[OPE-L:1834] Houses

Alan Freeman (100042.617@compuserve.com)
Fri, 19 Apr 1996 09:17:27 -0700

[ show plain text ]

Re Gil's 1828, Jerry's 1829 and Paul's 1831, in response to my 1827, all 19/4/96:

> Do houses depreciate?

Gil: Yes. Unmaintained, houses tend to fall apart, or in.
Jerry: I would assert that housing does depreciate
Paul: They do, but at a slower rate than money. Land prices also tend to rise

All seem to agree that
(a) houses do depreciate, at least materially
(b) this material depreciation is defined independently of the price; that
is, the house depreciates because of changes in its fabric. This may be
offset in some way or other, for example by movements in land prices or
the capitalisation of ground rent. But these facts are not part of the
material depreciation. Yes?

...houseowners (often) keep up maintenance--depreciation budget, if you'd like
--and thus there is no net physical depreciation to reflect in the price.


This defines at least two measures of depreciation independent of price movements:

(1) the rate at which the use-value of the artefact declines over time in the
absence of maintenance.

(2) the rate at which the artefact must be maintained in order to maintain
its use-value constant.

These are not contradictory measures of course. In fact (2) is a rather useful means
of estimating (1). But they are independent of the movements in price caused by such
factors as ground rent, local market prices, etc. The cost of maintaining my house
does not depend on its price, and neither does the rate at which its fabric
deteriorates. When pipes burst, they don't first nip into the local Estate Agent
to check out the prices. They just do their thing.

What I am getting at, is that material depreciation is a factor independent of
price movements brought on by external circumstance, and which is a direct function
of the material and physical exhaustion of an artefact.

Question 1: Is this peculiar to houses? Or is it a general attribute of any
durable artefact (eg means of production)

Question 2: Is it in principle possible to estimate the *physical* life of an
artefact independent of market factors? That is, can we say how *long* it would
be before the unmaintained house ceased to be a house, and became a ruin? It
seems to me that in general, it is.