Define "depreciation" in real estate terms.

In real estate, depreciation refers to the gradual reduction in a property's value over time, often as a result of wear and tear from usage, age, or physical deterioration. This concept recognizes that all properties experience some level of decline in value due to various factors including physical condition, obsolescence, and external market influences. As a property ages, it may require repairs and maintenance to retain its value, and if these are not addressed, the property could deteriorate further and lose value.

The understanding of depreciation is crucial for real estate professionals as it affects investment analysis and property valuations. Being aware that depreciation can occur due to physical deterioration helps appraisers, investors, and owners to more accurately assess a property’s worth and plan for its maintenance and potential future sales.

Other concepts related to property value, such as appreciation (an increase in property value) or tax deductions related to depreciation in the context of taxes, while relevant to the broader field of real estate, do not capture the specific definition of depreciation as it pertains to value decline from physical causes.