Which principle states that capital improvements add value to the property up to a limit?

The principle that indicates capital improvements add value to a property only up to a certain limit is known as the Principle of Decreasing Returns. This principle suggests that while investments in property improvements can enhance its value, there is a diminishing marginal return on those improvements after a particular point. This means that after a certain amount of improvement, the increased value of the property may not justify the cost of the improvements made.

In practical terms, if a homeowner invests a significant amount of money in renovations or upgrades beyond what is typical for the neighborhood or the property's initial value, they may find that the property does not appreciate in value proportionately. This principle is essential for property investors and owners to understand, as it helps them make informed decisions about how much to invest in improvements while being conscious of their potential return on investment.

The other principles relate to different concepts of property valuation and economics, focusing on different aspects of property performance and market dynamics, rather than the limit to which improvements can effectively add value.