Bracke, Philippe, Pinchbeck, Ted and Wyatt, James (2014) The time value of housing: historical evidence from London residential leases. SERC discussion papers (SERCDP0168). Spatial Economics Research Centre, London, UK.
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Abstract
Most housing transactions in London involve trading long leases of varying lengths. We exploit this feature to estimate the time value of housing --- the relationship between the value of a property and the length of time it will be owned for --- over the range 1-99 years. To do so, we compile a unique historical dataset from 1987 to 1992 to abstract from current institutional features of the UK system, for instance rights to extend leases that could confound our results. By applying hedonic techniques to these data we provide new evidence on how the market values leasehold properties. We find that the time value of housing over the range 1-99 is similar to an exponential shape, a finding that suggests sophisticated pricing behaviour in the London residential market. Digging deeper, however, we show that leasehold prices depart from this predictable pattern in a way that is consistent with a declining discount rate schedule
| Item Type: | Monograph (Discussion Paper) |
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| Official URL: | http://www.spatialeconomics.ac.uk/ |
| Additional Information: | © 2014 The Authors |
| Divisions: | Spatial Economics Research Centre |
| Subjects: | H Social Sciences > HC Economic History and Conditions H Social Sciences > HG Finance |
| JEL classification: | G - Financial Economics > G1 - General Financial Markets > G12 - Asset Pricing; Trading volume; Bond Interest Rates R - Urban, Rural, and Regional Economics > R3 - Production Analysis and Firm Location > R30 - General |
| Date Deposited: | 25 Nov 2015 10:24 |
| Last Modified: | 11 Dec 2024 19:16 |
| Funders: | Economic and Social Research Council, Department for Business, Innovation & Skills, Welsh Government |
| URI: | http://eprints.lse.ac.uk/id/eprint/64504 |
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