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The operating costs according to the Ordinance on Housing Calculations under the Second Housing Act (Second Calculation Ordinance – II. BV) contain an indexation rule to adjust the operating costs fixed in 2002 to future price conditions. In § 26 Paragraph 4 II. BV it states: “On 1 January 2005 and on 1 January of each third year thereafter, the […] amounts shall change by the percentage by which the consumer price index for Germany established by the Federal Statistical Office for the month of October preceding the change has increased or decreased compared to the consumer price index for Germany for the month of October preceding the last change. The change on 1 January 2005 shall be the increase or decrease in the consumer price index for Germany which occurred in October 2004 compared with October 2001.”

The Excel Spreadsheet available for download clearly lists all indexations of operating costs from 2002 to 2020.

Appraisal methods are not standardized worldwide. There are numerous variations that (should) lead to similar results when used correctly. They can be divided into two main groups: the a) direct capitalization methods (German value by income approach, income approach, investment method, direct capitalization method) and the b) indirect capitalization methods (especially the discounted cash flow methods).

In this paper both main groups are presented in an overview with their respective characteristics. The focus is on assessing their differences.

A simple Excel example demonstrates the basic structure of a discounted cash flow method. Since this method is not standardized, there are several variations that can be developed from the basic version presented here.

The second Excel example contains a simple implementation of the new Value by Income Approach Method (Ertragswertverfahren) in the ImmoWertV on the basis of periodically varying income (§ 17 Para. 3 ImmoWertV), which is similar to a standard DCF method, but in contrast to the latter it necessarily includes the parameters capitalization rate, remaining useful life, and land value that make prognostic approaches impossible.

Discount factors (fx=1-(äx-1) x p) for the commutation figures of the Federal Statistical Office are required for the evaluation of rights and burdens which are linked to the life of one or more persons (e.g. limited personal easements in gross, usufruct, etc.). You can find these in the following Adobe PDF Spreadsheets.

Spreadsheet Men and Women (basis 2007/2009) 
(Adobe PDF)

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Spreadsheet Men and Women (basis 2008/2010) 
(Adobe PDF)

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Spreadsheet Men and Women (basis 2009/2011) 
(Adobe PDF)

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Spreadsheet Men and Women (basis 2010/2012)
(Adobe PDF)

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Spreadsheet Men and Women (basis 2011/2013) 
(Adobe PDF)

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Spreadsheet Men and Women (basis 2012/2014) 
(Adobe PDF)

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Spreadsheet Men and Women (basis 2013/2015)
(Adobe PDF)

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Spreadsheet Men and Women (basis 2014/2016) (Adobe PDF)

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Spreadsheet Men and Women (basis 2015/2017) (Adobe PDF)

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Spreadsheet Men and Women (basis 2016/2018) (Adobe PDF)

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A paper on a method developed by the American scientist L.W. Ellwood, which is not well known in Germany and breaks down the initial return on a real estate investment into the yield expectations of equity and debt capital providers and checks these for plausibility. In addition to a general introduction, the paper contains the derivation of the entire method as well as various application examples. In addition, software is offered that performs the Ellwood method.

In many cases, capitalization rates are only determined by the expert committees for multi-story residential buildings and – to a less informative extent – for office buildings and mixed-use properties. As a result, there is no data available for many property types. In these cases, it is appropriate to derive the capitalization rate from gross or net yields. With the help of this small Excel macro, a corresponding capitalization rate for a selected value by income approach model (land value, management costs, remaining useful life) can be determined from a net yield with differing management costs (and without land value/remaining useful life) or a gross yield.

With the help of this Spreadsheet, the capitalization rate for a given purchase price can be determined on the basis of the parameters relevant to the net annual income, remaining useful economic life and land value.

A short introduction to some mathematical fields that are important for property appraisals in a one-day seminar: Fundamentals of financial mathematics, in particular calculation of interest, compound interest and pensions, statistical fundamentals (descriptive statistics, sampling, histogram, regression calculation), indexation (Laspeyres and Paasche indices; fundamentals of the construction price and consumer price index), plausibility checks of market values.

In this short presentation, various methods of risk analysis and evaluation for real estate appraisal will be presented. It was developed for a workshop and does not claim to be a complete and in-depth analysis.

A program that demonstrates the simulation of yield values using a Monte-Carlo simulation that was developed for didactic purposes. In addition to normal distribution, inclined distributions (left, right) as well as single-point and uniform distributions can be simulated for each parameter. The results are displayed graphically as a histogram and as a cumulative frequency distribution as well as mathematically as median, mode, etc.

Development of a Monte Carlo simulation for the value by income approach method introduced by the Real Estate Valuation Ordinance as of 1 July 2010 on the basis of periodically varying income (detailed value by income approach method) with the objective of making property-specific real estate risks (e.g. lease agreement structure, vacancies, market rent development) visible and examining their effects on the investment yield.

With the help of this spreadsheet, a property-specific capitalization rate can be determined from a predefined capitalization rate range after grading and weighting various risk factors. The Excel example is used exclusively to illustrate a possible weighting.

Lecture at the German Real Estate Academy Freiburg GmbH in the postgraduate course International Real Estate Appraisal, module Innovative Real Estate Appraisal Methods, June 12, 2007, with a focus on Ellwood methods and prognostic discounted cash flow methods.

Within the scope of the comparison value determination, purchase price data is examined for possible outliers in order to exclude these as disturbance variables from further calculations. One of the best-known methods of outlier extraction is the sigma method, where the (statistical) quality of information is limited to nearly normally distributed data, an application prerequisite that is often overlooked in practice. With the interquartile method, this paper presents and contrasts another statistical method that can be easily applied to any data distribution.

In this lecture held at the annual meeting 2019 of the Real Estate Appraisal Foundation of the Anhalt University of Applied Sciences (IBF-HSA; link to www.ib-foerderverein.de), the question of what role mathematical statistics can play in professional appraisal practice will be examined. After a brief introduction to descriptive statistics, the statistical outlier detection, regression calculation and the comparison value method will be discussed. Typical misinterpretations of statistical statements are pointed out.

This info sheet explains the use of the most recently published construction price index for the price base 2015 (=100) for indexing the normal production costs of the WertR 2006 (NHK 2000) or the Sachwert-Richtlinie (German guideline for determining the value of material assets ) (NHK 2010).

Investments in German residential properties are currently in demand. The asset class is benefiting from persistently low interest rates, stable economic data compared with other European countries, and rising population figures and rents in major cities. In contrast, rural regions are shrinking and demographic developments are causing the population to age. The authors examine the question of which living concepts are suitable for the future given this background.