Appreciation (Real Estate)

Appreciation is an increase in the value of real property over time due to economic, physical, or market-related factors.

• Refers to an increase in market value
• Can be natural (market-driven) or forced (value-added improvements)
• Affects both land and improvements
• Opposite of depreciation
• Often occurs over the long term, but can fluctuate

• Natural Appreciation
  • Caused by market forces beyond the owner’s control
  • Examples: population growth, job growth, low interest rates, inflation

• Forced Appreciation
  • Caused by actions taken by the property owner
  • Examples: remodeling, renovations, added units, zoning changes

• Location and neighborhood desirability
• Supply and demand
• Interest rates
• Economic conditions
• Infrastructure improvements (transportation, schools, amenities)

• Appreciation increases market value, not necessarily assessed value
• Appreciation is not guaranteed and can reverse during market downturns