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

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 aro...

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Bibliographic Details
Published in:The Review of financial studies 2021-08, Vol.34 (8), p.3572-3607
Main Authors: Chambers, David, Spaenjers, Christophe, Steiner, Eva
Format: Article
Language:English
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Summary: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.
ISSN:0893-9454
1465-7368
DOI:10.1093/rfs/hhab028