Which principle pertains to the effects of new developments on existing properties?

The Principle of Externalities pertains specifically to how external factors, including new developments, can influence the value and desirability of existing properties. This principle asserts that an outside development can either enhance or detract from the value of surrounding properties, depending on various factors such as location, land use, and community amenities.

For instance, if a new shopping center or park is built near existing homes, the value of those homes may increase due to enhanced accessibility and lifestyle improvements. Conversely, if a factory or undesirable facility opens nearby, it may diminish the attractiveness and value of neighboring properties due to potential noise, traffic, or environmental concerns.

Understanding this principle is crucial for appraisers as it helps them evaluate how external developments might affect property values in a given area, guiding them in providing more accurate appraisals. The other options listed, while related to property value and real estate dynamics, do not specifically address the direct impact of external developments on existing properties.