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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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Identification Number: 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.

Item Type: Article
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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: 20 Oct 2021 02:34
Projects: ES/M010341/1, ES/J021342/1
Funders: Economic Social Research Council

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