Do you own a plot with an old bungalow and wonder where the true value lies? Often, the greatest potential is not in the building, but in the land beneath it. This article shows you how a strategic decision – renovation or demolition – can increase the value of your property by up to 30%.
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The topic briefly and concisely
The true value usually lies in the land, whose potential is defined by the development plan, not in the old bungalow.
Demolition is often more economical when the renovation costs exceed 75% of the costs of a new build.
The Building Energy Act (GEG) often obliges new owners to carry out costly energy renovations within two years.
A property with a bungalow presents many owners with a complex decision. Is the charming single-storey building a home worth preserving or an economic stumbling block standing in the way of better use? The answer requires more than instinct; it demands a cool, data-driven analysis. Incorrect assumptions can lead to misinvestments of over 50,000 euros. We guide you through the crucial evaluation factors, from legal hurdles to financial opportunities, and provide you with the tools to realize the full potential of your property.
The essentials at a glance: Strategic levers
The valuation of a plot with a bungalow depends on four key factors. The standard land value defines the basic potential and can be viewed on portals like BORIS-D. Secondly, the municipality's development plan determines future usability and thus 90% of the development potential. Thirdly, the Building Energy Act (GEG) often forces new owners to carry out refurbishments worth over 20,000 euros. Fourthly, the value potential of a new building often exceeds the refurbishment costs when these exceed 75% of the new building costs.
Foundation of the valuation: Analyse land value and building rights
The first step is always the separate assessment of land and building. The value of the bungalow itself can even be negative due to renovation backlog or contamination. The decisive value factor is the plot of land, whose potential receives an initial indication through the official land value. You can view this value online for almost any region in Germany free of charge on the BORIS portals of the federal states.
However, the land value is only half the story. The deciding factor is the development plan (B-Plan) of the responsible municipality. This document legally establishes what you are allowed to build on the property: from the type of use (e.g., purely residential area) to the floor space index (FSI) to the permitted number of storeys. For instance, an FSI of 0.4 on a 1,000 m² plot allows a maximum floor area of 400 m². Checking these specifications is essential before planning further steps. A detailed analysis of the valuation factors protects against costly planning errors.
Option 1: Retain the bungalow and renovate it for energy efficiency
Renovating the bungalow is only economically viable if the building's structure is intact and costs do not exceed 75% of a comparable new build. Particularly during a change of ownership, the renovation obligation under the Building Energy Act (GEG) comes into play. New owners have a two-year period to comply with certain minimum energy standards.
The following measures are often unavoidable:
Insulation of the top floor ceiling: The thermal transmittance (U-value) must not exceed 0.24 W/(m²K).
Heating system replacement: Oil and gas constant temperature boilers older than 30 years usually need to be replaced.
Insulation of pipework: Uninsulated heating and hot water pipes in unheated cellars must be retrofitted.
The costs for comprehensive energy renovation can quickly reach 30,000 to 60,000 euros. Therefore, an accurate valuation before and after the renovation is crucial to assess the profitability. These investments must be reflected in a correspondingly higher sale price or living value, which is often not the case with old layouts.
Option 2: Demolition and new construction for full potential development
Often, demolishing the bungalow is the economically superior strategy. The pure demolition costs for a 100 m² bungalow average between 15,000 and 25,000 Euros. Caution is advised with contaminants such as asbestos, which can increase disposal costs by several thousand Euros. The decisive advantage, however, lies in the redesign: you can realise the maximum allowable living space according to the development plan and build a modern, energy-efficient house.
The costs for new construction in 2024 average between 3,000 and 4,200 Euros per square metre. A new detached house with 150 m² can result in construction costs of around 450,000 Euros. Although this represents a high initial investment, the value of a modern new build on a well-located plot often far exceeds the value of a renovated old bungalow. A professional valuation can compare both scenarios. Sometimes, even a property division is possible, where part of the plot is sold to finance the new build.
Mastering legal and financial frameworks
Regardless of your decision, a purchase entails additional costs that often amount to 10-15% of the purchase price. These incidental purchase costs consist of:
Property transfer tax: Depending on the federal state, this is between 3.5% and 6.5% of the purchase price.
Notary and land registry costs: Expect to pay around 1.5% to 2.0% for notarisation and registration.
Broker's commission: If an estate agent is involved, an additional 3.57% to 7.14% may be charged.
If you are planning a demolition and new build, it is advisable to make an early building pre-application to the relevant building authority. This provides you with legally binding information on whether your project is feasible and costs only a fraction of the later construction costs. For an initial assessment of your options without direct contact with the authorities, our ImmoGPT chat can offer you quick, data-based guidance. A private property sale also requires an accurate understanding of these costs.
Conclusion: Data trumps intuition in value optimization
The decision about the future of a property with a bungalow is one of the most consequential that a real estate owner can make. There is no one-size-fits-all answer. The right strategy depends 90% on the local circumstances of the development plan and the condition of the bungalow. An emotional attachment to the old building can lead to an economic loss of over €100,000 if the potential for a new build is ignored. Get an objective, AI-supported evaluation from Auctoa to make an informed decision that realises the full potential of your property. A data-driven strategy is your surest path to maximising value.
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Additional useful links
Statistisches Bundesamt (Destatis) provides detailed data on house prices and building land in Germany.
Die KfW provides information on funding programmes for private individuals for the energy-efficient renovation of existing properties.
Die Deutsche Bundesbank provides its indicator system on the residential property market with current statistics.
The Federal Ministry of Finance answers important questions about the new property tax in its FAQs.
Das Umweltbundesamt offers practical environmental tips for everyday life, especially on heating, building, and renovating.
Das Bundesinstitut für Bau-, Stadt- und Raumforschung (BBSR) provides comprehensive information on the developments in the housing and real estate markets.
On gesetze-im-internet.de, you will find the complete and up-to-date text of the Building Code (BauGB).
FAQ
Do I need to renovate an old bungalow after purchase?
Yes, with a change of ownership, the renovation obligation under the Building Energy Act (GEG) applies. As the new owner, you have two years to meet certain energy standards, such as insulation of the top floor ceiling or replacing outdated boilers.
Where can I find the development plan for my property?
You can view the development plan at the relevant city planning office or building regulations office of your municipality. Many municipalities now also offer these plans online on their websites for viewing.
What additional costs arise when purchasing a plot with a bungalow?
In addition to the purchase price, you should expect additional costs of 10-15%. These include the real estate transfer tax (3.5% - 6.5% depending on the federal state), notary and land registry fees (approximately 1.5% - 2.0%), and possibly a broker's commission.
Is a new build always better than a renovation?
Not always, but often. A new build is the better choice when the renovation costs are disproportionately high (over 75% of the new build costs) or the development plan allows for a significantly larger and more valuable construction than the old bungalow represents.
How can Auctoa help me with my decision?
Auctoa offers AI-supported, data-driven property valuation. We objectively analyse the value of your land and bungalow, comparing renovation scenarios versus demolition/reconstruction, and take into account all relevant market data and legal requirements. This way, you receive a solid foundation for your strategic decision.
