Houses 'better investment than gold'

Owning your own home has been almost twice as profitable as investing in gold over the last three-and-a half-years, the Nationwide has said.

The building society said the cost of property had risen by 68% to an average of £129,258 - but the price of gold had risen just 35% to £237 per troy ounce during the same period.

Nationwide's group economist Alex Bannister said: "While this makes housing look like a fantastic investment, the current rate of house price inflation is not sustainable and we predict a far slower pace in future."

The study came as the Nationwide reported house prices rose by 1.1% in August, taking gains this year to 8.9%.

But house price inflation - the measure of gains over the past 12 months - fell for a fifth straight month in August to 16.6% from 17.9% a month earlier.

Northern surge

Mr Bannister said that while price rises were set to slow, the current strength in the market was set to continue for a number of months.

As a result Nationwide said it was raising its 2003 forecast for price growth by 3% to 13%.

He added prices in Northern regions will surge 20-30% by the end of December while in the south, the area that sparked the boom, prices will increase in line with the 5% the building society had predicted.

Activity also slowed in the second half of the year, with sales 23% lower than the same period in 2002.

But Mr Bannister did warn that despite the slowdown it is still tough for first time buyers to get a foot on the property ladder.

"Although we anticipate a slowdown, weak supply of new property, low real mortgage rates, continued economic growth and poor returns from other asset classes are well supported.

"It will, therefore, remain a significant challenge for first time buyers to enter the housing market."