ABSTRACT
The value of a property and the cost of services it generates will change due to price changes in the building sector: construction prices and land prices. Far greater changes in property price may occur in the short term due to speculation (Morgan, 1990; Psunder, 1999), but these will not be incorporated into our analysis, since they depend on micro-economic circumstances, not on the property sector as such. At the moment of investment it is clear that the property value depends on the prevailing prices. It should also be clear that the costs of the services generated just after the building's completion will be based on the prices at that moment. After a few years it has to be decided how changes in the construction and land prices are to be taken into account in valuing properties and services. This depends on whether or not we consider a building as a means of production in a process similar to a ‘normal’ production process.
