What type of depreciation occurs when a property becomes less desirable due to changes in the surrounding neighbourhood?
Correct Answer
D) External obsolescence
External obsolescence (also called economic obsolescence) is a loss in value caused by factors outside the property, such as neighbourhood decline, new nuisances or a weaker local economy. The owner usually cannot cure it. Physical deterioration and deferred maintenance concern the building's condition, and functional obsolescence concerns its design.
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