Calculating the cost of a plot of land accurately is often a challenge. Many factors influence the price, from the location to the additional costs. This article shows you how to calculate the land costs and avoid unpleasant surprises.
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The topic briefly and concisely
The property costs consist of the purchase price and additional costs (approximately 10-15% of the purchase price) such as land transfer tax, notary, and brokerage fees.
Important value factors include location, size, buildability, level of development, and soil condition; the standard land value serves as an initial guideline.
Connection costs for linking to public networks can additionally amount to between €7,000 and €20,000 or more.
Do you dream of your own four walls or a solid investment in real estate? Before you take this step, an accurate calculation of the land costs is essential. The pure purchase price is only part of the truth; numerous additional costs and specific property characteristics can significantly impact the total amount. An accurate calculation protects you from financial shortfalls and enables sound planning. Discover here which factors determine the value of a property, how to assess it, and which additional expenses you must consider to place your investment on a stable foundation.
Understanding the Basics of Property Valuation
Determining a fair property price starts with understanding the basic valuation methods. In Germany, there are two predominant methods for determining the value of land. These provide initial benchmarks, which must then be refined to suit individual circumstances.
An essential metric is the standard land value. This is determined by independent expert committees at least every two years and indicates the average location value per square metre for a specific zone. It is based on actual sales prices from the past. You can find standard land values in standard land value maps or online through the BORIS-D portal.
The second common method is the comparative value method. In this process, the prices of recently sold properties with similar characteristics in comparable locations are used. This method is particularly insightful when there are enough comparable properties available. Both methods help to get an initial price estimate before specific features of the property affect the final cost calculation. For a detailed evaluation of the factors, expert knowledge is often required.
These factors drive the land costs
The price of a plot of land is determined by a multitude of factors that extend far beyond mere area. A precise understanding of these influencing factors is crucial for accurately calculating land costs. Location is often the primary price driver; plots in urban centres with good infrastructure are generally significantly more expensive than in rural areas. In major cities with over 500,000 inhabitants, the average price was €1,029.44/m² (as of Q2 2024).
Other important aspects include:
Size and layout: Larger plots cost more in total, but an unfavourable layout can reduce the relative value per square metre.
Buildability: The local council's development plan dictates what and how building can occur. An existing planning permission significantly increases the value.
Level of development: Is the plot already connected to public networks (water, electricity, sewage, roads)? A fully developed plot is more expensive but saves on future development costs.
Soil condition: Contaminants in the soil or challenging topography (e.g., slope) can cause additional costs and reduce value. A soil report costing approximately €1,000 to €2,500 can provide clarity here.
In many regions, demand exceeds supply, driving prices even higher. For example, the average price for development-ready land in Germany rose from around €134/m² in 2013 to over €254/m² roughly ten years later. A careful analysis of land prices is therefore essential.
Additional costs: The often underestimated extra expenses when buying a property
In addition to the pure purchase price of the property, various ancillary costs are incurred, which you must definitely include in your calculations. These additional expenses can significantly increase the total investment, often by 10 to 15 percent of the purchase price. Considering them early on protects against unpleasant surprises.
The most important ancillary costs include:
Property transfer tax: This tax varies depending on the federal state and ranges between 3.5 and 6.5 percent of the purchase price.
Notary and land registry costs: Fees are incurred for the notarisation of the purchase contract and entry into the land register, which usually amount to about 1.5 to 2 percent of the purchase price. The notary costs are legally regulated.
Broker's commission: If the property is brokered through an agent, a commission is due. This usually amounts to between 2.38 and 7 percent of the purchase price and can be shared between buyer and seller.
Possibly surveying costs: If the property boundaries are not precisely documented, costs for a resurvey of about 1,000 to 1,400 euros may arise.
These ancillary costs are an integral part of property financing and should be budgeted for early on. The exact amount depends on the purchase price and regional conditions.
Development costs: When the plot is made ready for construction
If your desired plot is undeveloped or only partially developed land, there will be additional costs: development costs. These are incurred for connection to public utilities and can significantly impact the property costs. The municipality can involve property owners in up to 90 percent of technical and 70 percent of traffic-related development costs.
The development typically includes:
Connection to the road network, including pavements and lighting.
Connection to water supply and wastewater disposal (sewerage).
Supply with electricity and, if applicable, gas or district heating.
Connection to telecommunications networks (telephone, internet).
The amount of development costs varies greatly depending on the municipality and the extent of necessary measures. Guidelines are often between 7,000 and 20,000 euros, but they can also be calculated per square meter (e.g., 10 to 40 euros/m²). It is advisable to inform yourself about the development status and potential costs at the responsible municipality before purchase. Sometimes these costs are already included in the property market value when marked with the note "ebf" (development contribution-free). A valuation report for your property can also provide clarity here.
