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Valuation of undeveloped land
Do you own an undeveloped plot of land and want to achieve the best possible price? A professional valuation is crucial. Valuing undeveloped plots is complex, but with the right expertise and tools, you can determine the true value. Learn more about our property valuation services on our contact page.
A professional undeveloped property valuation is crucial to achieve the optimal sale price and avoid costly mistakes. It strengthens your negotiating position.
The comparative value method and standard land values are important tools, but DCF models are gaining international significance. The correct application of these methods can increase the sales price by up to 10%.
Technological developments such as AI and Big Data are enhancing the accuracy and efficiency of property valuation. Considering sustainability and ecological aspects will become increasingly important in the future.
Fundamentals of Land Valuation
An unbuilt land valuation involves determining the market value of a plot of land that has not yet been developed. This value is crucial for various stakeholders, including property investors who need to assess potential returns, developers evaluating project feasibility, and authorities responsible for taxation and planning. An accurate valuation helps to avoid misguided investments and set realistic prices. The factors involved in land valuation are diverse and complex.
Legal Framework in Germany
In Germany, the Building Code (BauGB) and the Valuation Regulation (ImmoWertV) form the legal framework for land valuation. The BauGB controls the permitted use of land plots and stipulates the types of development allowed. The ImmoWertV specifies the methods for valuation and ensures a consistent and understandable evaluation practice. These laws are of central importance as they provide the foundation for the valuation of undeveloped land and ensure that valuations are legally sound.
Comparison Value Method
The Comparison Value Method is a common approach for valuing undeveloped plots. In this method, the value of the plot being evaluated is determined based on the sale prices of similar plots in the area. The data bases for this method are collections of purchase prices from expert committees and information from real estate portals. Advantages include its high accuracy when sufficient data is available, while disadvantages lie in its dependence on current market data and the comparability of the plots. International land prices can serve as a comparison.
Standard Land Values
Standard land values are average location values for plots in certain areas, determined by expert committees. They serve as a guide for valuation and provide an initial indication of a plot's value. However, the significance of standard land values is limited as they do not account for individual plot characteristics. There are noticeable regional differences in the standard land values, which are due to different demand and supply conditions. More information about standard land values can be found here.
Factors Influencing Plot Value
The value of a plot is influenced by a variety of factors. These include location (central vs. peripheral), shape (regular vs. irregular), condition (level vs. sloping), and buildability (type and degree of construction use). The development status (availability of roads, water, electricity) and possible contamination also play an important role. These factors must be carefully considered in the valuation to determine a realistic value. The cost of building land per square metre is an important factor.
Comparison of Traditional and International Methods
University of Graz highlights the comparison of traditional Austrian valuation methods with international standards such as the Discounted Cash Flow (DCF) models. While in Austria, the comparison value, intrinsic value, and income value methods are traditionally used, DCF models are gaining increasing importance. This is also due to the ÖNORM B 1802-2, which promotes the application of DCF models and supports alignment with international valuation practices. The growing significance of DCF models allows for a forward-looking valuation based on projected cashflows. According to Uni Graz, DCF models are becoming ever more important.
DCF Modelling in Detail
DCF modelling consists of two main phases: the detailed forecast period and the terminal value. In the detailed forecast period, future cashflows are estimated in detail, while the terminal value reflects the property's value at the end of the forecast period. A key role is played by the discount rate, which accounts for the investment risks. It is important to avoid double-counting growth expectations by using a "non-growth yield." The determination of the discount rate can be through the Capital Asset Pricing Model (CAPM) or the Weighted Average Cost of Capital (WACC). Choosing the correct discount rate is crucial for the accuracy of the DCF model. Real estate is a vital component.
International Valuation Standards and Organisations
There are various international organisations involved in setting valuation standards, including the International Valuation Standards Council (IVSC), The European Group of Valuers' Associations (TEGoVA), and the Royal Institution of Chartered Surveyors (RICS). These organisations work on the harmonisation of valuation practices across countries. They differentiate between market value and non-market value concepts to consider the specific purpose of valuation. The increasing importance of international standards is particularly relevant for cross-border real estate transactions. Land prices vary internationally.
Influence of the MRG on Property Valuation
The Austrian Rent Act (MRG) has a significant impact on property valuation, especially concerning rent restrictions and tenant protection. The MRG governs what rents can be charged for certain properties and limits the possibilities for rent increases. This directly affects the income value of a property, as the achievable rental income may be restricted. Therefore, it is important to consider the provisions of the MRG when making valuations. The Rent Act is complex and must be adhered to.
Categories of Rent Formation
The MRG distinguishes between different categories of rent formation, including the appropriate rent, the benchmark rent, and the Category-D rent. The appropriate rent is based on local customary rents, while the benchmark rent is calculated based on reference values per square meter of living space. The Category-D rent applies to apartments with a low standard. The respective category directly influences the maximum permissible rent and thus the income value of the property. Farmland prices are also important.
Analysis of Tenancy Agreements
A careful analysis of tenancy agreements is essential to check compliance with the MRG and to identify potential over- or under-rent. It is important to determine whether the agreed rents comply with legal provisions and whether rent increases are lawful. Over-rent can lead to claims for reimbursement by the tenant, while under-rent reduces the income potential of the property. Therefore, a detailed examination of the tenancy agreements is essential. Real estate is an important component.
Introduction to Hedonic Modelling
Hedonic modelling is a method used to quantify the contribution of individual property characteristics to the overall price. Statistical models are employed to analyse the impact of factors such as location, size, layout, and features on price. This method enables a granular analysis and helps to determine the value of a property more precisely. Hedonic modelling is especially useful when there are few comparable properties. The hedonic modelling allows for a detailed analysis.
