Value based on construction costs
The cost approach answers the question: What would it cost to rebuild the building today — and what portion of value remains after accounting for age and condition? Added to the land value, this results in the preliminary cost value, which is then adjusted to current market conditions using a market adjustment factor.
The method is codified in the ImmoWertV 2022 (§§ 35–39). The Normal Construction Costs (NHK 2010) serve as the cost basis, adjusted using regional construction cost indices and construction price indices published by the Federal Statistical Office.
Cost value — simplified formula:
Cost value = (Construction costs − Age-related depreciation) × Market adjustment factor + Land value
The market adjustment factor (Sachwertfaktor) is published by the expert committee (Gutachterausschuss) or derived from collections of purchase price data.
Cost approach
in the full appraisal report
- Cost approach in accordance with ImmoWertV
- NHK 2010 + current construction price index
- Market-adjusted market adjustment factor
- Court-standard & recognized for tax purposes
- Delivery in 10–15 business days
When is the cost approach applied?
The cost approach is always the leading method whenever income and comparable prices are not decisive — but rather the substance value of the building.
Single-family homes & semi-detached houses
For owner-occupied residential buildings (single-family homes, semi-detached houses, bungalows), the cost approach is the standard leading method — complemented by the sales comparison approach where sufficient purchase price data is available.
Special-purpose properties
For properties without sufficient comparable prices (schools, churches, hospitals, garages, industrial facilities), the cost approach is the only reliable valuation method.
Plausibility review of the income value
As part of a full appraisal report, the cost value serves as a control calculation and plausibility review of the income value, to verify the appropriateness of the result.
Tax & inheritance
The tax office determines the real estate value for inheritance tax purposes using the cost approach or the sales comparison approach. A counter-appraisal with a methodically correct cost value can reduce the taxable value.
Process of determining the cost value
Land value determination
Determination of the land value based on the standard land values published by the expert committee (Gutachterausschuss), with location adjustments for size, shape, and development status.
Determination of construction costs
Calculation of the Normal Construction Costs (NHK 2010) based on building type, fitting standard, and gross floor area (BGF), extrapolated using the current construction price index.
Age-related depreciation
Deduction of age-related depreciation depending on the year of construction, remaining useful life, and the assessed condition of the building. Modernizations are considered as increasing value.
External facilities & ancillary construction costs
Inclusion of ancillary construction costs (architect, structural engineering, permits) as well as external facilities (garage, terrace, fencing) based on market-standard percentages.
Market adjustment & cost value
Application of the market adjustment factor (Sachwertfaktor) to the preliminary cost value. Adding the land value results in the market-adjusted cost value.
Frequently asked questions about the cost approach
Why does the cost value differ from the purchase price?+
The cost value reflects the substance value of the building — not necessarily the market value. In sought-after locations, purchase prices often exceed the cost value. In structurally weak regions, the cost value can exceed the market value. The market adjustment factor (Sachwertfaktor) adjusts the result to local market conditions.
Is the cost approach recognized by the tax office?+
Yes. The cost approach is one of the recognized methods for proving a lower fair market value to the tax office (§ 198 BewG). If the expertly determined cost value is lower than the tax office's valuation, it can be decisive for inheritance or gift tax purposes.
What is the NHK 2010?+
The Normal Construction Costs 2010 (NHK 2010) are standardized construction cost tables that specify the average construction costs per square meter of gross floor area (BGF) for various building types and fitting standards. They are extrapolated to the current price level using the construction price index published by the Federal Statistical Office.
Request Cost Approach Appraisal
Whether owner-occupied property, special-purpose property or tax appraisal — we determine the material value (cost approach) with methodological accuracy and complete documentation.
