Appreciation

Appreciation refers to when the value of something increases over time.

The value of a house usually increases with time. Therefore its value is said to appreciate.

Example

A flat bought for £74 000 in 2008 appreciated in value each year by 1.5%.

Calculate the value of the house after four years.

We can use the multiplier method.

The multiplier is 1 + (1.5% of 1). This is 1+0.015 which is 1.015.

We multiply 74000 by this 4 times.

{(1.015)^4} \times \pounds74\,000

= \pounds78\,540.90

The value of the flat after four years is £78 540.90

(Another way of doing this is to calculate 1.5% of the value and add it on. We would repeat this until we had done it 4 times).