Intergenerational discounting: A case from Hong Kong

Wong, Siu Kei; Chau, K. T.; Yiu, CY; Yu, Marco K.W.

doi:10.1016/j.habitatint.2007.08.015

Cited by 22 publications

(9 citation statements)

References 24 publications

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“…GMS, whose primary focus is the UK housing 4 A few other studies have used price differences across properties of varying lease lengths to estimate discount rates. Examining small residential lots in Hawaii, Fry and Mak (1984) estimate a discount rate of 11% p.a.. Wong et al (2008) infer a discount rate of 4% p.a. from Hong Kong housing data.…”

Section: Introductionmentioning

confidence: 99%

How Do Households Discount Over Centuries? Evidence from Singapore's Private Housing Market

2016

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. We examine Singapore's fairly homogeneous private-housing market and show that new apartments on historical multi-century leases trade at a non-zero discount relative to property owned in perpetuity. Descriptive regressions indicate that new apartments with 825 to 986 years of tenure remaining are priced 4 to 6% below new apartments under perpetual ownership contracts that are otherwise comparable. We consider an empirical model in which asset value is decomposed into the utility of housing services and a second factor that shifts with asset tenure and the discount rate schedule. Exploiting the supply of new property with tenure ranging from multiple decades to multiple centuries, we estimate the discount rate schedule, restricting it to vary smoothly over time through alternative parametric forms. Across different specifications and subsamples, we estimate discount rates that decline over time and, accounting for the observed price differences, are of the order of 0.5% p.a. by year 400-500. The finding that households making sizable transactions do not entirely discount benefits accruing many centuries from today is new to the empirical literature on discounting and, with the appropriate risk adjustment, of relevance to evaluating climate-change investments. Terms of use: Documents in D I S C U S S I O N P A P E R S E R I E JEL Classification:D61, G12, H43, Q51, Q54, R32

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Section: Introductionmentioning

confidence: 99%

How Do Households Discount Over Centuries? Evidence from Singapore's Private Housing Market

2016

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“…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.The shape of discount rate functionsor the term structure of discount ratesprovokes considerable research interest across a number of fields. In this article, we use sales of leasehold dwellings to investigate discount rates in housing markets, complementing a recent literature that exploits features of property tenure to estimate market discount rates over long horizons (Wong et al, 2008;Gautier and van Vuuren, 2014; Giglio et al, 2015a, b;Fesselmeyer et al, 2016). Under a leasehold arrangement, a property is owned only for a fixed term so the intuition for why leasehold prices may contain information on discount rates is straightforward.…”

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confidence: 99%

The Time Value of Housing: Historical Evidence on Discount Rates

Bracke

Pinchbeck

Wyatt

2017

The Economic Journal

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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.

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“…In the same way as evaluating land, the interest rate while evaluating entitlements may vary in the short or long term (Wong et al, 2008). Accordingly, the interest rate risk considered is estimated as a random variable, k t r , which may vary in the numerical range (k t p , k t 0 ) in accordance with a density function f(k t r ) (Pérez, 1992(Pérez, , 1997.…”

Section: Methods and Sources Of Informationmentioning

confidence: 99%

Valuating single payment entitlements: Spain

Caballer

Olmeda

Poza

2009

Span. j. agric. res.

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This paper attempts to develop a valuation method for estimating the market value of the single payment system (SPS) entitlements in the community agricultural policy (CAP) reform. These entitlements are a new agricultural intangible asset which is not linked to land and has a similar financial performance to bonds. After applying the PERT method, which was applied to the inherent risk involved in valuing fixed income assets, and specifically to the uncertainty of CAP after 2013, this methodology is applied to estimate the average value of entitlements in Spain.

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Intergenerational discounting: A case from Hong Kong

Cited by 22 publications

References 24 publications

How Do Households Discount Over Centuries? Evidence from Singapore's Private Housing Market

How Do Households Discount Over Centuries? Evidence from Singapore's Private Housing Market

The Time Value of Housing: Historical Evidence on Discount Rates

Valuating single payment entitlements: Spain

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