Work

The Time Value of Housing: Historical Evidence on Discount Rates

Year: 2017

Type: article

Abstract: Most London housing transactions involve trading long leases of varying lengths. We exploit this to estimate the time value of housing – the relationship between the price of a property and the term of ownership – over a 100 years and derive implied discount rates. For our empirical analysis, we compile a unique historical data set (1987–92) to abstract from the right to extend leases currently enjoyed by tenants. Across a variety of specifications and samples, we find that leasehold prices are consistent with a time declining schedule and low long‐term discount rates in housing markets.

Source: The Economic Journal

DOI: 10.1111/ecoj.12501

Authors: Philippe Bracke, Edward W. Pinchbeck, James Wyatt

Institutions: Bank of England, London School of Economics and Political Science, Royal Institution of Chartered Surveyors

Language: English

Topic: Housing Market and Economics

Subfield: Economics and Econometrics

Field: Economics, Econometrics and Finance

Domain: Social Sciences

Open Access status: hybrid

Estimated APC paid: $4,463

Funder: Economic and Social Research Council