Housing Yields

We build a granular dataset of residential property yields using rental and sale listings from a major German real estate platform. With more than 1.5 million property-level rent-to-price ratios, we document a novel \textit{heterogeneity puzzle}. About two-fifths of yield dispersion remains unexplained after controlling for extensive observable property characteristics and postal code-level time-varying factors using fixed effects. When we absorb finer neighborhood amenities through richer fixed effects, the unexplained share remains close to one-third. This evidence points to the importance of investors' beliefs and preferences---rather than several alternative explanations we test---as sources of heterogeneity in risk premia.