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

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Listed:
  • Verónica Bäcker-Peral
  • Jonathon Hazell
  • Atif R. Mian

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

  • Verónica Bäcker-Peral & Jonathon Hazell & Atif R. Mian, 2023. "Dynamics of the Long Term Housing Yield: Evidence from Natural Experiments," NBER Working Papers 31760, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:31760
    Note: AP CF EFG IFM ME
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    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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