Fixed value

In real estate appraisal, fixed value refers to a simplified approach in which certain building components or systems are valued at a flat, permanent rate that is not regularly adjusted to market prices. In insurance and tax law, fixed value also refers to a value determined by regulatory authorities or contractually established for recurring assets that are difficult to assess individually.

Fixed Value in Real Estate Valuation and Property Insurance

In the context of building valuation and residential building insurance, the fixed value appears in two relevant contexts:

1. Fixed value as a valuation method in accounting: Commercial real estate owners who hold buildings as fixed assets may apply a fixed value for certain similar items (e.g., floor coverings, doors, plumbing fixtures) if the inventory remains approximately the same over time. Prerequisite: The fixed value must not deviate by more than 10% from the actual value (Section 240(3) HGB, Section 256, sentence 2 HGB).

2. Fixed Value in Homeowners Insurance: Older insurance policies often use a fixed insured value (e.g., based on the building’s value in 1914 or a “sliding replacement cost factor”), which is set once and subsequently adjusted only using construction price indices. The fixed value serves as the basis for calculating the sum insured.

Risk of underinsurance: If the fixed value does not correspond to the actual replacement value, there is a risk of underinsurance in the event of a claim-the insurance company will then only pay a proportionate amount.

Fixed value in property valuation and tax law

In the context of the tax valuation of land and real estate (Sections 79 et seq. of the Valuation Act), unit values and fixed values used to play an important role. Since the 2022/2025 property tax reform, new valuation methods have been in effect:

• Bavaria has opted for an area-based model in which area and location-not the individual market value-are decisive
• Fixed value approaches play a secondary role in the new Bavarian property tax model

For inheritance and gift tax, the following applies: The fixed value as a simplified valuation method has been largely replaced by current valuation law (BewG); for real estate, the comparable value, income value, or asset value methods must be applied.

Homeowners Insurance: Avoiding Underinsurance

The question of the correct insured value is of considerable practical importance for property owners. Construction cost trends in recent years-with price increases for materials and labor sometimes reaching double digits-have led to many older homeowners insurance policies based on fixed values now being insured for significantly less than the actual replacement value.

The underinsurance principle (§ 75 VVG) states: If, at the time of the loss, the building is insured for a value lower than its actual value, the insurance company will only pay a proportionate amount. For a building insured at 80% of its actual value, the owner bears 20% of any loss themselves-even in the event of a total loss.

To avoid underinsurance, the following methods are available:

Floating replacement cost insurance: The sum insured and premium are adjusted annually based on the construction price index (Federal Statistical Office). This method is the standard for modern residential building insurance and reliably protects against creeping underinsurance due to price increases.

Appraisal: For particularly valuable or historic buildings, it is recommended to have the replacement value determined by an expert. This value is then set as the sum insured.

Waiver of underinsurance: Some insurance companies offer a waiver of underinsurance for an additional fee-the insurer guarantees to cover the full damage even in the event of underinsurance. This offer should be examined critically, as it is not granted without restriction by all insurance companies.

Fixed Value and the 2025 Property Tax Reform in Bavaria

The property tax reform took effect on January 1, 2025. Bavaria is the only federal state to have introduced a pure area-based model that no longer takes market values or unit values into account:

• Property tax B is calculated based on the land and building area
• The location and value of the property no longer play a role in the Bavarian model
• The equivalence figures are decisive: 0.04 euros/m² of land area and 0.50 euros/m² of living space
• The municipal assessment rate determines the final property tax amount

For property owners in Nuremberg, the City of Nuremberg’s assessment rate applies. Since the Bavarian property tax reform is area-based rather than value-based, the fixed value in the traditional sense no longer plays a role in property tax in Bavaria.

Practical Tip for Property Owners in Nuremberg and Franconia

We recommend that owners of older residential buildings in Nuremberg and the metropolitan region review their home insurance based on the current replacement cost. Many policies are still based on the 1914 assessed value with a sliding factor-due to the significant increases in construction costs in recent years, a substantial underinsurance gap may have arisen.

We recommend working with your insurance advisor to determine the actual replacement cost of your building and adjust the sum insured. For Nuremberg Wilhelminian-style houses with historic facades or listed building status, an expert appraisal of the replacement value is particularly important-the labor costs for historic materials and craftsmanship are significantly higher than standard rates.

Frequently Asked Questions

What does “1914 fixed value” mean in my building insurance?

The 1914 fixed value is a historical reference value based on construction costs in 1914. A continuously adjusted multiplier is applied to this figure to derive the current replacement cost. This approach is still common in some older insurance policies. For buildings that have undergone significant alterations or additions after 1914, the 1914 fixed value may significantly underestimate the actual value.

How can I determine if my property in Nuremberg is underinsured?

Have the current replacement value of your building determined by an appraiser or directly by your insurance company. Many insurers offer free online calculators or consultation appointments. As a rough guideline: The new construction value of an average single-family home in the Nuremberg metropolitan area is currently between 2,500 and 3,500 euros per square meter of living space.

Is the unit value still used for property tax in Bavaria?

No. Bavaria has implemented the 2025 property tax reform using its own area-based model. The old unit value is no longer used to calculate property tax. The determining factors are now the land area and living space, as well as the municipalities’ property tax rates. Since 2022, property owners have been filing property tax returns based on the new regulations; the new assessment notices take effect as of January 1, 2025.

How is the fixed value for office furnishings or building components determined in accounting?

For commercially used buildings, the accountant or tax advisor may establish a fixed value for similar, regularly occurring items (e.g., floor coverings, windows, doors). The prerequisite is that the fixed value does not exceed or fall short of the actual value by more than 10%. Once a year, it must be verified whether this prerequisite is still met. In the event of significant deviations, the fixed value must be adjusted.

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