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Mitigating the Impact of Ageing on Property Value: An Analysis of Maintenance and Reinvestment Measures

Author

Listed:
  • Wilhelmsson, Mats

    (Department of Real Estate and Construction Management, Royal Institute of Technology)

  • Roos, Henrik

    (Lantmateriet)

Abstract

The value of a property tends to decrease over time as it ages, resulting in a reduced ability to generate the same value. Property depreciation is a multifaceted concept that encompasses both technical and economic aspects. The economic life of a property is used to determine its effective age. This study aims to determine the effective age of a selected property by analysing various data related to its condition, including information on maintenance and reinvestment operations. Additionally, the research seeks to investigate whether the year of construction or price level has an impact on the property's effective age. We collected specific data from property owners on the frequency of various maintenance and reinvestment operations, both internal and external, such as the roof, foundation, heating, and kitchen. Our database consists of nearly 10,000 houses in Sweden sold between the beginning of 2021 and 2022 that are over 30 years old. Our findings demonstrate that even for older properties, there can be a significant decline in value due to ageing. We also observe that property owners' actions, such as maintenance and reinvestments, can affect age-related value decline. By implementing appropriate measures to reduce the property's effective age, the decline in value due to ageing can be mitigated. Hence, policymakers could consider developing policies and incentives to encourage property owners to invest in maintenance and reinvestment measures that can mitigate the effects of ageing on property value.

Suggested Citation

  • Wilhelmsson, Mats & Roos, Henrik, 2023. "Mitigating the Impact of Ageing on Property Value: An Analysis of Maintenance and Reinvestment Measures," Working Paper Series 23/1, Royal Institute of Technology, Department of Real Estate and Construction Management & Banking and Finance.
    • Handle: RePEc:hhs:kthrec:2023_001
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    More about this item

    Keywords

    depreciation; age-related decrease in value; maintenance; effective age; Sweden;
    All these keywords.

    JEL classification:

    • D46 - Microeconomics - - Market Structure, Pricing, and Design - - - Value Theory
    • G51 - Financial Economics - - Household Finance - - - Household Savings, Borrowing, Debt, and Wealth
    • R30 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - General

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