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Jacqueline Sauren
Head of Real Estate Sales
Property valuation Munich - Your guide to real estate valuation
Sale, inheritance, divorce, statement of assets or financing. Especially in a high-price environment such as Munich, an imprecise valuation can quickly lead to financial losses or lengthy sales processes. The asset value method is one of the most important methods of valuation - especially for individually designed houses, villas or special properties for which there are no direct comparative values. Mr. Lodge, a real estate agent in Munich for over 30 years, is one of the most experienced players on the Munich residential market. With in-depth market knowledge, sound advice and precise valuation methodology, we support owners from the initial valuation to the successful sale. In this article, we explain what distinguishes the asset value method, when it is used - and why professional support is crucial.
Table of contents:
1 What is the asset value method?
The asset value method is a procedure for determining the value of real estate in which the asset value of a property is determined. "In contrast to comparative or income value methods, which are based on the market prices of comparable properties or rental income, the asset value method focuses on the actual components of the property: the value of the land (land value) and the value of the building based on the production costs," explains Mr. Lodge Managing Director Norbert Verbücheln. This procedure is regulated in Germany by the Real Estate Valuation Ordinance (ImmoWertV) and ensures that valuations are carried out according to uniform standards.
Some owners wonder whether the location of a property is also taken into account in this process. Yes, this is the case. The location flows directly into the calculation of the land value via the standard land value. In addition, the market adjustment factor (also known as the asset value factor) is used to adjust the calculated value to the sales prices that can actually be achieved in the respective region. In this way, both the quality of the location and the current market conditions contribute to the result of the real value method.
2. how the asset value method works
In the asset value method, the value of a property is calculated from scratch in several steps. Professionals - experienced real estate agents like Mr. Lodge - typically carry out the following steps:
- Determine land value: First, the land value of the property is calculated. This is done by multiplying the plot area by the official standard land value per square meter in this location. The standard land value is determined by the local expert committee from real sales data and published annually.
- Calculate the production costs of the building: The next step is to estimate the normal production costs of the building - i.e. the costs that a comparable new construction of the property would incur at the time of valuation. The construction quality, fittings and size are included in the calculation. Valuers often use standardized tables (e.g. NHK 2010) and adjust them to the current construction price level.
- Building asset value and age depreciation: The preliminary building asset value is calculated from the production costs. Reductions in value are deducted from this value, for example through age depreciation (age and wear and tear of the building). An older house is therefore discounted compared to a new building of the same type.
- Provisional asset value: By adding the adjusted building asset value to the land value, you obtain the provisional asset value of the property (also known as the net asset value). This reflects the current replacement cost of the building plus the land value.
- Market adjustment: Finally, the provisional asset value is multiplied by a market adjustment factor to arrive at the final asset value (market value). This factor is derived from purchase price data and adjusts the calculated costs to the market reality. For example, if the actual sales prices in Munich are significantly higher than the calculated asset values, the factor will be greater than 1 (and vice versa).
Note: Experienced estate agents often combine several valuation methods to find the optimum asking price. Even if the asset value method is the main method, professionals look at comparable sales and rental yields in parallel to validate the result. In this way, they ensure that the determined value is also enforceable on the market.
3 When is the asset value method used?
Unique, owner-occupied single-family homes without comparable properties are often valued using the asset value method, as market comparison data may be lacking. The asset value method is mainly used in cases where there are no or only a few comparable sales cases. Typical scenarios are
- Owner-occupied detached houses and villas: Particularly individual properties where no standard property exists for comparison.
- Special buildings: For example, listed properties, churches or schools - i.e. buildings not intended for profit or with a unique design.
- Rural or peripheral locations : In regions (or formerly also certain Munich suburbs) with few sales of comparable properties, the tangible value is more likely to be used, as the comparative value method is difficult due to a lack of data.
- Special properties: For example, railroad station buildings, special commercial properties or unusual architect-designed houses, where market prices vary greatly.
"Especially for unique properties in Munich, for which there are no direct comparative properties, we use the asset value method to determine a realistic market value," says Norbert Verbücheln.
For owners, this means that if your property is very individual or there are hardly any recent sales of similar properties in the area, the asset value method is often the method of choice. In other cases - e.g. typical condominiums in Munich - the comparative value method is used more frequently, as there are sufficient comparable prices available.
4. advantages and disadvantages of the asset value method
Like every method, the asset value method has its strengths and weaknesses. Here is a brief overview:
Advantages:
- Objectifiable: Based on comprehensible parameters (construction costs, land value) and less on market expectations that are difficult to grasp.
- Independent of letting: Ideal for properties that are not let or do not generate any income (as the income capitalization approach would not be applicable here).
- Uniqueness can be depicted: Provides a valuation basis for properties that are so unique that comparative prices are lacking - this is where the asset value method provides a valuation option in the first place.
Disadvantages:
- Market proximity varies: Without adjustment, the calculated asset value can deviate from the actual market price. In highly sought-after cities such as Munich, market prices are often higher than the pure asset value.
- Complexity: Considered the most demanding of the standardized methods. Many parameters (construction cost index, depreciation factors, market factors) must be correctly taken into account - errors have a direct impact on the result.
- Data requirements: Requires detailed documentation (building plans, description of fixtures and fittings, etc.) and up-to-date market and cost information. Difficult for non-professionals to carry out without professional support.
Tip: An incorrect price estimate can have major consequences. Set too high? Then you will scare off potential buyers and the sale will be delayed because informed buyers will look for cheaper alternatives. Set too low? Then you may be giving away money. A careful valuation in advance prevents both scenarios and ensures a speedy sale at the best possible price.
