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

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 Classification: G11, G23, N20, R30

Suggested Citation: Suggested Citation

Chambers, David and Spaenjers, Christophe and Steiner, Eva, The Rate of Return on Real Estate: Long-Run Micro-Level Evidence (January 5, 2021). HEC Paris Research Paper No. FIN-2019-1342, Available at SSRN: https://ssrn.com/abstract=3407236 or http://dx.doi.org/10.2139/ssrn.3407236