Which principle provides the basis for the income approach in property valuation?

The correct choice identifies the principle of anticipation as the foundation for the income approach in property valuation. This principle posits that the value of a property is determined by the income it is expected to generate in the future. In other words, potential buyers will assess what they can expect to earn from the property over time when making their investment decisions. This approach is particularly relevant for income-producing properties, such as commercial real estate, where the expected future cash flows directly influence the property’s current value.

The anticipation principle reflects the idea that the value of a property is linked to its future benefits, aligning closely with the rationale behind the capitalization of income streams. By projecting the expected income and applying an appropriate capitalization rate, assessors can derive a present value for the property based on those anticipated cash flows.

Other principles, while relevant in the field of property valuation, do not serve as the primary basis for the income approach. Comparative market analysis focuses on analyzing recent sales of similar properties to derive value, which is different from the income perspective. The principle of substitution asserts that a buyer will not pay more for a property than the cost to acquire a similarly desirable substitute, which again does not directly relate to the income-generating potential. Risk assessment involves evaluating uncertainties associated with