Capitalization rate

Real estate investment trust

Economics

Real estate

Business

Politics

Political science

Monetary economics

Residential real estate

Rate of return

Finance

Investment (military)

Real property

Net income

Cost approach

Review of Financial Studies

Real estate—housing in particular—is a less profitable investment in the long run than previously thought. We hand-collect property-level financial data for the institutional real estate portfolios of four large Oxbridge colleges over the period 1901–1983. Gross income yields initially fluctuate around 5%, but then trend downward (upward) for agricultural and residential (commercial) real estate. Long-term real income growth rates are close to zero for all property types. Our findings imply annualized real total returns, net of costs, ranging from approximately 2.3% for residential to 4.5% for agricultural real estate.

The Rate of Return on Real Estate: Long-Run Micro-Level Evidence