions when picking stocks would raise alarm bells for fund managers, but for some reason an ever-booming property market doesn't attract quite the same concern.

Using their stock picking techniques, Auscap Asset Management has determined the downside risks involved in property are too great to invest, especially when correlated over time with household income.

Australian residential property prices have experienced annual growth of 7.4 per cent and have not been exposed to a broad decline since 1991, prompting a view by many that buying houses is a relatively low-risk prospect.

"The inference is that past returns tell us something about future returns," Auscap Long Short Australian Equities Fund principals Tim Carleton and Matthew Parker said. "This extrapolation bias carries considerable risk."