Age-related depreciation of older properties

Abstract

ABSTRACT The value of a property tends to decrease over time as it ages, resulting in a reduced ability to generate the same value. Property depreciation is a multifaceted concept that encompasses both technical and economic aspects. The purpose of the study is to evaluate whether additional information on the quality of older single-family homes affected the depreciation factor. We collected specific data from property owners on the frequency of various maintenance and reinvestment operations, both internal and external, such as the roof, foundation, heating, and kitchen. Our database consists of nearly 10,000 owner-occupied single-family houses in Sweden sold between the beginning of 2021 and 2022 that are over 30 years old. Our results show, as expected, that the depreciation per year for older properties is lower. However, for older properties that have been renovated, the age-related price effect is an appreciation. This is especially true for older properties built before 1940. Renovating and maintaining older properties can mitigate the age-related decline in prices and should be taken into account when valuing properties, especially properties older than 80 years.