Hi.
Need some guidance over depreciation of building. I actually want to know how the price of an old house is compared against a new one. As far as i understand 20-30 years back houses were solid constructions in islamabad and it would take almost 25-30 years to reach their plot value. Nowdays people say construction quality in islamabad usually made by builders who sell for profit is getting worse and can be deemed to be having a life of 15 years max.
Does this mean after 15 years such houses will be sold at negligible value or at plot price.
Also i want to know a 5 year old house would be valued lower compared to a similar size new house in the same area. How such values are determined. Say a 1800 sq.Ft size double storey house cost 60 lac to build and its life is 15 years after which it will be sold at plot price. So it would depreciate yearly at 60 lac/15 years= 4 lac per year. So 5 year depreciation would be 20 lac. And say land value is also 60 lac and it remains the same after 5 years. So does this mean that 5 years old house would now have a price of 60(land)+60-20(building)=100 lac and if a new house is constructed there it would be priced at 120 lac (no depreciation).
Is this right? And first of all are houses built in islamabad nowadays do really have a life of 15 years and what does this mean in terms of their mv?
It's absolutely wrong that Islamabad houses in new sectors or newly built has 15 year life. If a house's map meet future needs than it has good life.
For example advent of TV changed the needs of a family forever till now. Those old houses which has no TV lounge has problems.
Now if such inventions changes our family structure in future than yes current houses will have problems.
So map is extremely important.
Now coming to structure. If you ask any structural engineer, current Islamabad houses are having overuse of steel. I haven't seen any houses without proper concrete columns and good steel in roof. I have seen specially in 500 sq yard houses. It's a great risk to save money on steel for such an expensive property. If builder's house develop structural cracks, all his investment will go down the drain. Builders are really afraid of such situation.
So structurally I don't think houses had any problem.
Problem is plumbing and rain water drainage etc. If plumbing is very good, there will be little problem in house life. Basic principle is to save your building from water. Islamabad is a rainy area. Houses should have good rain water drainage. Many houses are lacking in it.
All depends upon maintainence.
One thing is lacking in Islamabad houses is that most of the builders damn care about watering during construction. This is the major area of lackness.
ok thats fine so how much would be the life of newly constructed houses in islamabad after which they drop down to plot value or are considered just livable.
And how does one assess the price of a house in one area where one is 5 years old and other is newly constructed given both are constructed on same plot size.
I think a typical residential house in Islamabad should have life of 40-50 years, depending upon maintenance.