Microeconomic Estimates of Housing Depreciation

Malpezzi, Stephen; Ozanne, Larry; Thibodeau, Thomas G.

doi:10.2307/3146294

Cited by 122 publications

(88 citation statements)

References 13 publications

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“…There have been many hedonic studies on building depreciation. Some found linear depreciation rates ( Hulten and Wykoff, 1981 ;Malpezzi et al ., 1987 ;Wykoff, 1989 ), while others found nonlinear ones ( Chinloy, 1977 ;Shilling et al ., 1991 ;Yiu, 2002 ).…”

Section: Estimation Of the Housing Depreciation Ratementioning

confidence: 99%

Building depreciation and sustainable development

Yiu

2007

J Build Apprais

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Sustainable development is a hot topic, but is mostly referred to environmental protection, although it encompasses environmental, social and economic developments as defi ned by the United Nations. Worse still, the impacts of building maintenance on sustainable (economic) development are almost totally ignored. This paper aims to carry out the fi rst sensitivity analysis of the impacts of housing depreciation on sustainable development in Hong Kong. The analysis is based on an empirical result of the housing depreciation rate and an estimation of the ageing trend of housing in Hong Kong. The results highlight the utmost importance of building maintenance on achieving sustainable development. It does not only reduce construction waste, but it also enhances the total asset value of the city. For example, the analysis shows that a 10 per cent reduction of housing depreciation would yield about 14 per cent increase in gross domestic product (GDP) in a decade, but it just costs about 2.3 per cent of GDP.

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Section: Estimation Of the Housing Depreciation Ratementioning

confidence: 99%

Building depreciation and sustainable development

Yiu

2007

J Build Apprais

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“…These estimates are in line with the existing literature, and robust to the different methodologies. 26 Our estimates for 24 Malpezzi, Ozanne and Thibodeau (1987) provide an overview of the literature on depreciation. For example, Leigh (1980) estimates the annual depreciation rate of housing units in the U.S. to be between 0.36% and 1.36%.…”

Section: A25mentioning

confidence: 99%

“…A.107 1880-20131893, 19891918, 1932, 1944Belgium 1975Canada 1975Denmark 19751987Finland 197519911993France 18401882, 1889, 1907, 19301871, 1915, 1943Germany 1975Japan 19751992Italy 197511990, 2008Netherlands 16491893, 1907, 1921, 19391893, 1918, 1944New Zealand 19751987Norway 1819-20131899, 1922, 1931, 19881918, 1921, 1944Singapore 19751982South Africa 19751977, 1989NA South Korea 1975...…”

Section: Appendix Figuresmentioning

confidence: 99%

Very Long-Run Discount Rates

Giglio¹,

Maggiori²,

Stroebel³

2014

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We provide direct estimates of how agents trade off immediate costs and uncertain future benefits that occur in the very long run, 100 or more years away. We exploit a unique feature of housing markets in the U.K. and Singapore, where residential property ownership takes the form of either leaseholds or freeholds. Leaseholds are temporary, pre-paid, and tradable ownership contracts with maturities between 99 and 999 years, while freeholds are perpetual ownership contracts. The difference between leasehold and freehold prices reflects the present value of perpetual rental income starting at leasehold expiry, and is thus informative about very long-run discount rates. We estimate the price discounts for varying leasehold maturities compared to freeholds and extremely long-run leaseholds via hedonic regressions using proprietary datasets of the universe of transactions in each country. Agents discount very long-run cash flows at low rates, assigning high present values to cash flows hundreds of years in the future. For example, 100-year leaseholds are valued at more than 10% less than otherwise identical freeholds, implying discount rates below 2.6% for 100-year claims. Given the riskiness of rents, this suggests that both long-run riskfree discount rates and long-run risk premia are low. We show how the estimated very long-run discount rates are informative for climate change policy.

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“…Shilling et al (1991) estimates a hedonic model of sales prices for rental and owner-occupied single-family property in a single parish in Louisiana and finds that rentals depreciate faster. Malpezzi et al (1987) estimates hedonic models of rents and prices from the AHS and finds that rents decline evenly with age whereas prices decline at a declining rate. However, Gatzlaff et al (1998) finds limited evidence of differential maintenance by comparing appreciation rates of rentals and owner-occupied housing units.…”

Section: Modelmentioning

confidence: 99%

“…For instance, if we make the extreme assumption that r r − g r = r o − g o , equation (11) In Figures 10-11, we calibrate c o = .017 (consistent with measures of owner-occupied depreciation in Gatzlaff et al (1998);Malpezzi et al (1987); Amior and Halket (2014), among others) and set r − g = 0.01 for both sectors. For each estimate of ω 33 , we then plot the conditional and unconditional mean values of c r as functions of location, size, and dwelling type.…”

Section: Implication For Maintenance Costsmentioning

confidence: 99%

The housing stock, housing prices, and user costs: the roles of location, structure and unobserved quality

Halket¹,

Nesheim²,

Oswald³

2015

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Using the English Housing Survey, we estimate a supply side selection model of the allocation of properties to the owner-occupied and rental sectors. We find that location, structure and unobserved quality are important for understanding housing prices, rents and selection. Structural characteristics and unobserved quality are important for selection. Location is not. Accounting for selection is important for estimates of rent-to-price ratios and can explain some puzzling correlations between rent-to-price ratios and homeownership rates. We interpret this as strong evidence in favor of contracting frictions in the rental market likely related to housing maintenance.

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Microeconomic Estimates of Housing Depreciation

Cited by 122 publications

References 13 publications

Building depreciation and sustainable development

Building depreciation and sustainable development

Very Long-Run Discount Rates

The housing stock, housing prices, and user costs: the roles of location, structure and unobserved quality

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