ABSTRACT
This chapter outlines the main long-term factors which have influenced the property investment market, the importance of which will then be analysed using simple econometric models. Prior to the mid-1950s investment property was typically let on long leases, of 99 or 999 years, at fixed rents. The effect of the reduction in intervals between rent reviews over the 20 years since the mid-1950s was to increase the long-run rate of return on investment property. The development cycle produces a very strong, and regular, cyclical pattern in property investment returns, with intervals from troughs to peaks of between four and five years. As property values, and the volume of institutional property investment, are largely determined by current income plus the discounted value of future income, the crashes could therefore be expected to reduce the growth of property values and investment in the property sector.
