appreciation

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Appreciation

Increase in the value of an asset.

Appreciation

An increase in value of a property or other asset. Most property depreciates, and it is fairly rare to discuss a property's appreciation. Real estate and securities are major exceptions, since real estate tends to appreciate over time and securities may increase or decrease in value depending on market conditions. Appreciation may be used to calculate capital gains or property taxes. See also: Capital appreciation.

appreciation

1. An increase in value, as of an asset.
2. Used to distinguish between securities that are likely to provide profits because of increases in price and those that provide dividend payments.

Appreciation.

When an asset such as stock, real estate, or personal property increases in value without any improvements or modification having been made to it, that's called appreciation.

Some personal assets, such as fine art or antiques, may appreciate over time, while others -- such as electronic equipment -- usually lose value, or depreciate.

Certain investments also have the potential to appreciate. A number of factors can cause an asset to appreciate, among them inflation, uniqueness, or increased demand.

appreciation

or

capital appreciation

  1. an increase in the price of an ASSET. Assets held for long periods, such as factory buildings, offices or houses, are most likely to appreciate in value because of the effects of INFLATION and increasing site values, though the value of short-term assets like STOCKS can also appreciate. Where assets appreciate their REPLACEMENT COST will exceed their HISTORIC COST and such assets may need to be revalued periodically to keep their book values in line with their market values.

    See DEPRECIATION, definition 1, INFLATION ACCOUNTING, REVALUATION PROVISION.

  2. an increase in the EXCHANGE RATE of a currency against other currencies under a FLOATING EXCHANGE RATE SYSTEM, reflecting an increase in market demand for that currency combined with a decrease in market demand for other countries’ currencies. The effect of an appreciation is to make imports (in the local currency) cheaper, thereby increasing import demand, and EXPORTS (in the local currency) more expensive, thereby reducing export demand, ultimately working towards keeping a country's BALANCE OF PAYMENTS in equilibrium on a more or less continuous basis.

    Appreciations, like REVALUATIONS, can adversely affect the profitability and market position of domestic firms by making imports more price competitive in the home market and, similarly, reducing their price competitiveness in export markets. See REVALUATION, definition 2, for further discussion. Contrast with DEPRECIATION, definition 2, EXCHANGE RATE EXPOSURE.

appreciation

  1. 1 an increase in the value of a CURRENCY against other currencies under a FLOATING EXCHANGE-RATE SYSTEM. An appreciation of a currency's value makes IMPORTS (in the local currency) cheaper and EXPORTS (in the local currency) more expensive, thereby encouraging additional imports and curbing exports, so assisting in the removal of a BALANCE OF PAYMENTS surplus and the excessive accumulation of INTERNATIONAL RESERVES.

    How successful an appreciation is in removing a payments surplus depends on the reactions of export and import volumes to the change in relative prices; that is, the PRICE ELASTICITY OF DEMAND for exports and imports. If these values are low, i.e. demand is inelastic, trade volume will not change very much and the appreciation may in fact make the surplus larger. On the other hand, if export and import demand is elastic then the change in trade volumes will operate to remove the surplus. BALANCE-OF-PAYMENTS EQUILIBRIUM will be restored if the sum of export and import elasticities is greater than unity (the MARSHALL-LERNER CONDITION). See REVALUATION for further points. Compare DEPRECIATION 1. See INTERNAL-EXTERNAL BALANCE MODEL.

  2. an increase in the price of an ASSET and also called capital appreciation. Assets held for long periods, such as factory buildings, offices or houses, are most likely to appreciate in value because of the effects of INFLATION and increasing site values, though the value of short-term assets like STOCKS can also appreciate. Where assets appreciate, then their REPLACEMENT COST will exceed their HISTORIC COST, and such assets may need to be revalued periodically to keep their book values in line with their market values.

    See DEPRECIATION 2, INFLATION ACCOUNTING.

appreciation

The process of increasing in value. As a practical matter, although the IRS allows taxpayers to depreciate real property improvements as if they were becoming less valuable over time and will eventually be worthless, real property generally appreciates over time with proper maintenance and repair.

References in periodicals archive ?
The Appreciation Station is now available to parents and teachers at http://www.
CONTACT: Maureen Cahill, +1-952-447-8933, or Laura Oakes, +1-651-340-3195, for The Appreciation Station
Thus, metro area population growth rates on which local expectations of future housing appreciation are likely to be based are highly volatile and swamp the aggregate national factors including the population bulge from the baby boom.
As a consequence, we compared our predictions of appreciation using 1990 census data to actual housing appreciation rates during the 1990 to 1994 period.
To illustrate this ability, we input 1990 census data into the model and identified the five (out of 64) metro areas with the greatest predicted price appreciation and the five with the lowest predicted appreciation.
Notice that the metro areas with the highest predicted appreciation are also high actual appreciation areas.
To develop a model for forecasting long-run housing appreciation rates, we began by borrowing from the stock dividend literature.
However, under this assumption the expected total returns to homeowners from their houses are the sum of the expected appreciation rate (which is the housing analog of expected capital gains), and the rent owners pay to themselves implicitly (which is the housing analog of a dividend yield).
In the next period prices will on average fall in the middle of the band, decreasing the estimate of capital appreciation.
The dividend irrelevance proposition predicts that as this quality-adjusted rent-to-price ratio increases, expected capital appreciation falls.
Thus, a negative ARPR at the beginning of the decade will be associated with a lower level of observed capital appreciation during the decade.