Property Value, Building Age and Urban Renewal: A Study of the Apartment Market in Taipei

This paper investigates the impact of building age on the value of apartments in Taipei City. Using a dataset that separates the value of land and improvements, we explicitly measure how each value component is affected by property age, and find that inverse depreciation exists in total property value and land value, but not in improvement value. This finding is consistent with the hypothesis that inverse depreciation is attributable to increasing redevelopment probability in older properties. Additionally, we examine the locational variation in the depreciation pattern across districts in the city, and discover that the redevelopment value increases faster in areas with higher housing prices. The empirical results suggest that in highprice areas, property owners are more willing to reconstruct or renovate their aging properties. The policy implication is that in order to promote a well-balanced urban environment and revitalize deteriorated areas, the city government should prioritize its resources so areas that receive less attention from the private sector can benefit from the urban renewal programs.