Dynamics of the long term housing yield: evidence from natural experiments

Each month, a fraction of UK property leases are extended by 90 years or more. We construct a new dataset using thousands of these natural experiments since 2000, and estimate the expected long-term housing yield, y∗. After remaining steady at around 5%, y∗ starts to decline when the Great Recession hits, and reaches a low of 2.7% in 2024. The decline is steeper in inelastic markets, while y∗ remains higher in regions more exposed to long-run climate risk. Our estimate of y∗ is updated in real time using public data.