The classic wisdom of investing in the building-block security of property has a popular appeal but despite a housing market boom during the past few years, over the longer term, house prices have underperformed stocks and government bonds, a report showed on this week.

The Nationwide building society said equities and gilts outperformed property investment despite the doubling in house prices over the last 5 years.

Nationwide's group economist, Alex Bannister, said: "Homeowner expectations about future house price growth are an important determinant of current valuations. Whilst it is not entirely clear how expectations are formed, past experiences of house price inflation will play a part. As well as forming a view about future house price growth homeowners and would-be buyers, perhaps in the light of the recent stock market recovery, may have reassessed the outlook for other asset classes."

"Despite house prices having doubled since the start of 2000, over the longer term both equities and gilts have significantly outperformed housing as an asset class."

House prices, having fallen at the start of the 1990s and then remained broadly flat through to 1997, are now 4.6 times higher than they were at the start of 1985. Equities (on a total return basis) are more than 6 times higher than in 1985, as are government bonds. House prices have outperformed savings accounts. However, the majority of the outperformance has happened in the last few years. Despite the rally in the gold price since 1999, the gold price in sterling nominal terms remains below where it was in 1985.