Comment by Al-Khwarizmi
3 hours ago
No, I mean controlling for location.
A specific example. The very same building developer completed these two buildings and offered the flats for sale more or less simultaneously, in the second half of last year IIRC.
Building 1. Renovated early 20th century building (originally built in 1923). Google Maps coordinates (the renovation is not yet visible in Google Maps): https://www.google.com/maps/@43.3621801,-8.4070271,11a,75y,2... Photos of the renovated building: https://ammapromocion.com/plaza-de-vigo/ Flats have 117 useful sqm and the middle flats were being offered at between 1.1M-1.2M €, and sold fast (you can still buy the 1st floor flat for 950K. But it's a 1st floor with a bar directly below, which reduces its value rather sharply. This is Spain, bars are noisy and open until late).
Building 2. Newly built. Google Maps coordinates (again, finished building not visible yet in Google Maps): https://www.google.com/maps/@43.3599669,-8.4061383,23a,75y,2... Photos of the finished building: https://ammapromocion.com/promocion-juan-florez/ Flats are different sizes, but some are only slightly smaller than in the other building - around 110 useful sqm. They were being offered for around 700K. They also sold fast.
The distance between both buildings according to Google Maps is 290 m, a 4-minute walk, so they are basically in the same neighborhood. You can argue that the new one is in a worse location because it has more traffic and the street is uglier, and it's true (although the other is in an area with many bars, so I think not everyone would prefer its location). Anyway, that kind of difference could be worth at most 50K in this market, being generous - and most likely more than fully offset by fact that the newly built flats include garage while the renovated ones don't have it! Anyhow, it definitely doesn't explain a 400K+ price difference.
It's just one concrete example, but I've seen many (I was recently looking for flats... finally I settled from one from the 1940s, building not renovated :)). Of course I don't know the trends outside my city, but at least here, fully renovated old buildings are the apex of the housing market.
Here's a thought. Imagine roughly 5% of available apartments are in renovated old buildings. I don't know what the real figure is, doesn't matter I just assume it's significantly lower than newly built apartments.
Now also imagine that 20% of people prefer those old buildings.
Per apartment then, there's 4 times as many interested buyers than per modern apartment, and the buyers of the old apartments are looking at a much slimmer market so they're willing to pay much more for the right one because they're unlikely to see a comparable one soon.
Also I imagine bringing an old building up to modern standards is quite expensive so that also explains some of the price.
I don't really know anything, I just think what I'm writing makes sense.
I've also actually renovated my old place. I did it because I didn't want to rebuild the place entirely (there was no need, it was woven brick, more solid than most bunkers), and because I would have had to agree with the neigbors, which was ... let's politely call it "not guaranteed".
But very quickly it became clear why that was the right decision: building codes. People legislate building codes, but of course they're unwilling to DO anything. So old buildings, built against old building codes, don't have to change, and that means they effectively get to ignore building codes. If I rebuilt the place I would have had to move the house (as in physically move it, just 4 meters, but it's a house, 4 meters might as well be 400 kilometers, you have to rebuild it). I would have to give up at least 40% of the surface area (the "ground surface") AND one of the floors. Net result: the new house would have been about half the living surface of the old one.em.
So obviously the renovated house is worth a lot more than a new house: for starters it's double the size!
It's even self defeating: the isolation of the old house is better. Yes, people legislate modern isolation materials but if the house MUST be a lot smaller there must be a lot more contact area with the cold air, because it wouldn't be built against the neighbor's house anymore and a LOT less thermal mass (thermal mass = free heating, more or less) so you're starting from a very bad starting position.