Superstar Returns

87 Pages Posted: 27 Dec 2021

See all articles by Francisco Amaral

Francisco Amaral

University of Bonn

Martin Dohmen

University of Bonn

Sebastian Kohl

Max Planck Society for the Advancement of the Sciences - Max Planck Institute for the Study of Societies

Moritz Schularick

University of Bonn - Department of Economics; Centre for Economic Policy Research (CEPR)

Date Written: December 2021

Abstract

We study long-term returns on residential real estate in twenty-seven “superstar” cities in fifteen countries over 150 years. We find that total returns in superstar cities are close to 100 basis points lower per year than in the rest of the country. House prices tend to grow faster in the superstars, but rent returns are substantially greater outside the big agglomerations, resulting in higher long-run total returns. The excess returns outside the superstars can be rationalized as a compensation for risk, especially for higher co-variance with income growth and lower liquidity. Superstar real estate is comparatively safe.

Keywords: housing returns, housing risk, superstar cities, regional housing markets

JEL Classification: G10, G12, N90, R21, R31

Suggested Citation

Amaral, Francisco and Dohmen, Martin and Kohl, Sebastian and Schularick, Moritz, Superstar Returns (December 2021). FRB of New York Staff Report No. 999, Available at SSRN: https://ssrn.com/abstract=3992670 or http://dx.doi.org/10.2139/ssrn.3992670

Francisco Amaral

University of Bonn ( email )

Regina-Pacis-Weg 3
Postfach 2220
Bonn, D-53012
Germany

Martin Dohmen

University of Bonn ( email )

Regina-Pacis-Weg 3
Postfach 2220
Bonn, D-53012
Germany

Sebastian Kohl

Max Planck Society for the Advancement of the Sciences - Max Planck Institute for the Study of Societies ( email )

Paulstr. 3
50676 Koln
Germany

Moritz Schularick (Contact Author)

University of Bonn - Department of Economics ( email )

Bonn
Germany

Centre for Economic Policy Research (CEPR)

London
United Kingdom

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