Quote:
Originally Posted by Doodlebug
Not sure I agree with this...I built my home in 2001 for $300k, of which $85k was the lot price....house today is worth $700k, and similar lots selling for $200k in the area. Put in about about 60k over the years. The value of the house has appreciated above the appreciation in lot price and improvements put in.
Anyone who built a house around the same time is probally in a similar situation...caught the beginning of a real estate boom, driven by lower interest rates, good local economy.
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I don't know if your numbers make sense. Where in the city are you? How are you sure your lot is worth $700k? Why would anyone spend $700k on a "used" home when they can buy the same lot for $200k and have a house built on it for an additional $270k ($215k house price plus inflation according to Canadian inflation index). That's $470k vs. $700k and you get a brand new home.
The fact is a house is worth no more than the materials and labour of which it was constructed with. This also depreciates over time as it deteriorates or it requires maintenance which is a further sunk capital cost and shows depreciation. We're not talking about fine art here. We're talking about cookie cutter homes built out of a renewable resource.
Land, particularly close to important centres, is what appreciates. People want to live in an area and as demand goes up so do the values of the land.
This is why a condo (ie, new structure with no more value than the materials it's constructed with) in High River (ie, worthless land -
sorry) has taken such a hit during the same time that old homes (ie, already worthless structure) in the inner city (ie, valuable land) have continued to go up.
Or why a brand new (non luxury) infill from 2000 in Hillhurst is worth $700k when a 1980 infill is worth $650k and a 1912 infill is worth $640k. People aren't buying the shacks on the land - they're buying the land.