Abstract
Most London housing transactions involve trading long leases of varying lengths. We exploit this to estimate the time value of housing – the relationship between the price of a property and the term of ownership – over a 100 years and derive implied discount rates. For our empirical analysis, we compile a unique historical data set (1987–92) to abstract from the right to extend leases currently enjoyed by tenants. Across a variety of specifications and samples, we find that leasehold prices are consistent with a time declining schedule and low long-term discount rates in housing markets.
Original language | English |
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Pages (from-to) | 1820-1843 |
Number of pages | 24 |
Journal | Economic Journal |
Volume | 128 |
Issue number | 613 |
Early online date | 21 Mar 2017 |
DOIs | |
Publication status | Published - Aug 2018 |