Which principle describes the loss of value a high-quality property experiences when located near a lower-quality property?

The principle being described is known as regression. This principle asserts that the value of a property can decrease when it is situated near lower-quality properties. This is based on the idea that overall neighborhood quality influences individual property values; therefore, a high-quality property can experience a depreciation in value simply because it is surrounded by less desirable properties.

In real estate, this emphasizes the importance of location and surrounding property conditions. A high-end home, for example, may not sell for as much if it is adjacent to run-down or poorly maintained homes, as potential buyers may view it less favorably due to the neighborhood's overall perception. This principle is particularly relevant in discussions of market trends and property investment strategies, highlighting how external factors can impact property values significantly.

The other principles mentioned—contribution, substitution, and plottage—address different aspects of property value and do not pertain to the phenomenon of value depreciation due to surrounding lower-quality properties. Contribution relates to the value added by specific improvements, substitution considers the principle that a buyer will not pay more for a property than it would cost to acquire a comparable substitute, and plottage refers to the increased value that can result from combining adjacent properties into a single larger parcel.