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.