Does Housing Vintage Matter? Exploring the Historic City Center of Amsterdam

28 Pages Posted: 19 Dec 2018

See all articles by Lyndsey Rolheiser

Lyndsey Rolheiser

Ryerson University, School of Urban & Regional Planning; Harvard University - Center for Population and Development Studies

Dorinth van Dijk

De Nederlandsche Bank; Massachusetts Institute of Technology (MIT)

Alex Van de Minne

University of Connecticut - Department of Finance

Date Written: December 17, 2018

Abstract

A home is typically thought of as a bundle of land and structure. Land is supplied inelastically and is non-reproducible. Land values are therefore affected by a number of demand factors. Conceptually, structures are easily produced, and thus are supplied elastically. Under elastic supply, it is reasonable to assume that replacement cost should be equivalent to the value of the structure for new properties. Here, we examine how particular structure characteristics may introduce heterogeneity into these demand and supply relationships. In other words, how do structure vintages influence price dynamics. Older vintages are not easily reproducible leading to the value of an older vintage to potentially diverge from its replacement cost. To test our hypotheses, we employ a nonlinear model in a Bayesian structural timeseries approach that explicitly disentangles structure and land values to identify vintage effects separately from physical deterioration and land values. We find large differences in price dynamics between four distinct vintages of Amsterdam old city center apartments. Between 1999 – 2016, new construction had an average return of 1.7%, with a standard deviation of 2.4%. On the other hand, properties build in the 19th century had an average return of 3.6% with a standard deviation of 6.1%, during the same period.

Keywords: land and structure prices, depreciation, new construction, structural time series

JEL Classification: R21, R31, C11

Suggested Citation

Rolheiser, Lyndsey and van Dijk, Dorinth and Van de Minne, Alex, Does Housing Vintage Matter? Exploring the Historic City Center of Amsterdam (December 17, 2018). De Nederlandsche Bank Working Paper No. 617, Available at SSRN: https://ssrn.com/abstract=3303778 or http://dx.doi.org/10.2139/ssrn.3303778

Lyndsey Rolheiser

Ryerson University, School of Urban & Regional Planning

350 Victoria Street
Toronto, Ontario M5B 2K3
Canada

Harvard University - Center for Population and Development Studies ( email )

9 Bow Street
Cambridge, MA 02138
United States

Dorinth Van Dijk (Contact Author)

De Nederlandsche Bank ( email )

PO Box 98
1000 AB Amsterdam
Amsterdam, 1000 AB
Netherlands

Massachusetts Institute of Technology (MIT) ( email )

77 Massachusetts Avenue
50 Memorial Drive
Cambridge, MA 02139-4307
United States

Alex Van de Minne

University of Connecticut - Department of Finance ( email )

School of Business
2100 Hillside Road
Storrs, CT 06269
United States

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