German valuation: review of methods and legal framework

Abstract

PurposeThere is a continuing discussion about whether German valuation methods are inaccurate and inferior to the British standard, and the enduring efforts for a European and internationally standardised valuation method and value definitions intensify this discussion. The German valuation system is said to lead to valuations which do not reflect actual market conditions and excessive smoothing. Not surprisingly, German surveyors usually disagree and claim that the German valuation approach, with its sustainable rental value, fulfils not only its purpose but is more transparent and thus superior to the approach usually applied in UK. The purpose of this paper is to discuss the recently adjusted German valuation methods.Design/methodology/approachThe paper analyses the German valuation methods and highlights the predominant differences to the British valuation standards.FindingsThe paper shows that the discussed valuation methods should lead to comparable results. The legal framework of the German valuation approaches can therefore not be blamed for any of the observed empirical phenomenon.Originality/valueThe paper discusses the recently adjusted German valuation methods.