Housing Yields

67 Pages Posted: 22 Mar 2021 Last revised: 7 Dec 2021

See all articles by Stefano Colonnello

Stefano Colonnello

Ca Foscari University of Venice; Halle Institute for Economic Research

Roberto Marfè

University of Turin - Collegio Carlo Alberto

Qizhou Xiong

Said Business School, University of Oxford

Date Written: November 24, 2021

Abstract

This paper investigates heterogeneity in residential property yields using rental and sale listings from a major German online real estate platform between 2007 and 2017. Equipped with property-level rent-to-price ratios obtained by matching properties for sale and for rent, we show that these yields strongly co-move with regional factors, such as population age structure, industry structure, housing supply rigidities, and the liquidity and size of the housing market. Differences are particularly pronounced between globally relevant cities and other areas. Despite the importance of regional factors, the degree of unexplained heterogeneity in yields is puzzlingly high relative to equity yields, whose variation can be largely understood through a few systematic factors. Specifically, a substantial fraction of housing yields heterogeneity is explained neither by local factors nor by an extensive array of property-specific observable features, possibly pointing to the crucial role of idiosyncratic factors, within-city aggregation effects, as well as of informational and regulatory frictions.

Keywords: Housing, Rent-to-Price Ratio, Asset Pricing, Agglomeration Economies

JEL Classification: G12, G51, R31

Suggested Citation

Colonnello, Stefano and Marfè, Roberto and Xiong, Qizhou, Housing Yields (November 24, 2021). Proceedings of Paris December 2021 Finance Meeting EUROFIDAI - ESSEC, Available at SSRN: https://ssrn.com/abstract=3786959 or http://dx.doi.org/10.2139/ssrn.3786959

Stefano Colonnello

Ca Foscari University of Venice ( email )

Dorsoduro 3246
Venice, Veneto 30123
Italy

Halle Institute for Economic Research ( email )

P.O. Box 11 03 61
Kleine Maerkerstrasse 8
D-06017 Halle, 06108
Germany

Roberto Marfè

University of Turin - Collegio Carlo Alberto ( email )

Piazza Arbarello 8
Torino, Torino 10122
Italy

Qizhou Xiong (Contact Author)

Said Business School, University of Oxford ( email )

Park End Street
Oxford, OX1 1HP
Great Britain

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