What factors can contribute to property depreciation?

Property depreciation refers to a decline in the value of a property over time due to various factors. The choice that highlights physical deterioration, functional obsolescence, and external obsolescence is accurate because these elements are the primary sources of depreciation in real estate.

Physical deterioration encompasses the wear and tear of a property over time, affecting its structural integrity and aesthetic appeal. This can be the result of neglect, age, or environmental factors, leading to a decrease in the property's market value.

Functional obsolescence arises from features that are no longer desirable or useful, such as outdated layout designs or inadequate facilities. This type of depreciation occurs when a property does not meet current market standards or buyer expectations, resulting in a decrease in its utility and appeal.

External obsolescence refers to factors outside the property that negatively impact its value. This can include changes in the surrounding environment, such as the development of a nearby industrial site or an increase in crime rates, which can make an area less desirable.

Together, these three factors—physical deterioration, functional obsolescence, and external obsolescence—provide a comprehensive view of how and why property values can decline, making this choice the correct and most relevant answer regarding the causes of property depreciation.