Which principle of value refers to the idea that property value decreases due to surrounding properties?

The principle of regression refers to the idea that the value of a property can decrease when it is located in an area where surrounding properties are of lower value. This concept is based on the notion that the value of a property is influenced by the value of other properties in its vicinity. When higher-value properties are nearby, they can raise the value of a lesser property, but conversely, if the surrounding properties are less desirable or of lower value, it can diminish the perceived value of a property.

This principle indicates that a property’s value is not assessed in isolation; it is part of a broader landscape of real estate. The effect of regression emphasizes how neighborhood dynamics and the quality of nearby properties can impact individual property values. It is particularly important for appraisers and real estate professionals to consider these factors when determining market value or pricing properties.