Do you own building land and wonder how to fully exploit its potential? Many owners underestimate the diverse possibilities and risks. This article shows you how to make well-considered decisions for maximum returns.
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The topic briefly and concisely
The strategic development of building land can significantly increase its value; a precise analysis of location, building regulations, and the market is essential.
The Land Activation Act and the Annual Tax Act 2022 have established important new frameworks for land development and valuation.
Sound evaluation methods, consideration of standard land values and development costs (average €15,000-€20,000) are essential for maximizing profit.
The identification and utilisation of land development potentials is crucial for property owners and investors. Given the rising land prices, which increased by about 9% annually between 2015 and 2022, a well-founded strategy is becoming increasingly important. This article highlights key factors, valuation approaches, and legal frameworks such as the Land Mobilisation Act and the Annual Tax Act 2022. Learn how to systematically increase the value of your land and avoid costly mistakes.
Understanding and Assessing Development Potential of Land
What exactly lies behind Land Development Potentials? It refers to the entirety of possibilities for increasing the value of a property. This can be achieved through construction, change of use, or subdivision. A thorough potential analysis is the first step towards successful development and can increase the value by over 20%.
The relevance is equally high for private owners and professional developers. Germany has land reserves for at least 900,000 housing units. The right strategy transforms unused land into a profitable project. Early identification of these potentials is therefore a crucial competitive advantage.
The assessment methods are varied. The comparative value method, income approach, and cost approach are applied depending on the type of property. Standard land values, which are updated every two years, play a central role. A professional evaluation by Auctoa can provide you with clarity here.
These fundamentals lay the foundation for a detailed consideration of the influencing factors.
Precisely analyze influencing factors on development potential
The location is perhaps the most obvious factor. Good transport connections can increase the value of a property by up to 30%. Proximity to infrastructure facilities such as schools and shopping opportunities is also crucial. In German cities, the land prices in 2024 averaged €1,029/m². [4.]
The building law defines the possibilities for using a property. A development plan, for example, establishes the floor space index (FSI). A higher FSI allows for more building volume and increases potential. Checking the applicable building law is essential.
The market situation and demand are dynamic variables. Increasing population numbers in urban centres drive demand. Between 2015 and 2022, land prices nationwide rose by approximately 9% per year. [3] A detailed market analysis helps to identify trends early.
These factors are often closely interlinked and must be considered in the overall context, highlighting the complexity of land development.
Use the Land Mobilisation Act to activate areas
The Land Use Mobilisation Act came into force on 23 June 2021. It aims to activate more areas for housing construction. A central instrument is the sectoral development plan (§ 9 para. 2d of the Building Code). This facilitates the designation of residential land in unplanned inner areas.
The municipalities were given extended pre-emption rights. This now also applies to brownfield sites and so-called "derelict properties." In areas with a tight housing market, municipalities can justify pre-emption rights more easily. This is intended to counteract speculation and promote affordable housing.
The building obligation has also been expanded. Owners can now be more easily obliged to undertake residential construction. This is intended to close building gaps more quickly. The regulation aims to strengthen inner development and reduce pressure on open spaces.
The following facilitations for residential construction are also part of the Act:
Simplified exemptions from existing development plans for housing construction.
Relaxed rules for the integration of residential uses into the surroundings.
Conversion of upper limits of the Building Utilisation Ordinance into guideline values.
Introduction of the “Rural Residential Area” construction category.
These measures provide new opportunities but also require a precise knowledge of the legal situation in order to maximise potential.
Quantify potential through sound evaluation methods and data sources
The standard land value is an important reference point for the property value. It is determined by expert committees based on collections of purchase prices. [61] The average standard land value in Germany in Q2 2024 was €226.34/m². [4.] These values are publicly accessible, for example, via BORIS-D, the nationwide land value information system. [5]
Expert committees play a central role. They not only determine standard land values but also prepare property market reports. These reports provide valuable data on price trends and sales. For an accurate valuation, this information is essential.
Besides the official data, additional sources are relevant. Market reports from banks or research institutes provide insights into regional trends. The Federal Statistical Office (Destatis) provides data on construction activity and purchase values. [2] Comprehensive data analysis is the basis for any solid valuation of potential.
The complexity of valuation methods and the multitude of data sources often necessitate external expertise to realize the full potential of a property.
Keeping costs in view: Calculate development and additional costs
Development costs are a significant factor in land development. They include connection to public networks, such as electricity, water, sewage, and telecommunications. The connection to the transport network is also part of it.
The costs for fully developing raw land into building land range on average between 15,550 and 20,320 euros. Municipalities can involve landowners in up to 90% of the technical and 70% of the traffic-related development costs. The exact amount depends on regional conditions and local ordinances.
Typical cost components of public development are:
Connection to the electricity grid: 2,000 to 3,000 euros.
Connection to water: 2,000 to 5,000 euros.
Connection to the gas line: approx. 2,000 euros (if needed/possible).
Connection to the telecommunications network: approx. 1,000 euros.
Additional private development costs for lines on the property itself arise. Here, you can expect around 1,000 euros per meter of line length. A detailed cost breakdown is essential before starting the project.
These costs significantly influence the profitability of a development project and must therefore be integrated into the planning early on.
