Wear is defined as a reduction in the overall utility of a particular property, as well as its attractiveness to the consumer on the part of its assessment by a potential investor.
Thus, depreciation of real estate also expresses a corresponding decrease in the value of the object's valuation, which is affected by the impact of a number of specific factors over a period of time.
Operation of the facility undoubtedly leads to gradual deterioration of its parameters, which characterize in general the reliability at the structural level of the building / structure and their functional correspondence to the current and future use.
Also, the value of real estate is determined by its influence and external factors, which are due in particular to changes in the market environment, restrictions on the use of the facility for specific purposes, etc.
As a rule, the depreciation of real estate is determined by the percentage ratio, while the value expression for the use of the building is determined by nothing more than depreciation.
A number of reasons that cause the depreciation of the object, determines and the corresponding types of wear, namely:
- wear physical;
- functional wear;
- wear external;
Each of the listed species, in turn, is subdivided into subspecies.
This includes, in particular, removable wear, the elimination of which is possible physically with simultaneous expediency from the economic side.
Economic feasibility, in turn, consists in investing in specific works to improve the operational characteristics of the facility, which will subsequently increase its cost.
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If all identified above types of wear are identified, then here we are talking about the complex accumulated form of wear of the object.
The value of aggregate depreciation is determined by the difference between the recovered value and the value of a particular market property subject to valuation.
Based on these definitions and their essence, it can be determined that the complex accumulated depreciation predominantly lies in the temporal lifetime of the object, and this, in turn, determines additional parameters for assessing its characteristics.
This includes the physical life of the object, its chronological age, economic life, the effective age of the object, as well as the remaining period of its economic life.
