What generally causes a property to depreciate?

The correct response focuses on the various aspects that lead to the depreciation of a property. Economic factors such as market downturns can lower property values as demand decreases. Physical deterioration occurs when a property's condition declines due to lack of maintenance, natural wear and tear, or damage, which can lead to a decrease in its market appeal. Functional obsolescence refers to a property's decreased utility or desirability due to outdated features or design that no longer meets current standards or preferences.

These factors collectively impact the overall perception of the property's value in the market. In contrast, improvements to local amenities, increased neighborhood security, or rising property taxes typically do not contribute to depreciation; they could either stabilize or enhance a property’s value.