House Age, Price and Rent: Implications from Land-Structure Decomposition
Posted: 2 Mar 2018
Date Written: February 21, 2018
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 young 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
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