# age of home vs value



## rookie (Mar 19, 2010)

Hi,

I would like to know how the age gets factored into the price. lets take an example of 3 exactly same homes on the same street. one is 0-5yrs, second is 6-15 yrs and the last one is over 15yr old. how would the price ranges vary?


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## Dana (Nov 17, 2009)

The three biggest indicators of price IMO are location, lot and layout. Location is by far the biggest determining factor in value. If one of the three houses in you example sits on a premium lot within the location, that would also effect the value of the house, comparatively. Finally, layout (including updated amenities) will help determine the value (ie, sq. feet, number of rooms, state of repair, roof, windows, heating, etc.). I would think that all of these factors would figure more prominently in determining value than the age of the building.


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## kcowan (Jul 1, 2010)

And further to Dana's point, the status of maintenance also contributes. Windows have to be replaced, plumbing, water heaters, furnaces. So an extra ten years puts the home that much closer to its replacement cycle.

This will be a minor effect when compared to those items outlined by Dana.


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## Berubeland (Sep 6, 2009)

The age of the home does not really matter. In fact some would argue that new construction is inferior to previous methods used. 

Give me a double brick house over a new build any day. 

What seems to matter more is the condition of the house specifically the cleanliness and if the house has been updated to today's cosmetic standards.


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## OhGreatGuru (May 24, 2009)

rookie said:


> Hi,
> 
> I would like to know how the age gets factored into the price. lets take an example of 3 exactly same homes on the same street. one is 0-5yrs, second is 6-15 yrs and the last one is over 15yr old. how would the price ranges vary?


The flaw in your logic that three houses of different ages would not, in fact, be identical. If they were, age would not be a factor. But they would have differences in construction & layout (and remaining life of building elements subject to deterioration) that would affect price.


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## GeniusBoy27 (Jun 11, 2010)

But there is a depreciation factor that occurs at MPAC, based on the years of a house. As the other have said, it's much less than the other factors, but it's still present.


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## Four Pillars (Apr 5, 2009)

I agree with Dana - although I'd say the size of the house is important as well. Perhaps she was including that when she mentioned "layout".

Plus, if you are looking at age differences - 5 years is FA. On my street, most of the houses are around 90-100+ years old with a few new (less than 5 year) builds. 

Again - it depends on what has been done with the house - some old houses have been completely gutted, basement dug out and refinished etc. No reason why that house would be inferior to a "new" house, since most of the parts will be new.


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## rookie (Mar 19, 2010)

i understand the other factors. i want to know how only age affects. so lets say same lot, same upgrades, everything remaining the same, if the 0-5 is priced at 400k, what would the 6-15 and 15-30 be priced at? 

as rachelle says, some people might prefer older constructions but i have read articles which claim otherwise, that say that even though new construction materials seem cheap, they are more durable and effecient. personally, if all 3 homes are priced same, i would go for the newest. so if the older homes have to compete with new, then they have to attract me with better pricing.


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## GeniusBoy27 (Jun 11, 2010)

Historically, housing depreciation has been 1.5% per year in Canada.


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## Four Pillars (Apr 5, 2009)

rookie said:


> i understand the other factors. i want to know how only age affects. so lets say same lot, same upgrades, everything remaining the same, if the 0-5 is priced at 400k, what would the 6-15 and 15-30 be priced at?
> 
> as rachelle says, some people might prefer older constructions but i have read articles which claim otherwise, that say that even though new construction materials seem cheap, they are more durable and effecient. personally, if all 3 homes are priced same, i would go for the newest. so if the older homes have to compete with new, then they have to attract me with better pricing.


For your specific example, perhaps you could figure out the depreciation of everything in the house and discount by that?

For example if the brand new house is $400k then a 5 year old house should be worth a bit less (assuming EVERYTHING else is the same).

For example if a new roof is $10,000 and has a life span of 20 years. Then you could depreciate the roof by $2,500.

Furnace, AC, windows, appliances all have fairly specific life span estimates so this should be easy to calculate. It won't be perfectly accurate, but that is ok.

Things like bathrooms/kitchens - I'd say they do depreciate, but very hard to estimate. Maybe if you assume an old kitchen only retains 25% of it's value and old is 25 years old - depreciate by 3% per year? But how do you figure out what the purchase price of a new kitchen is? Contractor estimate?


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## iherald (Apr 18, 2009)

GeniusBoy27 said:


> Historically, housing depreciation has been 1.5% per year in Canada.


Where does this number come from? I understand that a car depreciates in value, since the sale price of a 1 year old car is less than the sale price of a new car.

A house, over the last twenty years, goes up in value each year. So how does depreciation work? Wouldn't it be appreciation?


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## GeniusBoy27 (Jun 11, 2010)

Sorry, it comes from a Stats Canada study if I remember correctly. We're talking about the building value, not the land value (which, of course, appreciates every year).

So the key is the separation of land and building values. If you take a look at the MPAC assessments, you'll see this separation clearly defined.

The original question was a counterfactual presentation. i.e. given all other things being equal, what's the difference between similar properties with differences in building ages. What you would need to do is separate out the building component (1/2-2/3 of the value of the property) and depreciate that component. It's not on 1.5% of the total value of the property.

Sorry, I should have been clearer before.


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## kcowan (Jul 1, 2010)

An SFH I sold last October was sold for the lot value ($200/sq.ft.), and it would have sold for slightly higher if it had been a vacant lot. The house was built in 1937 and had not been upgraded in any meaningful way.

(Avenue Road-Lawrence area)


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## crazyjackcsa (Aug 8, 2010)

A house need up keep, pure and simple. If we are to take the age of a house as strictly the age of the walls and floors and to a lesser extent windows it makes no difference. Plumbing and wiring would matter only that it is to code. The only thing that matters is the condition of said items. If we take the age of the house to include,the roof, the furnace, and the central air, then it does affect price.

My home is 100 years old. For every positive, there is a negative. 

Big Rooms/Small Closets.
Massive Wooden baseboards and Plaster Construction/ No insulation.
Stained Glass Windows/ Drafty Windows.
Character and History/More Upkeep.

Age is hardly a factor.


It's like a car, a rusted out hulk from the 1960's could be worthless, the same car kept up could be worth $100,000 dollars or more.


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