Building type

Building type is a classification of buildings based on their use, construction method, and function, which is used in real estate appraisal, tax law, and the insurance industry. The building type determines key valuation parameters such as standard construction costs, depreciation rates, and useful life. It is therefore one of the foundations for determining property value and calculating the mortgage lending value by banks.

Overview of Major Building Types

In the German real estate sector, the following building types are distinguished:

Residential buildings:

• Single-family home (detached, semi-detached, townhouse)
• Two-family home
• Multi-family home (3 or more residential units)
• Mixed-use residential and commercial building

Commercial buildings:

• Office buildings
• Retail buildings / commercial buildings
• Warehouse and industrial buildings
• Hotels / restaurants

Special-purpose buildings:

• Nursing homes, hospitals
• Schools, administrative buildings
• Agricultural buildings

Building type and real estate valuation

In the determination of property value according to ImmoWertV 2021, different standard construction costs (NHK 2010) are applied depending on the building type. These costs reflect the average expense of constructing a new building of this type and with this level of fit-out. Single-family homes have different construction cost parameters than multi-family homes or office buildings. This also results in a different economic remaining useful life and thus a different loss of value due to age.

The building type plays an equally important role in the income approach: multi-family homes and mixed-use residential and commercial buildings are regularly appraised using the income approach, as the achievable rental income is the key value indicator here. Single-family homes, on the other hand, are generally valued using the asset value or comparative value methods, as they are often purchased primarily for owner-occupancy rather than as investment properties.

Building Type in Insurance and Tax Law

In the insurance industry, the building type determines the premium for building insurance; industrial and commercial buildings are classified differently from residential buildings. In tax law, the building type is relevant for depreciation (depreciation allowance, AfA): residential buildings are depreciated at 2 percent annually (useful life of 50 years), while commercial buildings are depreciated at 2 or 3 percent, depending on the year of construction. Since 2023, an increased AfA rate of 3 percent per year has applied to newly constructed residential buildings (Section 7(4) EStG).

Building Type and Property Tax

With the property tax reform starting in 2025, the building type will also become more significant for property tax. In Bavaria, the value-independent area model applies-here, the building type plays a minor role in the calculation of property tax. In other federal states that use the federal model, the building type is factored into the determination of the property tax value. Owners should carefully review the information regarding the building type in their property tax return, as incorrect classifications can lead to incorrect tax assessments.

Mixed-Use: Residential and Commercial Building

Mixed-use buildings are particularly common in the existing building stock-such as an apartment building with a commercial unit on the ground floor. Here, the correct allocation of space by type of use is crucial:

• For the residential portion, residential rent, residential building insurance, and residential depreciation apply
• For the commercial portion, commercial rent, different insurance requirements, and, if applicable, a different depreciation rate apply

Under tax law, if a property is used predominantly for residential purposes (residential portion exceeding 90 percent), the entire property is generally treated as a residential building. If there is significant commercial use (more than 10 percent), a division must be made.

Practical Tip for Property Owners in Nuremberg and Franconia

In the Nuremberg metropolitan region, the distinction between single-family homes, two-family homes, and multi-family homes is particularly important in cases of mixed use (e.g., an owner-occupied home with a granny flat). The type of building influences not only the property value but also tax planning options (pro-rata depreciation for rented granny flats). We always take the building type into account in our market price analysis and advise on tax aspects in collaboration with tax experts.

In Nuremberg’s Wilhelminian-style building stock, many buildings were originally constructed as single-family homes and later converted into multi-family homes-or vice versa. This historical building evolution can lead to discrepancies between the building code classification and actual use. We recommend that buyers, in case of doubt, request the building file from the city archives or the building code office.

Frequently Asked Questions

How is a house with a granny flat classified?

A house with a granny flat is generally considered a two-family home. The decisive factor is the actual usage structure (two separate residential units). The building type is noted in the land registry and on the property tax assessment. For tax purposes, the division between owner-occupied and rented portions is relevant.

Does the building type affect the purchase price?

Yes. Multi-family homes are generally valued using the income approach (focusing on rental income), while single-family homes are often valued using the cost approach or the sales comparison approach. Depending on the building type, buildings of identical size on the same property may have different market values.

Can I change the building type of my property?

Yes, a change of use (e.g., converting an office building into residential space or a single-family home into a multi-family home) requires a building permit from the building authority. Subsequently, the new building type is noted in the property tax assessment and, if applicable, in the land registry.

Which building type currently yields the best returns in Nuremberg?

Multi-family homes and small residential complexes (5 to 15 units) consistently yield good returns in Nuremberg and the metropolitan region, as demand for rental apartments is high. Single-family homes are priced more based on their asset value and comparative value and are currently in demand primarily among owner-occupiers. Commercial buildings require a more nuanced case-by-case assessment, as demand varies significantly depending on location and type of use.

What should be considered regarding the building type in property listings?

In real estate listings, the building type is often not clearly specified, or there may be discrepancies between the intended use under building regulations and the actual use. We recommend that prospective buyers verify the building type in the land registry and the building permit and compare it with the current condition. Particularly with older buildings in Nuremberg, it can happen that buildings originally approved as single-family homes have later acquired a different usage structure through additions and renovations without a new building permit being issued. Such unapproved existing conditions can lead to problems with financing, insurance, and tax classification. The building file at the Nuremberg Building Authority provides information on the approved condition; we recommend reviewing it before purchasing any existing property.

Building Type and Energy Performance Certificate

The building type also determines which type of energy performance certificate is required. Residential buildings receive a residential energy performance certificate (demand- or consumption-based), while non-residential buildings receive a separate certificate in accordance with the GEG. For mixed-use buildings-residential and commercial-it must be determined whether one or two separate energy performance certificates are required. When selling or re-leasing, the energy performance certificate must be presented to the prospective buyer upon request during the viewing; violations can result in fines of up to 10,000 euros. For multi-family homes in existing neighborhoods in Nuremberg dating from the 1960s and 1970s, the energy efficiency class is often F or G-a factor that increasingly influences the purchase price and should be taken into account when evaluating the building type.

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