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Dynamics of the Long Term Housing Yield: Evidence from Natural Experiments

Author

Listed:
  • Veronica Backer-Peral

    (Princeton)

  • Jonathon Hazell

    (London School of Economics (LSE))

  • Atif Mian

    (Princeton
    Natioanl Bureau of Economic Research (NBER))

Abstract

Every month, a fraction of UK property leases are extended for another 90 years or more. We build a new dataset of thousands of these natural experiments from 2000 onwards to estimate the expected long term housing yield, y∗. Starting from a level of 5.3%, y∗ starts to fall during the Great Recession, reaching a low of 2.8% in 2023. Real time data shows y∗ has not risen since 2021, despite rising shorter term yields. Cross-sectional estimates show that y∗ is higher in areas with more housing risk, and falls by more in areas with more inelastic housing supply.

Suggested Citation

  • Veronica Backer-Peral & Jonathon Hazell & Atif Mian, 2024. "Dynamics of the Long Term Housing Yield: Evidence from Natural Experiments," Discussion Papers 2428, Centre for Macroeconomics (CFM).
    • Handle: RePEc:cfm:wpaper:2428
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    File URL: https://www.lse.ac.uk/CFM/assets/pdf/CFM-Discussion-Papers-2024/CFMDP2024-28-Paper.pdf
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    References listed on IDEAS

    as
    1. Emmanuel Farhi & Francois Gourio, 2018. "Accounting for Macro-Finance Trends: Market Power, Intangibles, and Risk Premia," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 49(2 (Fall)), pages 147-250.
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    Cited by:

    1. Masek, Frantisek & Zemlicka, Jan, 2024. "Average inflation targeting: how far to look into the past and the future?," Working Paper Series 2955, European Central Bank.

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    More about this item

    JEL classification:

    • E4 - Macroeconomics and Monetary Economics - - Money and Interest Rates
    • E40 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - General
    • E5 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit
    • G5 - Financial Economics - - Household Finance

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