Appreciation

Appreciation refers to the increase in the value of an asset over time. This increase can occur due to various factors such as market demand, inflation, improvements to the asset, or favorable economic conditions. Appreciation is common in assets like real estate, stocks, and collectibles. When an asset appreciates, its owner can sell it for more than the original purchase price, resulting in a capital gain. Appreciation is the opposite of depreciation, which is the decrease in an asset's value over time. Investors and businesses often seek assets that are likely to appreciate to build wealth and improve financial stability.

Example

If you buy a house for $200,000 and its value increases to $250,000 over five years, the appreciation is $50,000.