Yield Curves for Main Street: Housing and financial capital returns in a developing economy

Abstract

Total housing real returns in large agglomerations in Kazakhstan are approximately 1% per year lower than in the rest of the country. Our results are also supportive of emerging literature, that housing real rent returns, adjusted for population, are generally lower in large agglomerations compared to the rest of the country. We indicate that within-country heterogeneity of housing returns mainly result from the spatial concentration of economic activity in urban centers. Our findings also suggest that residential real estate in a developing economy produces higher returns compared to financial capital over the long-run. At the same time, the volatility of holding housing investment is substantially higher than its “safe” alternative (i.e. deposit rate paid for savings deposits). As such, “Yield Curves for Main Street” concept refers to the general positive spread between total housing returns and financial capital returns in a developing economy.