When the value of real property increases due to population growth, this increase is classified as what?

When the value of real property increases as a result of external factors such as population growth, this increase is best classified as "unearned increment." This terminology reflects the idea that the property owner is benefiting from an increase in value that is not directly tied to their actions or improvements made to the property. Instead, it is due to external economic and social factors, like demand driven by a growing population.

In real estate, unearned increment often occurs in regions where infrastructure, employment opportunities, and amenities attract more residents. As demand for housing or commercial space in these areas rises due to population growth, property values typically increase without the property owner having to invest additional resources into the property itself.

This concept is essential in understanding how market dynamics can influence property values over time, reinforcing the idea that external variables play a crucial role in real estate investment outcomes.