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House Age, Price and Rent: Implications from Land-Structure Decomposition

Author

Listed:
  • Yangfei Xu

    (Shanghai University of International Business and Economics
    Tsinghua University)

  • Qinghua Zhang

    (Peking University)

  • Siqi Zheng

    (Massachusetts Institute of Technology)

  • Guozhong Zhu

    (University of Alberta)

Abstract

Big cities often witness land price outgrowing structure price. For such cities this paper derives two predictions regarding the dynamics between house prices, rent and structure age. First, older houses have a higher price growth rate than younger ones, even after controlling for location and other attributes; second, the age depreciation of house price, defined as the decline of house price with respect to house age, is slower than the similarly-defined age depreciation of rent. These hypotheses are supported by the micro-data on housing market in Beijing. These two inferences have implications for both real estate valuation and house price index construction.

Suggested Citation

  • Yangfei Xu & Qinghua Zhang & Siqi Zheng & Guozhong Zhu, 2018. "House Age, Price and Rent: Implications from Land-Structure Decomposition," The Journal of Real Estate Finance and Economics, Springer, vol. 56(2), pages 303-324, February.
    • Handle: RePEc:kap:jrefec:v:56:y:2018:i:2:d:10.1007_s11146-016-9596-6
    DOI: 10.1007/s11146-016-9596-6
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    References listed on IDEAS

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