Keep an eye on other potential cost factors
Beyond the main and incidental costs already mentioned, additional expenses may arise that can affect your property cost calculation. Thorough pre-checks are essential. These include, for example, the costs for a soil survey, which can range from 1,000 to 2,500 euros or 0.3 to 0.5 percent of the construction costs. This survey provides insights into the soil condition and potential contamination.
If old buildings need to be demolished on the site, so-called preparation or demolition costs will be incurred. For a single-family house, these can quickly amount to 10,000 to 25,000 euros. The removal of heavy trees can also incur additional costs. The fees for the necessary building permit are often around 0.5 percent of the planned construction costs.
Do not forget that costs for a property appraiser may also be incurred if you want a detailed and independent assessment. However, this investment can be worthwhile to determine the fair market value and avoid bad investments. A comprehensive market analysis of the property helps to account for all contingencies.
Strategies for Optimising Your Property Costs
Although many cost factors are present, there are some strategies to optimise the overall burden when purchasing property. A deliberate decision in choosing the plot can already save several thousand euros. Consider, for instance, plots in more rural regions or the commuter belt of cities, where prices are often 20-30% lower than in prime locations.
Further tips for cost reduction:
Choose smaller plots: Carefully consider how much space you really need. A smaller plot not only reduces the purchase price but also many of the dependent incidental costs.
Purchase land and property separately: Buy the undeveloped land first, as stamp duty applies only to the land price, not to the later construction of the house. This can mean a saving of several percentage points.
Forgo estate agents: If possible, look for privately sold plots to save on estate agent fees of up to 7%.
Check development condition: An already developed plot may seem more expensive, but it can avoid incalculable follow-up costs for development.
A precise analysis of standard land values and a comparison of various offers are essential. Sometimes, professional consultation, like that offered by Auctoa with AI-assisted evaluations, can help to fully exploit optimisation potential and to consider the right aspects when purchasing property. Feel free to chat informally with our ImmoGPT to clarify initial queries.
grundstuckkosten-berechnen
The calculation of land costs is a complex process that goes far beyond the mere purchase price. A variety of factors, from the location and level of development to various incidental costs, significantly influence the total investment. Thorough research and calculation are therefore essential to minimize financial risks and create a solid foundation for your construction or investment project. On average, incidental costs often account for 10-15% of the purchase price.
Remember to use the standard land value as a first point of reference, but also consider individual circumstances and all incurred additional costs such as notary, agent, property transfer, and development fees. A professional assessment, for instance through AI-powered analyses by Auctoa, can help you objectively assess the fair value of a property and uncover hidden costs. In this way, you make well-informed decisions and take a big step closer to your dream of owning your own property.
Additional useful links
Statistisches Bundesamt (Destatis) offers publications on the purchase values of land.
Statistisches Bundesamt (Destatis) provides detailed tables on house and land prices.
The Deutsche Bundesbank presents a comprehensive indicator system for the residential property market.
The Bundesfinanzministerium provides information on important aspects of land acquisition tax and property tax.
The Federal Institute for Research on Building, Urban Affairs, and Spatial Development (BBSR) offers well-founded information on land prices and their development.
BORIS - The central land value portal of the federal states enables easy access to current land values throughout Germany.
The Central Real Estate Committee (ZIA) provides up-to-date market data and analyses on the German real estate industry.
The Institute of the German Economy (IW Köln) publishes studies and reports on the current situation and development of the real estate industry.
The ifo Institute offers press releases and research findings on global and national real estate market developments.
FAQ
What is the difference between standard land value and market value?
The standard land value is an average value for a specific area, based on past sales. The market value (or market price) is the actual achievable price for a specific plot, taking into account all individual characteristics and the current market situation. The market value can vary by up to 20% from the standard land value.
Are development costs always included in the purchase price?
No, not always. For undeveloped or partially developed plots, development costs are incurred additionally. For plots marked as 'erschließungsbeitragsfrei' (ebf), these are usually already taken into account. Always clarify this with the municipality before purchasing.
Can I deduct additional costs when purchasing a property from my taxes?
If you use the property privately and live in it yourself, the additional acquisition costs are generally not tax-deductible. It’s different if you want to rent out the property or use it for business purposes; in this case, acquisition and production costs can be depreciated. Tradesmen’s services related to development may be partially deductible in certain circumstances. Consult a tax advisor for this.
How can Auctoa help me calculate the land costs?
Auctoa offers AI-powered property valuations and strategic consultancy. We can help you objectively estimate a property's fair market value, identify value-affecting factors, and create a realistic cost calculation that includes potential additional costs. Our ImmoGPT chat can also quickly answer initial questions.
What are the average land prices in Germany?
Prices vary significantly. In the 2nd quarter of 2024, the average price for a plot of land in Germany was €226.34/m². In large cities, prices can exceed €1,000/m², while in rural areas they can fall below €100/m².
What is the cost of a soil survey for a plot of land?
A soil survey usually costs between 1,000 and 2,500 euros. The costs can also be expressed as a percentage of the construction costs (approximately 0.3% to 0.5%).
