European Business Schools Librarian's Group

HEC Research Papers Series,
HEC Paris

No 1342: The Rate of Return on Real Estate: Long-Run Micro-Level Evidence

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

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

JEL-codes: G11; G23; N20; R30

59 pages, June 25, 2019

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