The valuation of Real Estate in Germany

Inhaltsverzeichnis (Table of Contents)

• Executive Summary
• Principles of property valuation
  • Characteristics of the property market
  • German surveyors in international comparison
  • Definitions of value
  • Valuation methods and regulations
• Codified valuation methods
  • Vergleichswertverfahren (sections 13-14 WertV)
    • Basic principle and procedure
    • Requirements for application
    • Provision for adjustments
    • Calculation of the Vergleichswert and deviation of the Verkehrswert
  • Ertragswertverfahren (sections 15-20 WertV)
    • Basic principle and procedure
    • Determination of annual net income
      • Annual gross income
      • Management and maintenance costs
    • Determination of annual income attributable to the building
      • Determination of return on land value
      • Derivation of real property interest rate
    • Determination of multiplier and other factors influencing value
    • Determination of land value
    • Calculation of the Ertragswert and deviation of the Verkehrswert
  • Sachwertverfahren (sections 21-25 WertV)
    • Basic principle and procedure
    • Determination of the value of built assets
      • Cost of constructing the building
      • Deduction on account of age
      • Deduction on account of physical deficiencies and structural damages
      • Addition or deduction of other factors
    • Determination of value of additional ground
    • Determination of land value
    • Calculation of the Sachwert and deviation of the Verkehrswert
• International valuation methods
  • Comparative method
    • Basic principle and procedure
    • Critical review of the comparative method
  • Investment method
    • Basic principle and procedure
    • Current rent and rental value
      • Outgoings
      • Yields
    • Growth implicit models
      • Rack-rented properties
      • Under-rented properties
        • Term and reversion approach
        • Top slicing approach
      • Over-rented properties
    • Growth explicit models
      • Short-cut discounted cash flow method
        • Implied rental growth rate
        • Critical review of the short-cut discounted cash flow method
      • Discounted cash flow analysis
        • Free cash flow
        • Discount factor
        • Terminal value
    • Cost approach
      • Basic principle and procedure
      • Critical review of cost approach
    • Residual method
      • Basic principle and procedure
      • Critical review of the residual method
    • Profits method
      • Basic principle and procedure
      • Critical review of the profits method
  • Real world valuation example
    • Location and market conditions
      • Macro-location Stuttgart
      • Micro-location of property to be valued
      • Market conditions
    • Property description
    • Property valuation
      • Comparative method
      • Ertragswertverfahren
      • Sachwertverfahren
      • Growth implicit model
      • Discounted cash flow method
      • Residual method
    • Analysis of the results
  • Critical review of the property valuation methods
    • Critical review of Vergleichswertverfahren
      • Methodology
      • Applicability
      • Marketability
      • Excursus: Vergleichswertverfahren versus comparative method
    • Critical review of Ertragswertverfahren
      • Methodology
      • Applicability
      • Marketability
    • Critical review of Sachwertverfahren
      • Methodology
      • Applicability
      • Marketability
      • Excursus: Sachwertverfahren versus cost approach
    • Critical review of growth implicit models
      • Methodology
      • Applicability
      • Marketability
    • Critical review of growth explicit models
      • Methodology
      • Applicability
      • Marketability
    • Summary of critical reviews
  • Summary

  Zielsetzung und Themenschwerpunkte (Objectives and Key Themes)

  This diploma thesis examines the valuation of real estate in Germany, focusing on the application of various valuation methods both in a German and international context. The thesis aims to analyze and compare these methods, providing insights into their strengths, weaknesses, and applicability. The work concludes with a critical review of the methods used in a real-world valuation example.

  • Comparison of German and international valuation methods
  • Analysis of the strengths and weaknesses of different valuation methods
  • Evaluation of the applicability of valuation methods in different contexts
  • Critical assessment of the results of a real-world valuation case study
  • Understanding the challenges and considerations associated with valuing real estate in Germany

  Zusammenfassung der Kapitel (Chapter Summaries)

  • Executive Summary: This chapter provides a brief overview of the thesis, outlining the key objectives, themes, and findings.
  • Principles of Property Valuation: This chapter introduces the fundamental principles of property valuation, including the characteristics of the German property market, German surveyors in international comparison, and different definitions of value. It also covers various valuation methods and regulations.
  • Codified Valuation Methods: This chapter delves into three codified valuation methods commonly used in Germany: Vergleichswertverfahren, Ertragswertverfahren, and Sachwertverfahren. It examines each method's basic principle, application requirements, adjustments, and calculation processes.
  • International Valuation Methods: This chapter explores a range of international valuation methods, including the comparative method, investment method, cost approach, residual method, and profits method. It analyzes their principles, procedures, and critical reviews.
  • Real World Valuation Example: This chapter presents a case study involving the valuation of a specific property. It applies the different methods discussed in previous chapters to the case study and analyzes the results.
  • Critical Review of the Property Valuation Methods: This chapter provides a detailed critical review of each valuation method, examining their methodology, applicability, marketability, and comparison to similar international methods.

  Schlüsselwörter (Keywords)

  The key focus topics of this thesis include real estate valuation, German valuation methods, international valuation methods, property market analysis, comparative method, investment method, cost approach, residual method, profits method, and critical review of valuation methods.