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dc.contributor.authorChambers, David
dc.contributor.authorSpaenjers, Christian
dc.contributor.authorSteiner, Eva
dc.description.abstractWe provide evidence that direct real estate investments are less profitable and more risky in the long run than previously thought. We hand-collect property-level data on realized income, expenses, and transaction prices from the archives of four large institutional investors in the U.K.—historically important Oxbridge colleges—for the period 1901–1970. Gross income yields mostly fluctuate around 5%, but trend to lower (higher) levels for agricultural and residential (commercial) real estate near the end of our sample period. Operating costs mean that net yields are about one third lower than gross yields on average. Long-term real income growth rates are between -1.0% and 0.0% for the three main property types. Together these findings imply limited long-run capital gains and real annualized net total returns of less than 4% across all property types. Moreover, we find substantial volatility in net income streams and variation in relative price levels across transacted properties, revealing the considerable idiosyncratic risks associated with real estate investments.
dc.rightsRequired Publisher Statement: Copyright held by the authors.
dc.subjectreal estate
dc.subjectproperty prices
dc.subjectrental yields
dc.subjectlong-run returns
dc.subjectidiosyncratic risks
dc.titleThe Rate of Return on Real Estate: Long-Run Micro-Level Evidence
dcterms.contributorChambers, David: University of Cambridge
dcterms.contributorSpaenjers, Christian: HEC Paris
dcterms.contributorSteiner, Eva: Cornell University School of Hotel Administration
dc.description.legacydownloadsSteiner26_The_rate_of_return_on_real_estate.pdf: 325 downloads, before Aug. 1, 2020.

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