Building age, depreciation and real option value – an Australian case study
This paper examines the influence of building age as a measure of depreciation and real option (redevelopment) value within a large Australian housing market. A number of authors have proposed that building age used as an independent variable in hedonic analysis of housing markets can proxy for othe...
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| Format: | Conference Paper |
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Pacific Rim Real Estate Society Conference
2012
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| Online Access: | http://www.prres.net/papers/Costello_Building_Age_Depreciation_real_option_value.pdf http://hdl.handle.net/20.500.11937/36580 |
| _version_ | 1848754809677545472 |
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| author | Costello, Gregory |
| author_facet | Costello, Gregory |
| author_sort | Costello, Gregory |
| building | Curtin Institutional Repository |
| collection | Online Access |
| description | This paper examines the influence of building age as a measure of depreciation and real option (redevelopment) value within a large Australian housing market. A number of authors have proposed that building age used as an independent variable in hedonic analysis of housing markets can proxy for other omitted variables. Recent research suggests that depreciation of structures, location influences and real option potential are all measured implicitly with building age if hedonic models are not correctly specified so as to effectively identify and isolate the influence of these factors. The influence of building age in identifying and measuring the option value of redevelopment potential is tested empirically in a large Australian housing market (Perth, Western Australia). Specific housing submarkets are identified as having significant variance in building age of the housing stock. Transactions from these submarkets over the sample period 1995-2010 are analysed within several hedonic models to test these influences. Consistent with recent similar research in this area, an "intensity" variable is used. This variable is constructed from the ratio of building areas from sales of existing properties to building areas from sales of “new” construction within the same submarkets. The preliminary results confirm this variable as providing robust characteristics in identifying and measuring these influences. |
| first_indexed | 2025-11-14T08:46:19Z |
| format | Conference Paper |
| id | curtin-20.500.11937-36580 |
| institution | Curtin University Malaysia |
| institution_category | Local University |
| last_indexed | 2025-11-14T08:46:19Z |
| publishDate | 2012 |
| publisher | Pacific Rim Real Estate Society Conference |
| recordtype | eprints |
| repository_type | Digital Repository |
| spelling | curtin-20.500.11937-365802023-02-07T08:00:03Z Building age, depreciation and real option value – an Australian case study Costello, Gregory hedonic models prediction accuracy Housing economics submarkets multi-level models This paper examines the influence of building age as a measure of depreciation and real option (redevelopment) value within a large Australian housing market. A number of authors have proposed that building age used as an independent variable in hedonic analysis of housing markets can proxy for other omitted variables. Recent research suggests that depreciation of structures, location influences and real option potential are all measured implicitly with building age if hedonic models are not correctly specified so as to effectively identify and isolate the influence of these factors. The influence of building age in identifying and measuring the option value of redevelopment potential is tested empirically in a large Australian housing market (Perth, Western Australia). Specific housing submarkets are identified as having significant variance in building age of the housing stock. Transactions from these submarkets over the sample period 1995-2010 are analysed within several hedonic models to test these influences. Consistent with recent similar research in this area, an "intensity" variable is used. This variable is constructed from the ratio of building areas from sales of existing properties to building areas from sales of “new” construction within the same submarkets. The preliminary results confirm this variable as providing robust characteristics in identifying and measuring these influences. 2012 Conference Paper http://hdl.handle.net/20.500.11937/36580 http://www.prres.net/papers/Costello_Building_Age_Depreciation_real_option_value.pdf Pacific Rim Real Estate Society Conference restricted |
| spellingShingle | hedonic models prediction accuracy Housing economics submarkets multi-level models Costello, Gregory Building age, depreciation and real option value – an Australian case study |
| title | Building age, depreciation and real option value – an Australian case study |
| title_full | Building age, depreciation and real option value – an Australian case study |
| title_fullStr | Building age, depreciation and real option value – an Australian case study |
| title_full_unstemmed | Building age, depreciation and real option value – an Australian case study |
| title_short | Building age, depreciation and real option value – an Australian case study |
| title_sort | building age, depreciation and real option value – an australian case study |
| topic | hedonic models prediction accuracy Housing economics submarkets multi-level models |
| url | http://www.prres.net/papers/Costello_Building_Age_Depreciation_real_option_value.pdf http://hdl.handle.net/20.500.11937/36580 |