The principle stating that the maximum value of a property is set by how much it costs to buy an equally desirable and valuable property is known as:

The principle that describes how the maximum value of a property is determined by the cost to acquire a comparable property of equal desirability and value is known as the principle of substitution. This principle is foundational in real estate appraisal and posits that a rational buyer will not pay more for a property than the cost to purchase an equivalent substitute.

In practical terms, if there is a property on the market and a buyer is considering its value, they will compare it to similar properties in the area that offer comparable features and amenities. If these other properties are priced lower, the market price of the subject property needs to align closely with these alternatives. This dynamic helps establish a ceiling on property values, ensuring that prices remain competitive and reflective of the surrounding market conditions.

The other concepts mentioned represent different economic principles. For instance, progression refers to an increase in property value due to the influence of nearby higher-value properties, while regression indicates a decrease in value due to proximity to lower-value properties. Floors and ceilings refer to the minimum and maximum price limits set within a given market context, but they do not specifically address the direct comparison aspect that the principle of substitution encompasses.