what's a fair depreciation rate for a house?

[One]

Hi everyone

Thought this might be worth discussing. If we could claim all repairs as expenses, including stuff like recladding with current materials, replacing the roof, etc, what would be a realistic timeframe before you typically would have to just pull a house down and start again?

If I'm doing the maths right, the current 3% depreciation writes a house off after about 67 years. That does seem a bit pessimistic to me. Assuming repairs get done, I reckon they'd last more like 100 years. What do other people think?

In practice, I'm wondering if depreciation might be a fair thing for National to target. I know it's only a loan because you have to pay it back when you sell unless the house actually has depreciated, but I'm wondering if:
(1) in practice, houses have traditionally appreciated over the medium-long term, just because of inflation
(2) hardly anyone actually repays the depreciation, so this is a way property investors cheat.
Does anyone know whether either of these are true? I'm just guessing here.

[eri]

in japan a wooden house has a "life" of 20 years and a steel or cement house a "life" of 30 years

go figure

i mean what depreciation schedule did the pharaohs use for a pyramid?

if people can keep a 1920 car is operable condition, does that mean that company cars should have an 80 year depreciation schedule?

maybe if they can sell them for more than they cost new?

that would be what, 250quid?

it's a tricky one

[Keithw]

I think house type has a lot to do with it.
An original bungalow may have a life of 60 years or more.
A modern style house should be something similar, after all think about how we view a 60's house. if it was still in original condition it would be totally rennovated immediately, so at what point does the "original" depreciation "run out", ie how much rennovation overrides the base building ?

Apartments on the other hand are a different story, I would go so far as to say the useful life of an apartment may only be 30 years or so before they need a thorough rennovation, or what is more likely, the building will be torn down & replaced with something more modern.

Both these instances clearly show that buildings depreciate. if they didn't they wouldn't need updating.
The replacement cost will certainly increase over time, due to ever increasing building costs, but that has nothing to do with depreciation.
Same with property prices, they keep increasing but that is because of land prices, not because the building is worth more.
Easy to demonstrate : bach at The Mount, GV of over 800k of which the 30's bach is valued at 25k & the section is valued at $775k

[AMR]

I own a 1928 warehouse converted into an apartment...still in great nick but there has been a fair bit of modification in that time.

[hawkeye]

Originally Posted by One

If I'm doing the maths right, the current 3% depreciation writes a house off after about 67 years. That does seem a bit pessimistic to me. Assuming repairs get done, I reckon they'd last more like 100 years. What do other people think? .

I think if they have been built in the 80s or 90s 67 years might be a bit long! (Leaky cardboard and polystyrene houses). Anything built before the 70s will probably last longer if it has been kept painted on the outside.

Originally Posted by Two

(2) hardly anyone actually repays the depreciation, so this is a way property investors cheat.
Does anyone know whether either of these are true? I'm just guessing here.

We have sold several houses and paid back the depreciation. What people don't seem to realise is if you buy a house and you have say a 33% tax rate at the time you claim 33% tax on the depreciation. When you sell the house all the accumulated depreciation is added onto your income for the year at once which almost certainly pushes you up to the next tax bracket under current rules so you may end up paying 38% on a large amount of it so there goes your interest free loan!

[Keithw]

Originally Posted by eri

if people can keep a 1920 car is operable condition, does that mean that company cars should have an 80 year depreciation schedule?

maybe if they can sell them for more than they cost new?

that would be what, 250quid?

it's a tricky one

You would have to inflation adjust the value so the 250pds may be 250x3%^90yrs ?
about 20k i think