House Age, Price and Rent: Implications from Land-Structure Decomposition

• Main Authors: Xu, Yangfei (Author), Zhang, Qinghua (Author), Zheng, Siqi (Contributor), Zhu, Guozhong (Author)
• Other Authors: Massachusetts Institute of Technology. Center for Real Estate (Contributor), Massachusetts Institute of Technology. Department of Urban Studies and Planning (Contributor)
• Format: Article
• Language: English
• Published: Springer US, 2018-05-22T14:31:01Z.
• Subjects: Article
• Online Access: Get fulltext

Big cities often witness land price outgrowing structure price. For such cities this paper derives two predictions regarding the dynamics between house prices, rent and structure age. First, older houses have a higher price growth rate than younger ones, even after controlling for location and other attributes; second, the age depreciation of house price, defined as the decline of house price with respect to house age, is slower than the similarly-defined age depreciation of rent. These hypotheses are supported by the micro-data on housing market in Beijing. These two inferences have implications for both real estate valuation and house price index construction. Keywords: Land price, Structure price, House prices, Rent, Depreciation
National Natural Science Foundation (China) (71625004)
National Natural Science Foundation (China) (71273154)
National Natural Science Foundation (China) (71322307)
National Natural Science Foundation (China) (71533004)
China. Ministry of Science and Technology. National Key Technologies R&D Program (2016YFC0502804)