The time value of housing: historical evidence on discount rates

Bracke, Philippe, Pinchbeck, Edward W. and Wyatt, James (2017) The time value of housing: historical evidence on discount rates. The Economic Journal, 128 (613). pp. 1820-1843. ISSN 0013-0133

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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.

Item Type:	Article
Official URL:	http://onlinelibrary.wiley.com/journal/10.1111/(IS...
Additional Information:	© 2017 Bank of England. The Economic Journal © Royal Economic Society
Divisions:	Spatial Economics Research Centre Centre for Economic Performance
Subjects:	H Social Sciences > HC Economic History and Conditions H Social Sciences > HG Finance
JEL classification:	G - Financial Economics > G1 - General Financial Markets > G10 - General R - Urban, Rural, and Regional Economics > R3 - Production Analysis and Firm Location > R30 - General
Date Deposited:	08 Jan 2018 12:00
Last Modified:	12 Dec 2024 01:36
Projects:	ES/M010341/1, ES/J021342/1
Funders:	Economic Social Research Council
URI:	http://eprints.lse.ac.uk/id/eprint/86393

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