Price of house vs price of land
This effect can be compensated by higher density, which zoning often bans, condemning desirable areas to housing shortages. But even if you allow density, the higher density allowed still means that land prices are likely to have higher value per square foot of land... higher density just dilutes this higher land cost through many units, retaining housing affordability.
Buildings' value naturally depreciates
|Total value over time|
Another empirical proof of this is that new buildings in expensive areas tend to be more expensive than old buildings, all else being equal. Having a new home over an old one tends to be viewed as a good thing, the new one will be more modern and have more amenities and will be less likely to require repairs in the next few years. An old high class building can still be worth more than a recent shoddy construction, but that's an exception, not the rule, and a new high class building would probably be more expensive.
In terms of urban development, this is important to understand because when people see houses as investments and as appreciating goods, they tend to be hostile to any policies allowing their replacement. As the buildings are seen as valuable, destroying them is seen as little short of heretical. People need to understand it's not the building itself that is a wise investment product, but the land on which the house is built. Once we see buildings as essentially depreciating goods, I think we become more pragmatic about them, and understand that protecting buildings by preventing built areas from changing is not actually a wise course of action, at least on economic grounds.
In some ways, the North American approach of preventing housing from being torn down and instead renovating old houses over and over is a bit like the Cubans who, because of the embargo, kept the cars of the 50s they had and just kept rebuilding them over and over, replacing them part by part as they fail, since they couldn't get newer replacements. It may be great for classic American car lovers, but it still results in highly-polluting death traps traveling on the roads, when modern cars would be better for the environment and be much safer for people both inside and outside the vehicle.