5. special features of the asset value method in Munich
Munich is one of the most expensive real estate markets in Germany. This has an impact on how the results of the real value method are to be interpreted. Land in Munich has extremely high standard land values - in some top locations in the city, these will be €10,000 per square meter and more in 2024. This means that the land value alone accounts for a very large proportion of the total value of a property.
In addition, demand in Munich has been very high for years. Buyers are often prepared to pay prices that are significantly higher than the pure construction and land costs. In practice, this means that market adjustment factors in Munich are often >1 in order to raise the calculated asset value to real market prices. In certain periods, these factors have even risen sharply due to the booming price and market development, resulting in higher asset values (e.g. in the last ten years up to 2022). Although the market is currently in flux, Munich remains a premium location.
"In a city like Munich with very high land values and dynamic demand, the property valuation method must be adapted extremely carefully to the market conditions," emphasizes Norbert Verbücheln. "Our regional market knowledge is a decisive advantage here - we know the current purchase prices and trends and can adjust the calculated value accordingly."
Another aspect: The Munich expert committees regularly publish reports and data (standard land values, property value factors, etc.) that are used for valuations in Munich. These local data sources should definitely be used in order to obtain accurate results. Standard values from other regions are often not suitable for Munich. This is where the support of local experts who have access to the relevant market data and can interpret it correctly pays off.
6. conclusion: Professional valuation with Mr. Lodge
A well-founded property valuation is the basis for every successful sale. Especially in Munich, where supply and demand have a strong influence on prices, owners should rely on expert knowledge. Mr. Lodge has been working as a real estate agent in Munich for over 30 years and has many years of experience in the Munich real estate market. Thanks to our comprehensive regional market knowledge and expertise in price and market developments in Munich and the surrounding area, we can offer you a realistic and reliable valuation.
We will be happy to advise you personally on the asset value method and alternative valuation methods in order to determine the best possible price for your property. On request, Mr. Lodge will provide you with a free initial valuation of your property. We will then work with you to develop the optimum sales strategy - from the valuation to the presentation and contract negotiations.
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Why can the calculated asset value differ from the actual market price?
The asset value is based on cost ratios and land values, not directly on current offer prices. In a city like Munich, where demand often exceeds supply, the actual market prices are often higher than the calculated asset value. For this reason, the so-called market adjustment factor is used to adjust the asset value to the reality of the Munich real estate market. Without this correction, the result would often be too low. Our regional expertise ensures that the adjustment is precise.</p
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Can I carry out the asset value procedure myself or use an online calculator?
In theory, the asset value can be roughly calculated, but in practice the asset value method is very complex. You need precise knowledge of construction costs, standard land values and the current market situation. Without the appropriate expertise and data, errors can easily occur. We at Mr. Lodge therefore advise you to always consult a certified expert or experienced estate agent to determine the asset value in order to avoid incorrect valuations.
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Where does the data for the valuation using the asset value method come from?
The basis for the asset value method are official sources such as the standard land value maps of the expert committees, the standard production costs (e.g. NHK 2010), building price indices and market adjustment factors from local purchase price overviews. In addition, individual property data such as year of construction, condition, living space and furnishing features are required. The more precise this information, the more accurate the valuation. Mr. Lodge draws on an extensive set of current market data and combines this with many years of experience.</p
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How much does a valuation using the asset value method cost?
The cost of a valuation using the asset value method depends on the complexity and scope of the analysis. A simple appraisal is cheaper than a court-proof market value appraisal. However, many estate agents - including Mr. Lodge - offer a free initial valuation to roughly assess the market value of a property. For more detailed valuations, for example in the event of inheritance or divorce, a fee-based valuation is advisable. We will advise you transparently about the required scope and the expected costs.</p
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Is the asset value method also suitable for rented properties?
The income capitalization approach is usually preferred for rented properties, as it takes current income into account. However, the asset value method can be a useful addition, especially if rental income is not usual on the market or the property is heavily tied to its use. In the case of combined forms of use (e.g. residential and office), both methods can also be combined in order to obtain a balanced picture. Mr. Lodge individually selects the method or combination that best reflects the realistic market value.</p
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How long does a valuation according to the asset value method take?
The duration depends on the size of the property and the data available. A well-founded valuation can be prepared in a few days if the documentation is complete. It becomes more difficult if documents are missing or the property differs greatly. In Munich, the standard land values and market adjustment factors must also be checked regularly in order to remain up to date. Mr. Lodge ensures a quick yet well-founded valuation thanks to a clearly structured process.</p
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What happens after the evaluation - what does Mr. Lodge recommend?
After the valuation, we discuss the optimal marketing strategy with you. This includes setting a realistic asking price, targeting suitable buyer groups and a high-quality presentation of your property. We will guide you through the entire sales process - from the valuation to viewings to the notarized closing. Our goal is a smooth sale at the best possible price, tailored to the Munich market. You can rely on our decades of experience.
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What is the difference between the asset value method and the comparative or capitalized earnings value method?
The asset value method determines the value of a property on the basis of the production costs and the land value - i.e. according to the actual asset value. It is typically used for owner-occupied residential properties if no suitable comparative data is available. The comparative value method is based on recent purchase prices of similar properties, while the capitalized earnings value method is based on the expected rental income. Each method has its strengths and the choice depends on the type of property and the market situation. At Mr. Lodge, we can advise you on which method is most suitable.</p
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For which properties is the asset value method particularly suitable?
The asset value method is particularly suitable for detached single-family homes, villas, special buildings or listed properties - in other words, properties that are difficult to compare with others. The method is also frequently used for very individual furnishings or unusual construction methods. In Munich, for example, this applies to spacious townhouses or exclusive old buildings in prime locations. For standardized condominiums, on the other hand, the comparative value method is often more suitable. Our experts at Mr. Lodge will choose the right valuation method for you.</p
