DP15657 The Rate of Return on Real Estate: Long-Run Micro-Level Evidence

Author(s): David Chambers, Christophe Spaenjers, Eva Steiner
Publication Date: January 2021
Keyword(s): income growth, income yields, long-run returns, property prices, real estate
JEL(s): G11, G23, N20, R30
Programme Areas: Financial Economics, Economic History
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=15657

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 1901â??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.