Do you own a piece of land and wonder what really determines its value? An accurate land valuation is more complex than many assume and can decide over thousands of euros. Discover the crucial criteria that influence the value of your land and how you can use these to your advantage.
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The topic briefly and concisely
The location (macro and micro-location) is often the dominant factor and can account for up to 50% of the property's value.
The standard land value is an important point of reference, but individual property characteristics can lead to deviations of +/- 20%.
A professional property appraisal by an expert takes all factors into account and is essential for important decisions.
Do you know the feeling of not being able to accurately determine the true value of your property? Many owners underestimate how diverse the factors are for property valuation and how significantly they can influence the final selling price or mortgage value. A solid understanding of these aspects protects you from misjudgments and enables you to maximise the full potential of your property. This article highlights the key valuation factors and shows you how a professional analysis can lead to optimal results. This way, you make data-driven decisions rather than relying on your instincts.
Key Points: Core Factors of Land Valuation
A thorough property valuation is crucial for successful real estate decisions. It creates transparency and provides a solid foundation for negotiations or investment planning. Understanding the value-influencing factors is essential.
Understanding location quality: The macro and micro location determine up to 50% of the property's value.
Knowing the standard land value: It serves as an initial guide but does not represent the full value.
Checking development potential: The type and extent of use are decisive.
Considering development status: Serviced plots fetch higher prices.
Clarifying legal aspects: Encumbrances and rights can significantly influence the value.
These factors are only part of the overall picture, which is essential for precise value determination. A professional property valuation guide helps take all aspects into account.
Precisely analyse location quality: More than just the address
The location is undoubtedly one of the most important factors in property valuation. Experts differentiate between macro and micro location. The macro location includes regional aspects such as the economic strength of a region, the supra-regional transport connections, and the overall infrastructure, which can impact the value by up to 30%.
The micro location, on the other hand, refers to the immediate surroundings of the property. Here, factors such as neighbourhood development, the availability of shopping facilities, schools, doctors, and recreational facilities play a role. Noise disturbance or a good view can also affect the value by an additional 20%. A detailed analysis of both levels of location is essential for a realistic valuation. The evaluation of the infrastructure is an important component of this analysis. Having detailed knowledge of these factors allows the precise determination of a property's value, making it a critical step before any sale or investment decision.
Standard land value and plot size: The basis of the assessment
The Bodenrichtwert is an officially determined average value for land in a specific zone, expressed in euros per square metre. It is determined and published by expert committees at least every two years based on collected purchase prices. This value serves as an important reference point in property valuation. To get an initial rough idea of the land value, the Bodenrichtwert is multiplied by the plot size in square metres. A plot of 600 m² with a Bodenrichtwert of €430/m², for example, would have a land value of €258,000.
However, the Bodenrichtwert alone is not sufficient. Individual characteristics of the plot, such as the exact layout, shape, and topography can lead to deviations of up to 20% from the Bodenrichtwert. An unfavourable shape or steep slope may limit buildability and thus reduce the value. A detailed analysis of Bodenrichtwerte is therefore only the first step. For an accurate valuation, the specific features of the individual plot must always be considered. This brings us to the importance of buildability and development status.
Buildability and development status: Fully realize the potential
The potential use of a property is a key value driver. The developability is primarily regulated by the local development plan. This plan specifies the permissible type of development (e.g., residential, commercial), the floor space ratio (FSR), and the site coverage ratio (SCR). A property that allows for greater building utilisation is generally more valuable. The approved living area that can be realised plays a crucial role.
There are different development stages that greatly influence the value:
Land Awaiting Development: Areas where future development is expected often have a lower value due to uncertainties.
Raw Land: Designated as building land but not yet serviced, incurring additional infrastructure costs.
Ready-for-Construction Land: Serviced building land that can be built on immediately achieves the highest values.
The level of servicing is also an important factor. If a property is already connected to public networks such as water, sewage, electricity, and roads, its value increases as the buyer will not have to bear these costs, which can amount to 15,000 euros or more. A precise planning law assessment is therefore essential. Next, we will look at the physical properties of the soil itself.
Soil conditions and legal aspects: Identifying hidden depreciators
The physical condition of the soil can have significant impacts on the factors for property valuation. A stable ground is essential for construction projects and can reduce building costs by up to 10%. Conversely, legacy issues, such as soil or groundwater contamination, can substantially decrease the value since remediation costs can run into tens of thousands of euros. A soil survey can provide clarity here and is often an investment that pays off.
In addition to the physical aspects, legal conditions must also be reviewed. Encumbrances and restrictions registered in the land register, such as rights of way, easement rights, or a usufruct right, can limit usage possibilities and thus negatively affect the market value. Such entries can reduce the value by 5-15%. It is therefore advisable to check a current excerpt from the land register and examine possible legacy issues and their impact before an evaluation. This careful examination protects against unpleasant surprises. But how are all these factors consolidated into a single value?
Valuation methods and professional appraisals: Precisely determine the market value
To determine the market value of a property, which is the price achievable under normal market conditions, various standardised methods are used. The legal basis for this is the Immobilienwertermittlungsverordnung (ImmoWertV) and the Baugesetzbuch (BauGB). The most common methods are:
Comparative Value Method: This utilises actual purchase prices of comparable, recently sold properties. This method is considered very market-oriented, but it requires a sufficient number of comparable properties.
