Real estate valuation: What role does the standard land value play?

The standard land value indicates the average value of one square meter of undeveloped land at a specific location. It is usually expressed as a price range and can be found on standard land value maps or tables compiled by local valuation committees based on recent property sales. But what exactly is the proportion this important indicator represents in the market value of your property?

Especially when using the asset-based valuation method or the income-based valuation method, two things are theoretically separated to calculate the property value, which actually belong together: the value of the land and the value of the property built on it.

The value of the property using the asset-based or income-based valuation method

The intrinsic value of a building, which forms the basis for the cost approach, decreases over time due to wear and tear or damage. It can also be increased through renovation, modernization, extensions, and other improvements. The value of the land, however, develops independently of the building's condition. It is therefore determined separately and then added to the building's value. The procedure is similar for real estate valuation using the income approach. This valuation method is used for rented properties that serve as investments and determines their value based on the capital income that can be generated over a specific period. Here, too, the land value is considered independent of the return that can be achieved by renting out the property. The total value of the property is also determined by adding the land value and the income value of the building.

Standard land value and market value of a property

When a property is sold, the price of the land is usually not listed separately but is included in the sale price. Therefore, the market value of a developed property is inherently a hypothetical value. However, it would be incorrect to equate this land value directly with the standard land value. Each property must be individually assessed based on its specific location and other characteristics. The local standard land value is based on the average values ​​of past sales in the area, thus enabling a comparison of property prices. Especially in dynamic markets, such as those currently prevalent not only in major cities but also in many regions, standard land values ​​should be treated with particular caution. If the local real estate market experiences price increases of five to ten percent per year, the standard land values ​​can be outdated by the end of the year, even where they are published annually, rather than just every two years as legally required.

The standard land value is an important component for the professional valuation of a property. However, its precise meaning and how it specifically affects the market value of a property are not easy for laypeople to understand. A local, reputable real estate agent can determine the value of your property with a high degree of accuracy thanks to their precise market knowledge. They know which valuation method to apply in each specific case and incorporate the standard land value appropriately into the property valuation.

Want to know the current value of your property? Contact us now. We'd be happy to advise you.

You can find more information on this topic here:

https://de.wikipedia.org/wiki/Bodenrichtwert

https://ivd-plus.de/neue-bodenrichtwerte-vom-gutachterausschuss-fur-grundstuckswerte/

Notes

For the sake of readability, this text uses the generic masculine form. Female and other gender identities are explicitly included where relevant to the statement.

Legal notice: This article does not constitute tax or legal advice for any specific case. Please consult a lawyer and/or tax advisor to clarify the facts of your individual situation.

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