What term refers to the decrease in property value due to external factors, such as a new runway affecting a subdivision?

The term that refers to the decrease in property value due to external factors is known as economic obsolescence. This concept encompasses a variety of external influences that negatively impact the value of a property, such as nearby developments like a new runway, changes in zoning laws, or shifts in the local economy. Unlike physical deterioration, which involves the wear and tear of the property itself, or functional obsolescence, which pertains to outdated features or designs within the property, economic obsolescence is specifically about external factors that can lead to a loss of value.

Understanding economic obsolescence is important for real estate professionals, as it highlights how location and surrounding developments can have significant impacts on property values, regardless of the condition of the property itself. This makes it a crucial concept in assessing the overall valuation in real estate transactions.