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

Posted: 2 Mar 2018

See all articles by Yangfei Xu

Yangfei Xu

Tsinghua University - Hang Lung Center for Real Estate

Qinghua Zhang

Peking University - Guanghua School of Management

Siqi Zheng

Massachusetts Institute of Technology (MIT) - Center for Real Estate; Massachusetts Institute of Technology (MIT) - Department of Urban Studies & Planning; Hang Lung Center for Real Estate, Tsinghua University

Guozhong Zhu

University of Alberta - Department of Marketing, Business Economics & Law

Date Written: February 21, 2018

Abstract

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

Suggested Citation

Xu, Yangfei and Zhang, Qinghua and Zheng, Siqi and Zhu, Guozhong, House Age, Price and Rent: Implications from Land-Structure Decomposition (February 21, 2018). Journal of Real Estate Finance and Economics, Vol. 56, No. 2, 2018; University of Alberta School of Business Research Paper No. 3127740. Available at SSRN: https://ssrn.com/abstract=3127740

Yangfei Xu

Tsinghua University - Hang Lung Center for Real Estate ( email )

HeShanHeng Building
Beijing, 100084
China

Qinghua Zhang

Peking University - Guanghua School of Management ( email )

Peking University
Beijing, Beijing 100871
China

Siqi Zheng (Contact Author)

Massachusetts Institute of Technology (MIT) - Center for Real Estate ( email )

Building 9-323
Cambridge, MA 02139
United States

HOME PAGE: http://https://siqizheng.mit.edu/

Massachusetts Institute of Technology (MIT) - Department of Urban Studies & Planning ( email )

77 Massachusetts Avenue
Cambridge, MA 02139
United States

Hang Lung Center for Real Estate, Tsinghua University ( email )

HeShanHeng Building
Beijing, 100084
China

HOME PAGE: http://https://siqizheng.mit.edu/

Guozhong Zhu

University of Alberta - Department of Marketing, Business Economics & Law ( email )

Edmonton, Alberta T6G 2R6
Canada

Here is the Coronavirus
related research on SSRN

Paper statistics

Abstract Views
117
PlumX Metrics