What does physical deterioration refer to?

Physical deterioration refers to the loss of value in a property primarily due to physical wear and tear over time. This can occur because of factors such as aging, weathering, and lack of maintenance, which collectively reduce the property's overall condition and functionality. When a property experiences physical deterioration, it may require repairs or renovations to restore its value. This concept is essential in real estate as it helps assess a property's condition and informs appraisal processes.

The other options provided do not accurately capture the essence of physical deterioration. Improvement of value due to renovations describes an enhancement in value, rather than a loss. Value retention through effective management refers to maintaining existing value rather than deterioration. Market fluctuations pertain to external economic factors affecting property value, which is unrelated to the physical condition of the property itself.