Direct Residential Real Estate in Oslo, Risk, Return and Comparison to the Equity Markets

Abstract

This thesis studies the nominal- and risk-adjusted returns from direct residential real estate investments in Oslo, for different dwelling types and areas, and compare with returns offered by OSEFX. We develop a hedonic regression model, to estimate individual home prices for each quarter between 2010 and 2020. We implement costs and compute different return series for each dwelling. We find that neither dwelling type or district in Oslo offers superior average asset returns, independent of cost structure. All dwelling types and districts offer lower variances and superior risk-adjusted asset returns, given a specific cost structure. We conclude that for a short-term horizon, the OSEFX are superior on both average and risk-adjusted returns. The long-term return to equity offers significantly higher average- and risk-adjusted returns.