Global Housing Returns, and the Emergence of the Safe Asset, 1465-2024

Abstract: This paper presents new stylized facts and time series on global real estate returns and inflection points over centuries, by combining new historical primary data with machine learning approaches and econometrics. The evidence from different methodologies is consistent with the idea of inefficiencies having existed for the very long run in housing, with (excess) returns secularly increasing since the 1600s – showing few structural breaks, relatively fast mean reversion, and benefiting from a secularly falling cost of capital (mortgage rates). The evidence allows a broader contextualization of real estate in the long-run asset universe. Notably, real estate dynamics are consistent with the idea of a broader asset universe trend towards the "low expected returns" environment of the early 21st century: sovereign interest rates declined alongside rental yields over centuries, but the former did so more aggressively and from around 1600 appear to command an ever-rising "safety premium".

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