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Superstar Returns

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Abstract
We study long-term returns on residential real estate in twenty-seven “superstar” cities in fifteen countries over 150 years. We find that total returns in superstar cities are close to 100 basis points lower per year than in the rest of the country. House prices tend to grow faster in the superstars, but rent returns are substantially greater outside the big agglomerations, resulting in higher long-run total returns. The excess returns outside the superstars can be rationalized as a compensation for risk, especially for higher co-variance with income growth and lower liquidity. Superstar real estate is comparatively safe.

Suggested Citation

  • Francisco Amaral & Martin Dohmen & Sebastian Kohl & Moritz Schularick, 2021. "Superstar Returns," Staff Reports 999, Federal Reserve Bank of New York.
    • Handle: RePEc:fip:fednsr:93542
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    Cited by:

    1. Hilber, Christian A. L. & Mense, Andreas, 2021. "Why have house prices risen so much more than rents in superstar cities?," LSE Research Online Documents on Economics 112668, London School of Economics and Political Science, LSE Library.

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    More about this item

    Keywords

    housing returns; housing risk; superstar cities; regional housing markets;
    All these keywords.

    JEL classification:

    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • N90 - Economic History - - Regional and Urban History - - - General, International, or Comparative
    • R21 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Housing Demand
    • R31 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Housing Supply and Markets

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