House price depreciation rates and level of maintenance
My objective in this paper is to estimate different depreciation rates of house prices depending on the level of maintenance of the property and the location of the property. I do this by supplementing transaction price data with owner information about level of maintenance. The result indicates that the level of maintenance has a substantial impact on the price level. Since maintenance offsets some of the physical deterioration of the property, the depreciation rate will be lowered by maintenance, ceteris paribus. To be able to estimate maintenance effects on depreciation rates, I isolated the interaction effect between the level of maintenance and the age of the property to allow for the fact that maintenance has an impact on the effective age of the property. In this study, I separate maintenance into indoor and outdoor maintenance levels (or absence of maintenance). My results show that the depreciation rates are significantly different for a maintained property and for a property that is not maintained. The price difference between a 40-year-old property (built in 1960) and maintained both indoors and outdoors and a property of the same age that is not maintained is about 13% (-10% compared to -23% in total age effect). The absence of outdoor maintenance has more impact on price depreciation rates.
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.
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.
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.:
- 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.
- 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..
- Silver, Mick, 2000. "Hedonic regressions: an application to VCRs using scanner data," Omega, Elsevier, vol. 28(4), pages 399-408, August.
- Chinloy, Peter, 1980. "The effect of maintenance expenditures on the measurement of depreciation in housing," Journal of Urban Economics, Elsevier, vol. 8(1), pages 86-107, July.
- Brent C Smith, 2004. "Economic Depreciation of Residential Real Estate: Microlevel Space and Time Analysis," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 32(1), pages 161-180, 03.
- 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.
- Mats Wilhelmsson, 2000. "The Impact of Traffic Noise on the Values of Single-family Houses," Journal of Environmental Planning and Management, Taylor & Francis Journals, vol. 43(6), pages 799-815.
- Halvorsen, Robert & Palmquist, Raymond, 1980. "The Interpretation of Dummy Variables in Semilogarithmic Equations," American Economic Review, American Economic Association, vol. 70(3), pages 474-475, June.
- Knight, John R. & Sirmans, C. F., 1996. "Depreciation, Maintenance, and Housing Prices," Journal of Housing Economics, Elsevier, vol. 5(4), pages 369-389, December.
- John R. Knight & Thomas Miceli & C. F. Sirmans, 2000. "Repair Expenses, Selling Contracts, and House Prices," Journal of Real Estate Research, American Real Estate Society, vol. 20(3), pages 323-336.