The appreciation rate is the percentage increase in the market value of a property over a given period. Appreciation occurs when a property becomes more attractive due to factors such as:
improvements
conversions
better management
desirable location
local urban infrastructure developments
lower mortgage rates
under supply of land
low taxes
population increases
favourable economic conditions
Appreciation is calculated as the difference of the value in one period from the value of the previous period, over the value of the previous period. The formula for appreciation is:
A t = Px - Px-1/Px-1
Where:
At
= Appreciation rate for year x
Px = Property value in year x
Px-1= Property value in the previous year (x-1)
For example, in the previous year a property was worth £100,000 and
now it is valued at £110,000. The appreciation rate is 10% representing an
increase in capital of £10,000.
Related topics:
Depreciation