Land Value Method (often in combination): Based on the standard land value and individual adjustments.
Income Value Method: Used for investment properties (e.g. rented properties) and capitalises future expected earnings.
Cost Method: Calculates the value based on the construction costs of potential or existing buildings, minus age-related depreciation, plus land value.
While online calculators can provide an initial, rough estimate of property value (often with a deviation of +/- 20%), a binding and detailed evaluation requires a professional market value assessment by a certified expert. Such an assessment considers all relevant factors for property valuation and costs from about 1,000 euros, depending on the effort and value of the property. Choosing the right valuation methodology is crucial. Do you need assistance with the complex valuation of properties? An Auctoa valuation or a chat with our ImmoGPT can quickly provide clarity and analyse the specific factors of your property.
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Besides the property-specific characteristics, the current market situation plays a crucial role in property valuation. Supply and demand significantly determine the achievable price. In regions with high demand for building land and limited supply, property prices tend to rise. A scarcity of supply can drive prices up by 10-25%. Conversely, an oversupply or a decrease in demand, for example, due to economic downturns or demographic changes, can lead to a decrease in prices.
A professional market analysis for properties takes into account current trends, interest rate developments and regional economic forecasts. Monitoring the sales figures of comparable properties in the vicinity over the past 6-12 months provides insights into price dynamics. The planned usage of the property must also align with current demand. For instance, if there is high demand for single-family homes, a suitable plot for this purpose will tend to be valued higher than one that is only usable for specific commercial purposes. Understanding these market dynamics is essential for a realistic value assessment and is included in every well-founded property valuation report. How all this information is combined to ensure accuracy is the next logical step.
Conclusion: Precision through comprehensive factor analysis secures your property value
What is the difference between land value and market value of a property?
The land value is simply the value of the land itself, often derived from the standard land value and its specific characteristics. The market value (or market price) is the price that can typically be achieved for the entire property (possibly including any buildings) under normal market conditions.
How often should a property valuation be carried out?
A revaluation is advisable when considering selling, inheritance, divorce, for tax purposes, or if there have been significant changes in market conditions or legal frameworks (e.g., a new development plan). Standard land values are usually updated every two years.
What documents are needed for a property valuation?
Important documents include a current land registry extract, an extract from the cadastral map, possibly the development plan, information on infrastructure, and for developed plots, construction documents (plans, building description).
How long does a professional property valuation take?
The duration of a market value appraisal depends on its scope and complexity. After the property inspection and submission of all documents, the report can usually be completed in 2 to 4 weeks.
Can I determine the value of my property myself?
You can make a rough estimate based on the standard land value and the size of the plot. However, for an accurate and reliable valuation, especially for important financial decisions, a professional appraisal is advisable.
What does a market value appraisal for a property cost?
The costs for a market value appraisal are not uniformly set and depend on the property's value, the effort involved, and the complexity. For an average property, costs can range from about 0.5% to 1.5% of the market value, often starting at approximately 1,000 to 2,500 euros.
Additional useful links
Statistisches Bundesamt offers the latest data on construction prices and the residential property price index in Germany.
BORIS is the central information system for standard land values in Germany and provides an overview of official land values.
Deutsche Bundesbank presents its indicator system for the residential property market, which supplies key figures on market development.
Wikipedia offers a comprehensive overview of the various aspects and methods of property valuation.
Gesetze im Internet contains the full legal text of § 196 of the Baugesetzbuch (BauGB), which regulates the determination of the market value.
Bundesinstitut für Bau-, Stadt- und Raumforschung (BBSR) publishes a special edition on residential and commercial properties in Germany, providing important market insights.
ifo Institut informs in a press release about experts' expectations regarding significant price increases for real estate worldwide.
Bundesministerium für Digitales und Verkehr (BMDV) provides information on federal transport infrastructure planning, which can indirectly influence the attractiveness of locations.
FAQ
What is the difference between the land value and the market value of a plot?
The land value is the pure value of the site, often derived from the standard land value and specific characteristics. The market value (or fair market value) is the price that can be expected to be achieved under normal market conditions for the entire property (possibly including development).
How often should a property valuation be carried out?
A revaluation is advisable if you intend to sell, in the case of inheritance, divorce, for tax purposes, or if significant market conditions or legal frameworks (e.g., a new development plan) have changed. Standard land values are usually updated every two years.
What documents are needed for a property appraisal?
Important documents include a current extract from the land register, an excerpt from the property map/land plan, possibly the development plan, information on utilities, and in the case of developed plots, construction documents (plans, building description).
How long does a professional property valuation take?
The duration for a market value appraisal depends on the scope and complexity. After the property inspection and submission of all documents, preparing an appraisal usually takes 2 to 4 weeks.
Can I determine the value of my property myself?
You can make a rough estimate based on the standard land value and the size of the plot. However, for an accurate and reliable valuation, especially when making important financial decisions, a professional appraisal is advisable.
How much does a market value appraisal for a property cost?
The costs for a market value appraisal are not fixed and depend on the property's value, the effort involved, and the complexity. For an average property, the costs can be around 0.5% to 1.5% of the market value, often starting at approximately €1,000 to €2,500.
