The Total Return and Risk to Residential Real Estate

P. Eichholtz, M. Korevaar*, T. Lindenthal, R. Tallec

*Corresponding author for this work

Research output: Contribution to journalArticleAcademicpeer-review

4 Citations (Web of Science)

Abstract

We estimate total returns to rental housing by studying over 170,000 hand-collected archival observations of prices and rents for individual houses in Paris (1809–1943) and Amsterdam (1900–1979). The annualized real total return, net of costs and taxes, is 4.0% for Paris and 4.8% for Amsterdam and entirely comes from rental yields. Our returns weakly correlate with the implied returns in Jordà et al. (2019) and are substantially lower. We decompose total return risk at the individual asset level and find that yield risk becomes an increasingly important component of property-level risk for longer investment horizons.
Original languageEnglish
Pages (from-to)3608-3646
Number of pages39
JournalReview of Financial Studies
Volume34
Issue number8
DOIs
Publication statusPublished - 1 Aug 2021

JEL classifications

  • g11 - "Portfolio Choice; Investment Decisions"
  • g12 - "Asset Pricing; Trading volume; Bond Interest Rates"
  • n20 - Economic History: Financial Markets and Institutions: General, International, or Comparative
  • r30 - Real Estate Markets, Production Analysis, and Firm Location: General

Keywords

  • HOUSE PRICES
  • MARKET
  • INDEX
  • FUNDAMENTALS
  • EQUILIBRIUM

Cite this