Land, Structure & Depreciation

We introduce a hedonic price model which enables us to disentangle the value of a residential property into the value of land and the value of structure, while controlling for depreciation and vintage effects. For given reconstruction costs we are able to estimate the impact of physical depreciation, functional obsolescence and vintage effects on the structure and the impact of time on sale on the land value. We find a large effect of maintenance on the value of the structure. The effects are larger for older structures than for younger ones. Finally, our findings show that land prices have been a lot more volatile over the years than the value of the structure.