Which term best describes the wear and tear on a property that reduces its value over time?

The term that best describes the wear and tear on a property that reduces its value over time is physical deterioration. Physical deterioration refers to the physical decline of a property due to factors such as age, weathering, and lack of maintenance. Over time, normal wear and tear can lead to issues like crumbling infrastructure, peeling paint, or outdated elements that physically impair the condition of the property. This directly affects the property's value, as buyers typically desire homes that are in good physical condition.

In contrast, functional obsolescence involves a reduction in value due to outdated design or features that do not meet current market demands, such as having too few bathrooms for modern standards. External obsolescence refers to a loss in value due to external factors outside the property, like neighborhood decline or environmental issues. Investment depreciation, while a relevant term in finance, does not specifically address the physical aspect of a property's decline. Therefore, physical deterioration accurately captures the concept of wear and tear leading to a decrease in property value.