What principle states that property value is influenced by its surroundings?

The principle that states property value is influenced by its surroundings is known as the principle of conformity. This principle suggests that a property’s value can be affected by how well it conforms to the characteristics and standards of the surrounding properties within its neighborhood. When properties are similar in terms of style, age, and quality, they tend to support and enhance each other’s value. If a property is vastly different from others in its vicinity, its market value may be negatively impacted.

In real estate, conformity means that there is more stability and value retention when properties harmonize with one another in a specific area. For example, a modern home in a neighborhood of traditional homes might experience a decline in value simply due to its dissimilarity to the surrounding properties, as it may not appeal to the same buyer demographic that prefers the established character of the area.

The other principles mentioned serve different roles in real estate valuation. Scarcity refers to the limited availability of certain types of properties, competitiveness relates to the attractiveness of various investments in the marketplace, and substitution deals with the concept that a buyer will not pay more for a property than the cost of acquiring a similar one. Each principle plays its part, but when discussing the influence of surroundings specifically, conformity is the key