1. The Rate of Return on Real Estate: Long-Run Micro-Level Evidence
- Author
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Eva Steiner, Christophe Spaenjers, David Chambers, Department of Economics, Tilburg University [Netherlands], HEC Research Paper Series, and Apollo - University of Cambridge Repository
- Subjects
Micro level ,Economics and Econometrics ,real estate ,38 Economics ,rental yields ,Real estate ,Monetary economics ,JEL: G - Financial Economics/G.G2 - Financial Institutions and Services/G.G2.G23 - Non-bank Financial Institutions • Financial Instruments • Institutional Investors ,3801 Applied Economics ,Accounting ,long-run returns ,JEL: G - Financial Economics/G.G1 - General Financial Markets/G.G1.G11 - Portfolio Choice • Investment Decisions ,JEL: R - Urban, Rural, Regional, Real Estate, and Transportation Economics/R.R3 - Real Estate Markets, Spatial Production Analysis, and Firm Location/R.R3.R30 - General ,Economics ,3504 Commercial Services ,Real income ,Rate of return ,business.industry ,Gross income ,Investment (macroeconomics) ,idiosyncratic risks ,35 Commerce, Management, Tourism and Services ,JEL: N - Economic History/N.N2 - Financial Markets and Institutions/N.N2.N20 - General, International, or Comparative ,Agriculture ,[SHS.GESTION]Humanities and Social Sciences/Business administration ,Income growth ,property prices ,business ,Finance ,JEL: G - Financial Economics/G.G1 - General Financial Markets/G.G1.G12 - Asset Pricing • Trading Volume • Bond Interest Rates - Abstract
Real estate—housing in particular—is a less profitable investment in the long run than previously thought. We hand-collect property-level financial data for the institutional real estate portfolios of four large Oxbridge colleges over the period 1901–1983. Gross income yields initially fluctuate around 5%, but then trend downward (upward) for agricultural and residential (commercial) real estate. Long-term real income growth rates are close to zero for all property types. Our findings imply annualized real total returns, net of costs, ranging from approximately 2.3% for residential to 4.5% for agricultural real estate.
- Published
- 2019
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