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Do distant rent flows matter? Inferring discount rates from leasehold apartments in Denmark

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  • Andersen, Carsten

Abstract

I estimate medium and long-run discount rates in the Danish housing market. From leasehold apartment sales I observe transactions of use rights for 34–75 years, a relevant yet understudied horizon for trade-offs of current costs and future benefits. In contrast to related studies of leaseholds I find a discount rate of 5.4% which is more on par with conventional estimates of the real return to capital. Nonparametric estimation of the term schedule suggests a flat pattern.

Suggested Citation

  • Andersen, Carsten, 2022. "Do distant rent flows matter? Inferring discount rates from leasehold apartments in Denmark," Economics Letters, Elsevier, vol. 219(C).
    • Handle: RePEc:eee:ecolet:v:219:y:2022:i:c:s0165176522002919
    DOI: 10.1016/j.econlet.2022.110798
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    References listed on IDEAS

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    1. Maureen L. Cropper & Mark C. Freeman & Ben Groom & William A. Pizer, 2014. "Declining Discount Rates," American Economic Review, American Economic Association, vol. 104(5), pages 538-543, May.
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    Keywords

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    JEL classification:

    • D6 - Microeconomics - - Welfare Economics
    • H43 - Public Economics - - Publicly Provided Goods - - - Project Evaluation; Social Discount Rate
    • Q51 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Valuation of Environmental Effects
    • Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy
    • R3 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location

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