Definition
Appreciation is the increase in the value of an asset over time, whether due to market demand, scarcity, or economic growth. It reflects higher prices or perceived worth compared to its original value.
Why It Matters
Appreciation is important for investors and businesses because it can lead to increased wealth and capital gains. Understanding how and why assets appreciate helps guide investment decisions and long-term financial planning.
Example
A homeowner buys a property for $200,000. Over five years, due to a booming real estate market and increased neighborhood demand, the property is valued at $250,000. The $50,000 increase is the property's appreciation.