In the context of real estate, what does depreciation refer to?

Depreciation in real estate refers specifically to a loss of property value due to various factors. Over time, properties can lose value due to aging, wear and tear, changes in the surrounding environment, or market trends. This concept is essential for real estate professionals as it impacts the valuation of properties, investment analysis, and tax considerations.

For property investors and owners, understanding depreciation is crucial because it can affect their returns and influence decisions related to property maintenance and renovations. When calculating depreciation, it's not just about the physical deterioration; it can also involve external factors such as changes in neighborhood dynamics or economic shifts that negatively impact property desirability and value.

While the other options touch on different aspects of property management or valuation, they do not accurately represent the concept of depreciation. The increase in property value over time is known as appreciation, repairs do not directly contribute to depreciation but are part of maintenance and improvement strategies, and tax savings are a separate consideration that can involve depreciation but do not define it.