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

Abstract : Direct real estate investments are less profitable and more risky in the long run than previously thought. We hand-collect property-level financial data for four large U.K. institutional investors—Oxbridge colleges—for the period 1901–1970. Gross income yields initially fluctuate around 5%, but then trend downward (upward) for agricultural and residential (commercial) real estate. Net yields are about one third below gross yields on average. Long-term real income growth rates are close to zero. These findings imply real annualized net total returns of less than 4% across all property types. Moreover, real estate investments are associated with considerable idiosyncratic risks.
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Preprints, Working Papers, ...
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https://hal-hec.archives-ouvertes.fr/hal-02896386
Contributor : Antoine Haldemann <>
Submitted on : Friday, July 10, 2020 - 2:51:27 PM
Last modification on : Saturday, July 11, 2020 - 3:51:04 AM

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David Chambers, Christophe Spaenjers, Eva Maria Steiner. The Rate of Return on Real Estate: Long-Run Micro-Level Evidence. 2020. ⟨hal-02896386⟩

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