What is economic depreciation?

Economic depreciation is a situation where the value of assets decreases for reasons that have nothing to do with the quality of the assets themselves. As a result of depreciation, the property no longer has to control the same price in the open market it once enjoyed. This negatively affects the ability to obtain a mortgage for real estate or even borrow money using real estate as collateral. If the owner has decided to sell the property, there is a chance that he may have to absorb the loss on the land, if the economic depreciation is so serious that the market price will fall below the amount originally paid for the property.

In many cases, economic depreciation includes only a small or no change in the integrity of the property itself. Buildings on the land tract can still be as robust and attractive as always, including all the advantages that have been available for years in terms of comfort, energy efficiency and many other attributes. Depreciation occurs because factor or factors that include an area around the property has caused the soil toDa was less desirable and so less valuable for potential buyers.

There are two common reasons why real estate depreciation occurs. The first is to do with a general decline in the area surrounding the property. This may happen as a result of a shift in the application for a residential area, sometimes caused by people from the economic holder who have decided to move from the area and open the way for people in lower economic brackets to move to the area. This type of change can also be developed by the development of newer residential areas that attract the attention of buyers, either because of their proximity to shopping or shopping centers, or by the general organization of the planned neighborhood. As a result, the lack of demand for real estate in the old neighborhood decreases, which in turn forces the value of the properties in the neighborhood.

Economic depreciation may sometimes occur due to changes in land -use planning for a given area.For example, if the area was once a zone only for residential use, but zoning planning will later change to allow commercial companies and residences in this area, this may cause the value of certain real estate to drop because large enterprises like factories are replacing the tracts of houses. Thanks to resoning, this area is less desirable for people who want peace and silence at the end of the day, which in turn depicts the value of these residential properties.