Despite the volatility of the past two years, direct property still provided strong returns with low downside risk, according to a report released by the Australian Direct Property Investment Association (ADPIA).

The study, conducted by Atchison Consultants at the request of the association, found direct property provided returns of 10.1 per cent over the past ten years and 6.9 per cent over the past 20 years.

It provided income returns of 6.7 per cent per annum over ten years and 6.9 per cent over 20 years.

"Importantly, once again it did this at the lowest level of volatility and downside risk of any investment," ADPIA president Linden Toll said.

The research revealed that a conservative level of gearing was an effective way of enhancing returns.

"Gearing in property has been one of the most contentious issues for investors over the period of the global financial crisis," Toll said.

"However, our research has shown that conservative gearing does work. Gearing over the long term is rewarded, but requires considerable management skill and restraint."

The report also showed direct property reduced negative annual returns in diversified portfolios.

"Evidence is clear that the inclusion of direct property in diversified investment portfolios can reduce the chance of negative annual returns in the portfolio. When negative returns are avoided it is less likely the investors will take inappropriate defensive investment decisions as a response and will focus on longer-term objectives," Toll said.

Investors should be increasing property allocations from 5 to 10 per cent to 20 per cent in balanced, growth and high-growth portfolios, Toll said.