Housing as a Financial Asset

From IMF’s Global Financial Stability Report – April 2018:

“Housing is an important asset class for households and investors. In a typical economy, housing wealth, on average, accounts for roughly one-half of total national wealth and can fluctuate considerably over time (Piketty 2014). Real estate investors often borrow to purchase housing assets, making mortgage payments and receiving rental income and potential capital gains. Publicly traded real estate investment trusts have become available in many countries, allowing investors to invest indirectly in the real estate market. In addition, institutional investors have been increasing their direct exposure to residential real estate in recent years (see Figure 3.3 in the main text).

Investing in housing assets can yield considerable returns in the long term, but is subject to significant variation over time. In many advanced economies, the average annual real return on housing assets between 1950 and 2015 lies between 5 percent and 8 percent,comparable in magnitude to that of equity investment but with a lower standard deviation (Jordà and others 2017). In the shorter term, however, the expected returns on housing assets can vary significantly over time and are affected by the risk appetite of financial market investors as well as other behavioral factors (for example, Cheng, Raina, and Xiong 2014; Brunnermeier and Julliard 2008).”


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Posted by at 10:33 AM

Labels: Global Housing Watch


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