Which principle refers to the idea that property should be used for its highest and best use?

The principle that property should be used for its highest and best use is referred to as "Highest Best Use." This concept emphasizes that each piece of real estate has the potential for different uses, and the value is maximized when the property is utilized in a manner that yields the greatest return or benefit.

The highest and best use analysis considers factors such as the physical characteristics of the property, its location, the market demand, and legal restrictions. For example, a parcel of land may be more valuable if developed as residential housing compared to being used for agriculture, based on the local real estate market and community needs.

In the context of real estate valuation, utilizing the highest and best use principle allows appraisers and investors to determine the most economically feasible use of the property and thus estimate its maximum value accurately.