Do flats appreciate or depreciate over the years?

The main focus of this article is to answer the question; do flats appreciate or depreciate? Flats, like any other physical properties, may increase or decrease in value over time depending on factors such as the size of the flat, rental value, land value, and more.

Depreciation of flat value

Depreciation of flats can be defined as the loss defined as a real loss in the existing use value of the building, in rental or capital terms. Flats experience degradation and obsolescence, in contrast to many other types of investments. Due to wear and tear and technological advancements, older structures lose value over time compared to similar new construction.

Physical degeneration, as well as functional or aesthetic obsolescence, may be the cause of the depreciation of the value of flats. An older property depreciates more slowly than newer property does. This is due to properties being closer to their site values and the end of their useful building lifespan. Another factor that influences the depreciation of a flat is the size, a smaller flat with fewer rooms has a higher rate of depreciation. 

Also, the flexibility of the flat influences its depreciation. A flat is a pre-built living space that you generally move into hence, there’s less room for making changes like transforming a bedroom into a bedroom with a walk-in wardrobe. 

Flats that are not in proximity to social amenities such as;

• schools,
• shopping malls, 
• and workplaces are more likely to depreciate over the years.

Several obstacles could influence the depreciation of a flat. Examples are; flats usually have numerous service charges that impact cash flow, and leasehold; these are more complex to understand and require the aid of solicitors to help distinguish critical points in contract forms.

How to measure the depreciation of a flat?

Property depreciation is a typical occurrence, and if calculated correctly, you may quickly ascertain the asset's market worth. More information on property depreciation and how to calculate it can be found here:

• The typical lifespan of any building, independent home, or flat is 60 years.
• The number of years following construction is divided by the structure's overall useful life (60 years) in the calculation used to determine the depreciation of property. The current price of the building can be calculated by deducting the formula's result from the selling price of the building or residence.
• That, however, does not represent the full cost of the flat.
• It’s also important to note the price or value of the land. 
• It is important to find out the value of the land at the time of purchase and also the current or appreciated value of the land.
• The construction cost of the flat and the number of years after construction.

Looking at a typical example below;

For instance, an individual decides to sell his 10-year-old property, whose

• Land value at the time of purchase is £30
• The construction cost is £20
• Appreciated land value is £45
• The total useful age is 60 years
• The number of years after construction or age of the structure is 10 years

Using the formula above, the depreciation or otherwise appreciation can be calculated.

10/60= 1/6 × £20 (construction cost) = £3.33

• This £3.33 is the depreciation value of the flat.
• The addition of the appreciated land value to £3.33 gives us the current value of the flat after 10 years.

Do flats increase in value?

The answer is a definite yes. Particularly, flats appreciate in value within ten (10) years, when their entire value has increased by an incredible 60%. Flats have historically appreciated more than other types of real estate. This 60% indicates that the overall cost of flats is rising by £730 each month. 

Over the past ten years, flats have been the most sought-after houses in London, but semi-detached and terraced homes have grown in popularity there. One of the reasons why flats’ worth and overall price increase on a monthly basis in London is that they account for 50% of all real estate sales. If we look at the property sales in England during the previous ten years, we can say:

• Flats made 60% of overall property sales;
• Terraced properties made 41% of sales;
• Semi-detached properties made up 31% of sales;
• Bungalows made 28% of sales;
• Detached properties made 21% of sales;

From these statistics, we can easily recognize that flats are a highly sought-after class of property, so it may not come as a surprise that the value of flats rises with time.

Any real estate venture depends heavily on location, but what makes a site desirable differs depending on the sort of product (residential, industrial, office, flat, retail.). A desirable location for flats typically entails simple access to transit and job hubs.

People rush to invest in flats in congested city centres like London. For instance, students and working people seek out urban hotspots near their institutions of higher learning and places of employment. 

Some advantages of flats that are likely to cause their appreciation include; 

• a lower entry price upon purchase compared to a house, 
• higher cash returns, 
• flexibility, 
• and creativity.

In the considerations above an extra bedroom can easily be created by converting one room in the flat or merging a kitchen with a living room.

One main factor that drives the appreciation of flats is the value of the land. To ensure constant appreciation of flats, it is advisable to purchase the best land. Hence, an area of the country where you believe wages will increase dramatically over the next twenty (20) years should be considered.

What’s the best option available?

Knowing the market segment your flat will serve before you contemplate investing in it is a good idea. Because some tenants would only look for flats in the city centre, location is another important factor to take into account. Also, flat trends and demographics are much more closely related to residential life. 

In contrast, flats are ideal for anyone seeking to live in a desirable area 

• for less money close to dining, shopping, and entertainment options, 
• and frequently at a more inexpensive price than purchasing a condo or single-family home.

Nevertheless, whether you intend to invest in a flat or any related property, you should take the time to carefully analyse their benefits and drawbacks. Visit RealAdvisor for added insights and information to make well-versed decisions.

Below are key points to know about flat appreciation or depreciation over the years

1. Flats, like every other physical property can appreciate or depreciate in value over the years.
2. Property depreciation is a typical occurrence and physical degeneration may be the main cause of it. 
3. Over the past ten years, flats have been the most sought-after houses in London and made 60% of overall property sales. 
4. The main factor that drives the appreciation of flats is the value of the land and the ideal location.