What is the effect of competition as described in property valuation principles?

The principle of competition in property valuation emphasizes how the dynamics of supply and demand interact within a market. When competition exists among sellers, it can create an environment where there are more properties available than there are buyers, leading to an oversupply situation. Conversely, if buyers are competing for a limited number of properties, this can result in shortages.

The essence of competition is that it drives prices toward equilibrium based on how many buyers and sellers are active in the market. If there are more buyers than available properties, prices can rise. If there is an oversupply of properties without corresponding demand, prices may drop. Thus, competition impacts the property market by reflecting the balance or imbalance between supply and demand, influencing market dynamics rather than ensuring stability or preventing changes.

The other options do not accurately reflect the principle of competition. Price stability, prevention of market changes, and centralization of the property market do not capture the inherent fluctuations and varying conditions that competition introduces to property valuation and market behavior.