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The Rate of Return on Real Estate: Long-Run Micro-Level Evidence
[Inflation protection from homeownership: Long-run evidence, 1814–2008]

Author

Listed:
  • David Chambers
  • Christophe Spaenjers
  • Eva Steiner
  • Stijn Van Nieuwerburgh

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.

Suggested Citation

  • David Chambers & Christophe Spaenjers & Eva Steiner & Stijn Van Nieuwerburgh, 2021. "The Rate of Return on Real Estate: Long-Run Micro-Level Evidence [Inflation protection from homeownership: Long-run evidence, 1814–2008]," The Review of Financial Studies, Society for Financial Studies, vol. 34(8), pages 3572-3607.
    • Handle: RePEc:oup:rfinst:v:34:y:2021:i:8:p:3572-3607.
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    File URL: http://hdl.handle.net/10.1093/rfs/hhab028
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    Citations

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    Cited by:

    1. William N Goetzmann & Christophe Spaenjers & Stijn Van Nieuwerburgh, 2021. "Real and Private-Value Assets [Gendered prices]," The Review of Financial Studies, Society for Financial Studies, vol. 34(8), pages 3497-3526.
    2. Aleksandar Andonov & Roman Kräussl & Joshua Rauh & Stijn Van Nieuwerburgh, 2021. "Institutional Investors and Infrastructure Investing [Pension fund asset allocation and liability discount rates]," The Review of Financial Studies, Society for Financial Studies, vol. 34(8), pages 3880-3934.
    3. Fehrle, Daniel & Heiberger, Christopher, 2024. "The return on everything and the business cycle in production economies," Economic Modelling, Elsevier, vol. 136(C).
    4. Claudio Borio & Øyvind Eitrheim & Marc Flandreau & Clemens Jobst & Jan F Qvigstad & Ryland Thomas, 2022. "Historical monetary and financial statistics for policymakers: towards a unified framework," BIS Papers, Bank for International Settlements, number 127, October –.
    5. Stefano Colonnello & Roberto Marfè & Qizhou Xiong, 2021. "Housing Yields," Working Papers 2021:21, Department of Economics, University of Venice "Ca' Foscari", revised 2021.
    6. Korevaar, Matthijs, 2023. "Reaching for yield and the housing market: Evidence from 18th-century Amsterdam," Journal of Financial Economics, Elsevier, vol. 148(3), pages 273-296.
    7. Wang, Jiaxin & Huang, Xiang & Gu, Qiankun & Song, Zilong & Sun, Ruiyi, 2023. "How does fintech affect bank risk? A perspective based on financialized transfer of government implicit debt risk," Economic Modelling, Elsevier, vol. 128(C).

    More about this item

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors
    • N20 - Economic History - - Financial Markets and Institutions - - - General, International, or Comparative
    • R30 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - General

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