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

59 Pages Posted: 25 Jun 2019 Last revised: 6 Jan 2021

See all articles by David Chambers

David Chambers

University of Cambridge - Judge Business School; CEPR

Christophe Spaenjers

HEC Paris - Finance Department

Eva Steiner

Penn State Smeal College of Business

Date Written: January 5, 2021

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 Classification: G11, G23, N20, R30

Suggested Citation

Chambers, David and Spaenjers, Christophe and Steiner, Eva Maria, 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

David Chambers

University of Cambridge - Judge Business School ( email )

Trumpington Street
Cambridge, CB2 1AG
United Kingdom
44 (0)1223 339700 (Phone)

CEPR ( email )

London
United Kingdom

Christophe Spaenjers (Contact Author)

HEC Paris - Finance Department ( email )

1 rue de la Liberation
Jouy-en-Josas Cedex, 78351
France

Eva Maria Steiner

Penn State Smeal College of Business ( email )

University Park, PA 16802
United States

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
887
Abstract Views
4,051
rank
30,840
PlumX Metrics