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

David Chambers, Christophe Spaenjers () and Eva Steiner
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David Chambers: University of Cambridge - Judge Business School; CEPR
Christophe Spaenjers: HEC Paris
Eva Steiner: Pennsylvania State University - Smeal College of Business

No 1342, HEC Research Papers Series from HEC Paris

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.

Keywords: real estate; income growth; income yields; property prices; long-run returns (search for similar items in EconPapers)
JEL-codes: G11 G23 N20 R30 (search for similar items in EconPapers)
Pages: 59 pages
Date: 2019-06-25
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Persistent link: https://EconPapers.repec.org/RePEc:ebg:heccah:1342

DOI: 10.2139/ssrn.3407236

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