Abstract
The value of a property comprises the value of both the building and the land. Numerous studies have reported a nonlinear relationship between house age and housing prices, which may result from mispricing the value of the land. The paper establishes a theoretical model to evaluate the optimal time for land redevelopment and the land value after redevelopment according to the real options. Although the depreciation effect causes the value of buildings to decrease as house age increases, properties with a lower residual building value have a higher probability of being redeveloped. Thus, the depreciation effect of building value and the inverse depreciation effect of land value contribute to the nonlinear relationship between house age and housing prices. Data from Taipei City, Taiwan, are employed for empirical analysis. The results imply that where land is scarce, housing prices are unlikely to depreciate due to ageing buildings.
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
More From: International Journal of Strategic Property Management
Disclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.