Functional Forms
Various functional forms are used in hedonic modelling, including linear, exponential, and double-log models. Each form has different characteristics and is suitable for different types of data. Choosing the right functional form is crucial for the interpretation of regression coefficients. Linear models are straightforward to interpret, whereas exponential and double-log models can represent non-linear relationships. The factors for property valuation are diverse and complex.
ÖGRUSIM GPSIM Models in Austria
In Austria, ÖGRUSIM GPSIM models are applied in the property price analysis. These models are a practical application of hedonic modelling and assist in determining the value of properties and real estate more accurately. They consider a variety of factors and enable a detailed analysis of the real estate market. The models are used by experts and evaluators to provide well-founded assessments. International property prices can serve as a comparison.
Sensitivitätsanalyse
A sensitivity analysis is an important aspect of valuation, especially for investment apartments. This process involves varying the key factors for returns (appreciation rate, inflation rate, tax rate, vacancy costs) to examine their impact on the outcome. Such an analysis helps better assess the risks and opportunities of an investment. The sensitivity analysis shows which factors have the greatest impact on returns and where potential risks lie. The sensitivity analysis is a crucial part.
Mietmultiplikator
The rental multiplier is a metric that indicates the ratio between the purchase price of a property and the annual rental income. It serves as an indicator of the investment's attractiveness. A high rental multiplier suggests an expensive property, while a low rental multiplier may indicate a more affordable investment. It is important to consider the rental multiplier in the context of the respective market and the specific characteristics of the property. The land standard values are a key factor.
Challenges in Valuing Undeveloped Land
The valuation of undeveloped land faces various challenges. One of the biggest challenges is data availability and quality. To conduct an accurate valuation, up-to-date and reliable data on comparable plots, standard land values, and market developments are necessary. Another challenge is market transparency, as the land market is often less transparent than other real estate markets. It is important to recognise these challenges and take appropriate measures to overcome them. The cost of land per m² is a significant factor.
Technological Developments
Technological developments offer new opportunities for land valuation. The use of Artificial Intelligence (AI) and Big Data allows for the analysis of large datasets and identification of patterns relevant to valuation. Automated Valuation Models (AVM) can accelerate the valuation process and make it more objective. These technologies contribute to improving the accuracy and efficiency of land valuation. The technological developments are diverse.
Future of Land Valuation
The future of land valuation will be shaped by various trends. Sustainability and ecological considerations will play an increasingly important role as buyers and investors place more value on environmentally friendly construction methods and resource-efficient usage. The adaptation to changing market conditions, such as demographic change and new forms of housing, will also be crucial. Land valuation must adapt to these changes and develop new methods and criteria to realistically assess the value of land. Real estate is a key component.
A professional, AI-supported undeveloped land valuation is key to achieving the optimal sale price and avoiding costly mistakes. By combining advanced technology and human expertise, you receive an accurate and market-aligned valuation that strengthens your negotiating position. Invest in a well-founded valuation to unlock the full potential of your property.
At Auctoa, we revolutionise property and land valuation by using state-of-the-art automation and AI-supported human expertise to provide precise, certified, and market-consistent valuations. Our fully automated valuation platforms, hybrid AI-human assessments, and digital market analyses offer you a comprehensive overview of your property's value.
Key Benefits of Professional Land Valuation
Here are some of the key benefits you'll gain:
Maximising Price Determination: With an accurate valuation, you secure the best possible sale price.
Avoiding Mistakes: A professional valuation protects against costly misjudgments.
Strengthening Negotiating Position: With a well-founded valuation, you can negotiate with more confidence.
An accurate undeveloped land valuation is crucial to achieving the best possible price and making informed decisions. Whether you want to sell, mortgage, or develop a plot, a professional valuation provides clarity and security.
Auctoa offers you a unique combination of advanced AI and experienced human appraisal to guarantee the highest precision and speed in determining the true value of your property. Our experts support you at every step of the appraisal process and are on hand with advice and assistance.
Take the opportunity now to maximize the value of your land. Contact us today for a free initial consultation and find out how we can help you achieve your goals. Register now for free and receive an immediate initial assessment of your land's value!
What is an undeveloped land valuation and why is it important?
An undeveloped land valuation determines the market value of an undeveloped plot. It is crucial for property investors, developers, and authorities to avoid bad investments and establish realistic prices.
What legal foundations are relevant for undeveloped land valuation in Germany?
The Building Code (BauGB) and the Valuation Ordinance (ImmoWertV) form the legal framework. The BauGB regulates building use, while the ImmoWertV specifies the valuation methods.
Which methods are used to value undeveloped land?
The comparison method is a common approach, where the value is determined based on sales prices of similar plots. Additionally, land value guidelines serve as a reference point.
What are land value guidelines and how are they used?
Land value guidelines are average locational values determined by the expert committees. They serve as a reference point, but do not take individual plot characteristics into account.
What factors influence the value of undeveloped land?
The location, layout, condition, buildability, and development status influence the value. Possible contaminations also play a role.
What role do DCF models play in land valuation?
DCF models (Discounted Cash Flow) are gaining importance, particularly due to ÖNORM B 1802-2. They enable a forward-looking valuation based on projected cash flows.
How does the Austrian Tenancy Act (MRG) affect land valuation?
The MRG impacts the valuation, especially regarding rent control and tenant protection. It regulates the maximum permissible rent and thus the yield value.
How can AI improve the accuracy of land valuation?
The application of Artificial Intelligence (AI) and Big Data allows for the analysis of large data sets and the identification of patterns, which enhances the accuracy and efficiency of valuations.
