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The Time Value of Housing: Historical Evidence on Discount Rates

Philippe Bracke, Edward Pinchbeck and James Wyatt

Economic Journal, 2018, vol. 128, issue 613, 1820-1843

Abstract: Most London housing transactions involve trading long leases of varying lengths. We exploit this to estimate the time value of housing – the relationship between the price of a property and the term of ownership – over a 100 years and derive implied discount rates. For our empirical analysis, we compile a unique historical data set (1987–92) to abstract from the right to extend leases currently enjoyed by tenants. Across a variety of specifications and samples, we find that leasehold prices are consistent with a time declining schedule and low long‐term discount rates in housing markets.

Date: 2018
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Working Paper: The time value of housing: historical evidence on discount rates (2017) Downloads
Working Paper: The time value of housing: historical evidence on discount rates (2016) Downloads
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Economic Journal is currently edited by Estelle Cantillon, Martin Cripps, Andrea Galeotti, Morten Ravn, Kjell G. Salvanes, Frederic Vermeulen, Hans-Joachim Voth and Rachel Kranton

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