Definition
Appreciation is a measure of the additional value of property based on internal enhancements and/or external market forces such as inflation.
Analysis
Real estate tends to appreciate in most years, especially in areas of high demand. The land itself appreciates rapidly if it is in a highly desirable location. The opposite may occur if neighboring properties show signs of neglect or high rates of foreclosure.
Special features, such as water frontage or landscaping improvements may add to appreciation of a property. The structure itself may appreciate at a much lower rate, or it may normally depreciate as it show signs of wear.
A mobile home tends to depreciate much like a car is expected to. The property may still appreciate if the land is owned and gains value.
Only a small percentage of vehicles show appreciation. Classic cars may require high restoration and storage costs in order to cause price appreciation. Almost all vehicles depreciate rapidly directly after their initial purchase.
Appreciation of property is one of the chief sources of equity. Principal payments on a loan will also add to equity of a property. Property that depreciates rapidly may result in the owner experiencing negative equity.
