What is "depreciation" in terms of property valuation?

Depreciation, in the context of property valuation, refers to the decrease in a property’s value over time due to various factors, primarily physical wear and tear as well as economic influences. This concept is critical in assessing the value of real estate because it helps appraisers recognize that a property may not hold its original value due to age, deterioration, or shifts in the local economy that can affect market demand.

For example, as a building ages, its components such as roofing, plumbing, and appliances may degrade, necessitating repairs or replacements. Additionally, external economic factors, like changes in the neighborhood or shifts in the real estate market, can also contribute to a property's depreciation. Understanding this concept is crucial for assessors as it impacts property tax assessments and overall property market values.

In contrast, the other options present ideas that do not accurately capture the essence of depreciation. An increase in property value due to renovations represents an appreciation, while a temporary reduction in market demand is not synonymous with depreciation, which is a persistent decline in value. Lastly, while improving property can lead to a higher assessment, depreciation is not a method for increasing property assessment—it addresses the decline of value instead.