Advanced Search
MyIDEAS: Login to save this article or follow this journal

Dwelling Age, Redevelopment, and Housing Prices: The Case of Apartment Complexes in Seoul

Contents:

Author Info

  • Bun Lee

    ()

  • Eui-Chul Chung

    ()

  • Yong Kim

    ()

Registered author(s):

    Abstract

    The aging of a housing structure not only leads to depreciation but also increases the possibility of redevelopment. If redevelopment accompanies an increase in structural density in order to accommodate the increased demand for housing, it provides large capital gains to the existing owners. In this case, expectations of redevelopment in the near future and the eventual announcement of redevelopment plans can have a strong positive impact on the current price of housing. We test this hypothesis using a hedonic pricing model designed to decompose the age effects into depreciation effect and redevelopment effect. Based on 3,474 observations on apartments in Seoul in 2001, estimation results confirm our hypothesis. While the depreciation effect dominates the redevelopment effect until 15 to 19 years of age, depending on the specification, the redevelopment effect eventually dominates the depreciation effect thereafter, causing the apartment price to increase. At 27 years of age, the apartment price decreases by as much as 45∼53 percent of the initial value, due to depreciation. However, the redevelopment effect increases the price by as much as 28∼32 percent, driving the price up to 76∼87 percent of the original value. Copyright Springer Science + Business Media, Inc. 2004

    Download Info

    If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
    File URL: http://hdl.handle.net/10.1007/s11146-004-4831-y
    Download Restriction: Access to full text is restricted to subscribers.

    As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.

    Bibliographic Info

    Article provided by Springer in its journal The Journal of Real Estate Finance and Economics.

    Volume (Year): 30 (2004)
    Issue (Month): 1 (October)
    Pages: 55-80

    as in new window
    Handle: RePEc:kap:jrefec:v:30:y:2004:i:1:p:55-80

    Contact details of provider:
    Web page: http://www.springerlink.com/link.asp?id=102945

    Related research

    Keywords: dwelling age; redevelopment; hedonic pricing; apartments;

