Yield capitalization relies on which of the following assumptions?

Yield capitalization is a method used by appraisers to determine the value of an income-producing property by analyzing the income it generates and applying a yield rate. This method is rooted in the principle that the value of a property is fundamentally linked to its ability to produce income.

The correct choice reflects the idea that yield rates will fluctuate with market conditions, allowing for a more accurate representation of the property's potential financial performance. This assumption acknowledges that changes in the economy and the real estate market can impact investor perceptions and the required return on investment. Therefore, the yield rates used in the capitalization process must be adaptable to reflect these dynamic market conditions.

In contrast, assuming that future income will remain constant does not account for potential market shifts that could affect rental prices or vacancy rates. Similarly, the belief that property values will continuously rise overlooks economic downturns and local market fluctuations. Lastly, stating that property will experience no depreciation is unrealistic, as all properties undergo wear and tear over time, which can influence both income and value. Thus, yield capitalization emphasizes the importance of assessing how yield rates will respond to changing market conditions.