Appreciation RateThe yearly rate of appreciation can be calculated as follows: At = Vt-Vt-1/Vt-1 Where: At = Appreciation rate for year t The appreciation rate overlaps to some extent with the capital return concept, but the calculation of the latter may differ. Also notice that the concept of capital return encompasses and the case that property value decreases (in which case it is referred to as depreciation), while appreciation refers only to value increases. The term appreciation in real estate is synonymous to property value increase, or capital growth. Property value appreciation occurs mainly as a result of market forces and supply shortages, capital improvements, better management, urban infrastructure improvements and developments that make the location of a property more attractive. Understanding the forces that cause properties to appreciate in value can help make better and more profitable real estate investment decisions.
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