The returns to housing are particularly important because this asset class makes up such a large fraction of household wealth. Yet they are not straightforward to calculate given both the heterogeneity in homes and the fact they sell only infrequently. We outline a methodology for constructing the excess returns to housing at a disaggregated level, essentially that of the individual home. Our approach explicitly takes account of the inherent risk in homeownership with regard to the capital gain or loss component of housing returns. This approach is applied to a rich data set for Sydney, Australia, from 2003Q1 to 2011Q2. Our findings indicate that the returns to housing are on average quite weak though they exhibit significant diversity across dwelling types and regions. Excess returns are also strongly influenced by assumptions regarding the level of risk aversion.