Property Valuation

Property valuation is the tax procedure used to determine the value of land and buildings for the purposes of inheritance, gift, and real estate transfer taxes. It is governed by the provisions of the Valuation Act (BewG) and must be distinguished from the determination of market value under civil law. The tax office generally conducts the real estate valuation using standardized methods-without physically inspecting the property-which can result in the tax value deviating from the actual market value.

Valuation Methods Under the BewG

The BewG provides for three methods for developed properties: The comparable sales method (for single-family and two-family homes as well as condominiums, based on comparable prices from the Appraisal Committee), the income approach (for rental residential properties and mixed-use properties), and the cost approach (a fallback method for owner-occupied and special properties). Undeveloped properties are valued by multiplying the standard land value by the property area.

The comparative value method is the simplest and most market-oriented method, but it is only applied when sufficient comparable prices are available. The Appraisal Committee for Property Values of the respective city or county provides these comparable prices. In Nuremberg, the Appraisal Committee publishes regular real estate market reports that provide current purchase price indices and standard land values.

The income approach is based on the sustainable annual gross income (rental income) minus operating costs. The remaining net income is capitalized using a property interest rate to determine the income value of the building; the land value is added separately. This method accurately reflects market logic for rented properties but can lead to high tax values when property interest rates are low.

Significance for Inheritance and Gift Tax

The tax value determined as part of the real estate appraisal serves as the basis for calculating inheritance or gift tax. Since the procedure is standardized, the tax value may be higher or lower than the actual market value. Owners and heirs have the right to prove a lower fair market value through an expert appraisal (Section 198 of the Property Valuation Act). This right is of considerable practical importance when the tax office’s valuation appears unrealistically high.

Especially for properties in need of renovation or those in outlying locations, the tax office’s valuation often deviates significantly from the actual market value. In such cases, an expert appraisal in accordance with the ImmoWertV can substantially reduce the tax assessment basis, thereby saving several thousand euros in inheritance or gift tax. The costs of the appraisal are deductible as estate liabilities.

Real Estate Valuation Following the 2022 Reform

Since January 1, 2023, new rules have applied to real estate valuation under inheritance and gift tax law. The reform introduced by the Annual Tax Act of 2022 has adjusted the valuation parameters: property interest rates and gross yield factors have been updated, which has generally led to higher tax values. At the same time, personal exemptions under inheritance tax law have not been adjusted-meaning that a larger proportion of real estate inheritances will be subject to tax.

For families wishing to transfer real estate to the next generation, it is therefore more important than ever to develop a gifting strategy early on. Regular gifts within the limits of the tax-free allowances (410,000 euros per child per parent every ten years) can significantly reduce the future tax burden.

Practical Tip for Property Owners in Nuremberg and Franconia

In the Nuremberg metropolitan area, the automated tax assessment values-particularly in areas with high price growth such as southern Nuremberg, St. Johannis, or downtown Erlangen-can be significantly higher than the realistic market value, especially for older buildings in need of renovation. We generally recommend checking whether a second appraisal is advisable for major property transfers. The appraisal costs, typically ranging from 1,500 to 4,000 euros, can quickly pay off if the tax value can be reduced by several tens of thousands of euros.

Anyone wishing to bequeath or gift a property in the metropolitan region should plan the timing carefully. Before a transfer, we always recommend checking the current standard land value and the comparative prices from the Appraisal Committee and determining the estimated tax value. We can assist by recommending suitable experts.

Frequently Asked Questions

When does the tax office conduct a property valuation?

The tax office conducts a property valuation in cases of inheritance or a gift involving real estate, as well as when real estate transfer tax is due. The tax office’s valuation department then issues a separate assessment notice, which may be appealed.

Can I challenge the tax office’s assessment notice?

Yes. An appeal against the real property value assessment notice may be filed within one month. To prove a lower value, an expert opinion must be submitted that meets the requirements of the ImmoWertV.

Does the real estate valuation also apply to business assets?

No. Business assets are subject to separate valuation regulations under the BewG. The real estate valuation applies exclusively to real estate and rights equivalent to real estate held as private assets.

What is the difference between a real estate valuation and a market value appraisal?

Real estate valuation is a standard tax procedure used by the tax office that operates without an on-site inspection and follows fixed guidelines. The market value appraisal under the ImmoWertV is an individual expert valuation that reflects the actual market price. The two values can differ significantly from one another-especially for older properties, those in need of renovation, or atypical properties.

What special considerations apply to the property valuation of condominiums?

Condominiums are primarily valued using the comparative value method as part of the property valuation process. The tax office relies on the comparative prices published by the appraisal committee of the respective city or county for similar apartments in comparable locations and with comparable features. In Nuremberg, the appraisal committee provides regular purchase price indices that differentiate by apartment size, year of construction, feature class, and city area. Since the appraisal committee derives the statistical values from actual purchase prices, they generally reflect the market better than the flat-rate estimates of the cost or income approach. Nevertheless, there may be deviations: apartments in special locations, with unusual floor plans, or in need of renovation deviate from the statistical averages. Heirs or donees who receive a Nuremberg condominium as a transfer should critically review the assessment notice and, in cases of obvious overvaluation, commission a counter-appraisal-especially if the tax value exceeds the actual market prices achievable in the specific street location.

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