Annual Tax Act 2022: Understanding the Impact on Land Valuation
The Annual Tax Act 2022 brought significant changes to property valuation. This is particularly relevant to inheritance and gift tax. [1,1] The valuation parameters have been adjusted to the current market situation. This generally leads to higher property values and thus potentially higher tax burdens. [1]
A key change is the adjustment of the real value factor. This factor, which reflects marketability, is set to increase from the previous 0.9-1.1 to 1.3-1.5. [1,3] This directly affects the amount of the taxable real value. The introduction of regional factors into the real value method is also new. [1]
The total useful life for properties has been increased from 70 to 80 years. [1] This extends the notional remaining useful life. A longer remaining useful life generally leads to a higher property value. These adjustments should be considered in long-term planning of asset transfers.
The new regulations require a careful review of your individual situation. A professional assessment, like the one offered by Auctoa, can help correctly estimate the tax implications. Use our ImmoGPT-Chat for initial questions.
These tax aspects are closely linked to strategies for maximizing value.
bauland-entwicklungspotenziale
Proactive planning and development can significantly enhance the value of your building land. This begins with a detailed analysis of the current state. What type of building is currently permitted? Are there untapped potentials such as gaps or possibilities for infill development? Filling a gap alone can increase the overall value of an area by 10-15%.
Optimising building rights is often key. Can a change in the development plan achieve greater utilisation? A higher floor-area ratio (FAR) of 0.8 instead of 0.5, for instance, can increase the achievable living space by 60%. Cooperation with the local council is crucial here.
Development and parceling are additional important steps. A large plot of land can often achieve a higher total sale price when divided into several smaller plots. The costs for additional development must, of course, be taken into account. Parceling can increase the value per square metre by 15-25%.
The following measures can contribute to maximising value:
Obtaining a current development plan and checking the usability (e.g., FAR, GRZ).
Checking possibilities for infill development or adding additional storeys to existing buildings.
Analysing the standard land value and comparing it with similar plots in the vicinity.
Clarifying the development status and calculating potential development costs.
Obtaining a professional potential analysis and property valuation.
Examining options for optimising building rights in consultation with the local council.
Potentially parceling the land to create multiple building plots.
Developing a marketing strategy based on the identified potentials.
Implementing these strategies requires expertise and market knowledge to fully realise the potential of your building land.
Future Trends and the Role of Auctoa in Potential Analysis
How can I specifically increase the development potential of my building land?
The potential can be enhanced by optimising building laws (e.g., applying for higher utilisation), subdividing larger plots, ensuring development, or changing the land use. A professional potential analysis reveals individual possibilities.
What is the difference between land intended for building, raw land, and building land?
Land intended for building is land that is expected to become building land in the future. Raw land is earmarked for construction but not yet developed. Building land (or ready-to-build land) is developed and ready for immediate construction.
What role do land value benchmarks play in the valuation of building land?
Land value benchmarks are average values for properties in a specific location and stage of development. They serve as important guidance for valuation and are regularly published by appraisal committees.
How does Auctoa support the analysis of building land development potentials?
Auctoa uses AI-supported analyses and extensive market data to provide an accurate assessment of your plot's development potential. We also offer strategic advice on maximising value and leveraging these potentials.
Do I always have to cover the development costs of my property myself?
The municipality can require property owners to contribute to public development costs—up to 90% of technical and 70% of traffic-related costs. The private development on one's own property is typically fully borne by the owner.
What does urban infill mean in the context of building land?
Urban infill refers to the use of land potential within existing settlement areas. This includes closing building gaps, repurposing vacant sites, or densification (e.g., adding storeys). The goal is to reduce the need for new land take.
Additional useful links
The Statistisches Bundesamt (Destatis) provides detailed data on house and land prices in Germany.
The Federal Institute for Research on Building, Urban Affairs and Spatial Development (BBSR) publishes studies and publications on building research, urban development, and spatial planning.
The German Real Estate Association (IVD) offers current news and articles on real estate prices and market developments.
The Deutsche Bundesbank offers comprehensive statistics on real estate and construction performance prices in Germany.
The German Association of Cities provides information in its press releases about the amendment to the Land Mobilisation Act and its effects.
Wikipedia offers a comprehensive article with basic information and definitions on the topic of 'Bauland'.
The Federal Agency for Cartography and Geodesy (BKG) provides information on cadastral parcels in Germany.
The BFW Newsroom of the Federal Association of Independent Real Estate and Housing Companies offers news and specialist articles on the subject of 'Bauland'.
The Prognos AG provides analyses and information on site development and the real estate industry.
FAQ
How can I specifically increase the development potential of my land?
Potential increase can be achieved through optimisation of building rights (e.g. applying for higher utilisation), parceling of larger plots, ensuring development, or a change of use. A professional potential analysis reveals individual possibilities.
What is the difference between expectant land, raw land, and building land?
Bauerwartungsland is land that is expected to become building land in the future. Raw land is already intended for development but has not yet been developed. Building land (or ready-for-construction land) is developed and can be built on immediately.
What role do standard land values play in the valuation of building land?
Standard land values are average values for properties in a specific location and state of development. They serve as an important guide for property valuation and are regularly published by expert committees.
How does Auctoa assist in analyzing land development potential?
Auctoa uses AI-based analyses and extensive market data to create an accurate assessment of your property's development potential. We also provide strategic advice on maximizing value and leveraging these potentials.
Do I always have to cover the costs for the development of my property myself?
The municipality can involve property owners in the public development costs – up to 90% of the technical and 70% of the traffic-related costs. The private development on one's own property is usually borne entirely by the owner.
What does infill development mean in the context of building land?
Inner development refers to the use of space potential within existing settlement areas. This includes closing building gaps, repurposing brownfield sites, or densification (e.g. adding additional storeys). The aim is to reduce the consumption of new land.
