What is the main consequence of physical depreciation?

Physical depreciation refers to the loss of value of a property due to wear and tear or deterioration over time. This can result from factors such as age, neglect, or environmental damage. The main consequence of physical depreciation is a reduction in market value. As properties age and show signs of physical decline, potential buyers or investors often perceive them as less desirable, leading to a lower market price.

In contexts where physical depreciation is significant, property owners may find it challenging to command the same listing prices they could have previously achieved when the property was in better condition. This phenomenon can have wider implications, affecting financing options and investment decisions, as lenders and investors typically take the current market value into account when considering a transaction.

While factors like increased rental income or enhanced curb appeal could occasionally occur if a property is renovated or well-maintained, these outcomes are typically not direct results of physical depreciation. Similarly, while higher maintenance costs may arise from ongoing repairs due to deterioration, the fundamental impact of physical depreciation primarily manifests as a decline in the property's market value.