The time value of housing: historical evidence on discount rates
Edward Pinchbeck and
LSE Research Online Documents on Economics from London School of Economics and Political Science, LSE Library
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.
Keywords: housing; leasehold; discount rates; ES/M010341/1; ES/J021342/1 (search for similar items in EconPapers)
JEL-codes: G10 R30 (search for similar items in EconPapers)
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Published in The Economic Journal, 16, August, 2017, 128(613), pp. 1820-1843. ISSN: 0013-0133
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http://eprints.lse.ac.uk/86393/ Open access version. (application/pdf)
Journal Article: The Time Value of Housing: Historical Evidence on Discount Rates (2018)
Working Paper: The time value of housing: historical evidence on discount rates (2016)
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Persistent link: https://EconPapers.repec.org/RePEc:ehl:lserod:86393
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