Analysis of Economic Depreciation for Multi-Family Property

Jeffrey D. Fisher (), Brent C Smith (), Jerrold J. Stern () and R. Brian Webb ()
Additional contact information
Jeffrey D. Fisher: Director of the Center for Real Estate Studies Professor of Finance and Real Estate Indiana University
Brent C Smith: Department of Finance Insurance and Real Estate Virginia Commonwealth University P.O. Box 844000 Richmond, VA 23284-4000
Jerrold J. Stern: Department of accounting Indiana University
R. Brian Webb: UBS Realty Investors LLC

Journal of Real Estate Research, 2005, vol. 27, issue 4, pages 355-370

Abstract: This paper uses a hedonic pricing model and National Council of Real Estate Investment Fiduciaries data to estimate economic depreciation for multi-family real estate. The findings indicate that investment grade multi-family housing depreciates approximately 2.7% per year in real terms based on total property value. This implies a depreciation rate for just the building of about 3.25% per year. With 2% inflation, this suggests a nominal depreciation rate of about 5.25% per year. Converted into a straight-line depreciation rate that has the same present value, this suggests a depreciable life of 30.5 years - as compared to 27.5 years allowed under the current tax laws. Thus, these laws are slightly favorable to multi-family properties by providing a tax depreciation rate that exceeds economic depreciation, which is in part due to inflation that has been less than expected during the past decade.

JEL-codes: L85 (search for similar items in EconPapers)
Date: 2005
View list of references

Downloads: (external link)
http://aux.zicklin.baruch.cuny.edu/jrer/papers/pdf/past/vol27n04/vol27n04a01.pdf Full text (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: http://EconPapers.repec.org/RePEc:jre:issued:v:27:n:4:2005:p:355-370

Ordering information: This journal article can be ordered from
Diane Quarles American Real Estate Society Manager of Member Services Clemson University Box 341323 Clemson, SC 29634-1323
http://aux.zicklin.b ... u/jrer/about/get.htm

Access Statistics for this article

Journal of Real Estate Research is edited by Dr. Ko Wang

More articles in Journal of Real Estate Research from American Real Estate Society
Address: American Real Estate Society Clemson University School of Business & Behavioral Science Department of Finance 401 Sirrine Hall Clemson, SC 29634-1323
Series data maintained by JRER Graduate Assistant/Webmaster ().