Principle Of Anticipation

Principle of Anticipation Definition

Principle of Anticipation is the idea that the property’s market value is the present value of the sum of anticipated future benefits.

Explanation

A very simple example is that a buyer agrees to pay a certain price for a rental property, based on that buyer’s calculations of the rental income that the property can bring during a certain time period. This property appraisal method based on the principle of anticipation is known as Income Approach.

Another simple example would be a vintner who is making an offer on a vacant land because he sees that it’s located in an area where the climate and water supply are perfect to develop a vineyard. The vintner is anticipating a return in the future, that is greater than he/she could experience by simply buying and holding a vacant piece of land.

It’s also important to realize that the principle of anticipation doesn’t always refer to monetary gain. It could also be emotional or mental gain.

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