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How do homes match up to gold and silver?

Posted by Jaimie Kanwar on Wednesday, May 03, 2006

Annual asset price for silver in April 2006 was running at 72%. With gold and silver reaching record highs and dramatically out-performing homes in growth terms, does this mean staple investment in property has run its course?

Fionnuala Earley, Nationwide's group economist looked at some interesting figures at the end of last month (April 06), pointing out that oil and gold have hit the headlines with prices of each reaching record highs. At the same time the growth in house prices has slowed to a crawl in comparison.

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These price explosions have brought annual price inflation of these commodities up to over 40%. Silver has also increased dramatically, rising by over 70% in the last year.

This makes the recent upturn in annual house price inflation to around 5% in the last two months look decidedly modest. With predictions of the housing market stabilising and possibly not seeing a marked upturn until 2009 it would be tempting to jump ship soon.

But does this mean the end of housing as an investment vehicle? Probably not according to Nationwide and to prove the point, they presented figures that show housing outperforms in the longer term.

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In spite of the very strong recent and historical rallies in commodity prices, including the two OPEC oil price crises in the 1970s, housing has still outperformed over the longer term. Since 1970 house prices have increased by over 3,500%, compared to the increase in oil prices of around 1,750%, gold of around 1,550% and silver of about 500%."

There's nothing like bricks and mortar they used to say, way back when: and they've been saying it ever since. There's something very comforting about that but it's nice to have some confirmation now and again.

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