Which term is used to describe a decrease in property value due to changes in design or materials?

The term that describes a decrease in property value due to changes in design or materials is functional obsolescence. This concept refers to a loss of value arising from outdated or inferior design features that make a property less desirable to buyers, often as a result of technological advancements, changes in consumer preferences, or the introduction of improved materials and construction techniques.

Functional obsolescence occurs within the property itself, as opposed to factors external to the property, such as neighborhood decline or market conditions. Recognizing this form of depreciation is crucial for property tax consulting because it directly affects how properties are assessed for tax purposes and helps identify areas where property owners may need to invest in upgrades to regain value.

In contrast, other terms like functional depreciation and structural depreciation have distinct definitions that do not specifically encompass this phenomenon of outdated design or materials. Market depreciation typically relates to external economic factors affecting property values rather than the intrinsic features of the property itself.