Cutoff value

Demolition Value - The demolition value (also known as the demolition cost) is the calculated value of a developed property based on the assumption that the existing building will be demolished and the land will be utilized as undeveloped building land. It is calculated by subtracting the demolition costs and, if applicable, any disposal costs for contaminated building materials from the land value.

Calculation and Application

The demolition value is calculated using the formula: Land value - Demolition costs - Disposal costs = Demolition value. The land value is based on the municipality’s standard land value multiplied by the plot area. Demolition costs depend on the size, construction method, and condition of the building and typically range from 50 to 150 euros per square meter of enclosed space.

Calculation example: An 800 m² property in a downtown Nuremberg location with a standard land value of 600 euros/m² has a land value of 480,000 euros. The existing old building (800 m² of living space) incurs demolition costs of approximately 80,000 euros and disposal costs for asbestos roof panels of approximately 20,000 euros. The demolition value then amounts to 480,000 - 80,000 - 20,000 = 380,000 euros. If the current income value of the rented building is below 380,000 euros, demolition followed by new construction makes more economic sense.

The demolition value is used as a valuation benchmark when a building is no longer economically viable-for example, in cases of severe structural damage, contamination (asbestos, PCBs), an extreme backlog of renovation work, or when the current use does not fully exploit the site value. In these cases, the land value minus demolition costs exceeds the income value or asset value of the developed property.

For investors, the demolition value is an important parameter in the valuation of revitalization projects: If the purchase price of a developed property is below the land value minus demolition costs, demolition and new construction may be more economically viable than a costly renovation.

Demolition Value in Real Estate Valuation

In the determination of market value according to the ImmoWertV, the demolition value is used as a supplementary valuation method when the market value of a building is below the land value. Appraisers refer to this as a negative building value-the building reduces the value of the property because the demolition costs exceed the asset value of the building.

In such cases, the market value of the land is set as the demolition value. This is the case in many older neighborhoods where the building fabric is severely damaged, the floor plans are no longer marketable, and operating costs are disproportionately high.

Hazardous Materials Assessment Before Demolition

A hazardous materials assessment is mandatory before any planned demolition. Buildings constructed before 1995 often contain:

• Asbestos in corrugated sheets, facade panels, floor coverings, and fire dampers
• Man-made mineral fibers (MMF) in insulation materials
• PCBs in joint compounds and capacitors
• Tar and PAHs in paints and roofing felt

The disposal of building materials containing hazardous substances is subject to the Circular Economy Ordinance and must be carried out by certified waste management companies. Depending on the type and quantity of hazardous substances, costs can range from a few thousand euros to six-figure sums, significantly reducing the demolition value.

Practical Tip for Nuremberg and the Metropolitan Region

In sought-after Nuremberg locations such as the Old Town, Wöhrd, or St. Johannis, where standard land values are high, dilapidated post-war buildings are increasingly being traded at their demolition value. We recommend that buyers obtain a contaminant assessment before purchasing, as asbestos, mineral fiber, and other contaminants can significantly increase demolition costs. The demolition permit must be applied for at the building authority. In Nuremberg, the city’s Building Regulations Office is responsible; in the surrounding area, the respective district offices handle this task.

In addition, we recommend clarifying the building planning situation early on: What can be built on the property after demolition? Permitted floor area, building depth, and setback distances significantly determine the potential for new construction and thus the actual economic value of the demolished property.

Frequently Asked Questions

When is demolition more economically viable than renovation?

When renovation costs exceed the cost of new construction or the building does not fully utilize the plot’s potential floor area ratio under building regulations. As a rule of thumb: If renovation costs exceed 75 percent of the cost of new construction, demolition is generally worthwhile. In addition, you should assess whether a new building can generate higher rental income or sales proceeds than the renovated existing property. Both scenarios should be carefully calculated and discussed with an expert.

Do I need a permit for demolition?

In Bavaria, the demolition of buildings is generally not subject to a permit, but must be reported to the municipality in advance (notification of demolition pursuant to Art. 57(5) BayBO). For buildings under historic preservation, demolition is only permitted with the approval of the historic preservation authority and is generally only approved if there is a proven risk of collapse. The demolition of buildings subject to the demolition notification requirement also requires the prior involvement of the responsible waste disposal company.

How much does building demolition cost?

Depending on the building’s size, construction method, and level of contamination, costs range from 15,000 to 80,000 euros for a single-family home, and can be significantly higher for contaminated properties. Basement removal, disposal of contaminated building materials, and backfilling of the excavation pit are major cost drivers. We always recommend obtaining at least three quotes from specialized demolition companies and openly communicating the contamination situation to avoid unpleasant surprises later on.

Demolition Value and Historic Preservation

A special situation arises when the building to be demolished is a historic landmark. Listed buildings in Nuremberg-from the medieval old town to post-war modern architecture in the outer districts-cannot generally be demolished without permission from the local historic preservation authority. In these cases, a negative demolition value is possible: Demolition costs may exceed the land value if the historic building is severely damaged but cannot be demolished. Owners of such properties find themselves in a difficult financial situation-renovation is expensive, and demolition is prohibited. In Nuremberg, the Bavarian State Office for the Preservation of Historical Monuments is responsible and works in close coordination with the municipal historic preservation office.

For buyers who purchase a property at demolition value and plan to build a new structure, a preliminary review under historic preservation law is therefore essential. We recommend submitting an informal inquiry to the historic preservation office before the notary appointment to determine whether there are any obstacles under building or historic preservation laws to demolition. This information is free of charge and can significantly influence the purchase price and financing structure.

How does the demolition value affect purchase price negotiations?

If the developed property is being traded at demolition value, the framework for negotiation is clear: the maximum reasonable purchase price is the demolition value, since any higher price reduces the investor’s profit after demolition and new construction. Sellers who wish to achieve more than the demolition value must either demonstrate an alternative use or convince the buyer of the property’s higher potential. In high-price areas of Nuremberg, the demolition value can be substantial-even with demolition costs-given standard land values of 600-900 euros/m², making even old buildings in need of renovation attractive purchase targets for project developers.

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