6.17 Which will lose value over time just because of age?

What will lose value over time just because of age?

The correct answer is c. Both land and buildings will lose value over time due to age because of wear and tear and other factors.

Depreciation in Real Estate

Land and buildings will lose value over time due to age because of wear and tear and other factors. This is because depreciation occurs in real estate, where both land and buildings experience wear and tear and become less valuable as they age. For example, a new building may be more attractive to potential buyers or tenants because it is in better condition and requires less maintenance. As the building gets older, it may require more repairs and renovations, making it less desirable and lowering its value. Similarly, land can also lose value over time due to factors such as changes in zoning regulations, environmental issues, or changes in the surrounding area. Hence, c is the correct option. Further Explanation: Depreciation in real estate is a common phenomenon that occurs as properties age. This depreciation is caused by a variety of factors, including physical wear and tear, functional obsolescence, and economic factors such as changes in market demand. Physical wear and tear: As buildings age, they are subjected to natural wear and tear that can affect their structural integrity and appearance. This can include issues such as roofing problems, plumbing leaks, and deteriorating paint. These physical problems can reduce the overall value of the property, as potential buyers or tenants may be deterred by the need for costly repairs. Functional obsolescence: Functional obsolescence occurs when a property's design or features become outdated or no longer meet the needs of modern users. For example, a building with an outdated floor plan or inefficient heating system may be less desirable than newer properties with more modern amenities. This can lead to a decrease in the property's value over time, as buyers may be more interested in properties that offer better functionality. Economic factors: Changes in the economic environment can also impact the value of real estate properties. For example, fluctuations in market demand or changes in the local economy can affect the desirability of properties in certain areas. Additionally, external factors such as changes in zoning regulations or environmental issues can also influence the value of land and buildings over time. In conclusion, both land and buildings will lose value over time due to age because of wear and tear, functional obsolescence, and economic factors. It is important for property owners to be aware of these depreciation factors and take steps to maintain and improve their properties to preserve their value in the long run.
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