The time value of housing: historical evidence on discount rates
Bracke, P., Pinchbeck, E. W. & Wyatt, J.
(2017).
The time value of housing: historical evidence on discount rates.
The Economic Journal,
128(613), 1820-1843.
https://doi.org/10.1111/ecoj.12501
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.
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picture_as_pdf - Pinchbeck_Time value of housing_2018.pdf
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subject - Accepted Version
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picture_as_pdf - Pinchbeck_Time-value-of-housing_Published.pdf
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subject - Published Version
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