What is the term for the allowable deductions in property value due to economic factors?

The correct answer is external obsolescence. This term refers specifically to the reduction in property value that results from external factors or economic influences that are typically beyond the control of the property owner. These factors may include things like changes in the neighborhood, economic downturns, or new developments in the area that negatively impact property desirability.

Understanding external obsolescence is crucial for appraisers, as it helps them accurately assess a property's market value by recognizing how external dynamics can detract from its worth. This differentiates it from other types of obsolescence or depreciation, such as functional obsolescence, which relates to issues inherent within the property itself, or physical depreciation, which refers to wear and tear over time. Market decline relates more broadly to shifts in market conditions rather than specific external influences on a property’s individual value.