Discussion Paper Details

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Title: The Rate of Return on Real Estate: Long-Run Micro-Level Evidence

Author(s): David Chambers, Christophe Spaenjers and Eva Steiner

Publication Date: January 2021

Keyword(s): income growth, income yields, long-run returns, property prices and real estate

Programme Area(s): Economic History and Financial Economics

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.

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Bibliographic Reference

Chambers, D, Spaenjers, C and Steiner, E. 2021. 'The Rate of Return on Real Estate: Long-Run Micro-Level Evidence'. London, Centre for Economic Policy Research.