    References

    References listed on IDEAS
    Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
    as in new window
    1. Donald Haurin & David Brasington, 1996. "The Impact of School Quality on Real House Prices: Interjurisdictional Effects," Working Papers 010, Ohio State University, Department of Economics.
    2. Rosen, Sherwin, 1974. "Hedonic Prices and Implicit Markets: Product Differentiation in Pure Competition," Journal of Political Economy, University of Chicago Press, vol. 82(1), pages 34-55, Jan.-Feb..
    3. Clapp John M. & Giaccotto Carmelo, 1994. "The Influence of Economic Variables on Local House Price Dynamics," Journal of Urban Economics, Elsevier, vol. 36(2), pages 161-183, September.
    4. Amin Kaushik & Capozza Dennis R., 1993. "Sequential Development," Journal of Urban Economics, Elsevier, vol. 34(2), pages 142-158, September.
    5. Wheaton, William C., 1982. "Urban spatial development with durable but replaceable capital," Journal of Urban Economics, Elsevier, vol. 12(1), pages 53-67, July.
    6. Quigley, John M., 2006. "Urban Economics," Berkeley Program on Housing and Urban Policy, Working Paper Series qt0jr0p2tk, Berkeley Program on Housing and Urban Policy.
    7. Richard J. Arnott, 1978. "A Simple Urban Growth Model with Durable Housing," Working Papers 284, Queen's University, Department of Economics.
    8. Clapp, John M. & Giaccotto, Carmelo, 1998. "Residential Hedonic Models: A Rational Expectations Approach to Age Effects," Journal of Urban Economics, Elsevier, vol. 44(3), pages 415-437, November.
    9. Williams, Joseph T, 1991. "Real Estate Development as an Option," The Journal of Real Estate Finance and Economics, Springer, vol. 4(2), pages 191-208, June.
    10. Margolis, Stephen E, 1982. "Depreciation of Housing: An Empirical Consideration of the Filtering Hypothesis," The Review of Economics and Statistics, MIT Press, vol. 64(1), pages 90-96, February.
    11. Son, Jae-Young & Kim, Kyung-Hwan, 1998. "Analysis of Urban Land Shortages: The Case of Korean Cities," Journal of Urban Economics, Elsevier, vol. 43(3), pages 362-384, May.
    12. Joseph T. Williams, 1997. "Redevelopment of Real Assets," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 25(3), pages 387-407.
    13. Braid, Ralph M., 2001. "Spatial Growth and Redevelopment with Perfect Foresight and Durable Housing," Journal of Urban Economics, Elsevier, vol. 49(3), pages 425-452, May.
    14. Dixie M. Blackley & James R. Follain & Haeduck Lee, 1986. "An Evaluation of Hedonic Price Indexes for Thirty-four Large SMSAs," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 14(2), pages 179-205.
    15. Mills, Edwin S. & Simenauer, Ronald, 1996. "New Hedonic Estimates of Regional Constant Quality House Prices," Journal of Urban Economics, Elsevier, vol. 39(2), pages 209-215, March.
    16. Thorsnes, Paul, 2000. "Internalizing Neighborhood Externalities: The Effect of Subdivision Size and Zoning on Residential Lot Prices," Journal of Urban Economics, Elsevier, vol. 48(3), pages 397-418, November.
    17. Hite, Diane, et al, 2001. "Property-Value Impacts of an Environmental Disamenity: The Case of Landfills," The Journal of Real Estate Finance and Economics, Springer, vol. 22(2-3), pages 185-202, March-May.
    18. Capozza, Dennis & Li, Yuming, 1994. "The Intensity and Timing of Investment: The Case of Land," American Economic Review, American Economic Association, vol. 84(4), pages 889-904, September.
    19. Kennedy, Peter E, 1981. "Estimation with Correctly Interpreted Dummy Variables in Semilogarithmic Equations [The Interpretation of Dummy Variables in Semilogarithmic Equations]," American Economic Review, American Economic Association, vol. 71(4), pages 801, September.
    20. Åke Gunnelin, 2001. "The option to change the use of a property when future property values and construction costs are uncertain," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 22(7), pages 345-354.
    21. Benson, Earl D, et al, 1998. "Pricing Residential Amenities: The Value of a View," The Journal of Real Estate Finance and Economics, Springer, vol. 16(1), pages 55-73, January.
    22. Brueckner, Jan K., 1980. "A vintage model of urban growth," Journal of Urban Economics, Elsevier, vol. 8(3), pages 389-402, November.
    23. Stephen Malpezzi & Larry Ozanne & Thomas G. Thibodeau, 1987. "Microeconomic Estimates of Housing Depreciation," Land Economics, University of Wisconsin Press, vol. 63(4), pages 372-385.
    24. Capozza, Dennis R & Sick, Gordon A, 1991. "Valuing Long-Term Leases: The Option to Redevelop," The Journal of Real Estate Finance and Economics, Springer, vol. 4(2), pages 209-23, June.
    25. Grether, D. M. & Mieszkowski, Peter, 1974. "Determinants of real estate values," Journal of Urban Economics, Elsevier, vol. 1(2), pages 127-145, April.
    26. Mendelsohn, Robert, 1984. "Estimating the Structural Equations of Implicit Markets and Household Production Functions," The Review of Economics and Statistics, MIT Press, vol. 66(4), pages 673-77, November.
    27. Randolph, William C., 1988. "Estimation of housing depreciation: Short-term quality change and long-term vintage effects," Journal of Urban Economics, Elsevier, vol. 23(2), pages 162-178, March.
    28. Driscoll Paul & Dietz Brian & Alwang Jeffrey, 1994. "Welfare Analysis When Budget Constraints Are Nonlinear: The Case of Flood Hazard Reduction," Journal of Environmental Economics and Management, Elsevier, vol. 26(2), pages 181-199, March.
    Full references (including those not matched with items on IDEAS)

    Citations

    Lists

    This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

    Statistics

    Access and download statistics

    Corrections

    When requesting a correction, please mention this item's handle: RePEc:kap:jrefec:v:30:y:2004:i:1:p:55-80. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Guenther Eichhorn) or (Christopher F. Baum).

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If references are entirely missing, you can add them using this form.

    If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.