How are a property's property tax value and market value related?

The property tax value and the market value are two independent value figures with different purposes: the property tax value is determined on a standardized basis in accordance with the Valuation Act (Bewertungsgesetz) for property tax from 2025 onwards, while the market value reflects the price actually achievable on the market. Both values can differ considerably from one another.

Two values, two purposes

Since the property tax reform, a property tax value is determined for every plot of land in Germany property tax value – the calculation method depends on the respective federal state (federal model or one of the state models, e.g. in Bavaria, Baden-Württemberg or Hamburg). The basis is always standardized, automatically processable factors such as the standard land value, plot area, building type and year of construction – individual characteristics of the specific property are not taken into account.

The market value is instead determined individually by us as valuers in accordance with § 194 BauGB and takes into account all value-relevant characteristics: condition, fittings, degree of modernization, noise or contamination burdens, third-party rights, and the actual market situation.

Property tax value and market value in direct comparison

Key differences at a glance:

Explains how often the established value is reviewed How often is the property tax value reassessed?

From property tax value to property tax: the calculation

The property tax value is only the first component of the actual tax burden. The annual amount is only determined by the tax multiplier and the municipality's levy rate – an example based on the federal model for a single-family home:

In the federal model, the tax assessment rate for residential properties is 0,31 per mille, while each municipality sets its own multiplier. The extent to which this final factor determines the actual tax burden is shown by What is the assessment rate (Hebesatz) and how does it affect the actual property tax?

This calculation method applies in the eleven states of the federal model – from Berlin via North Rhine-Westphalia to Schleswig-Holstein. Five states follow their own approaches: Bavaria calculates purely based on area, Baden-Württemberg purely based on land value, and Hamburg, Hesse, and Lower Saxony combine area with location or residential location factors.

Which model applies in which federal state and what this entails for documentation and objections is addressed by What is the difference between the federal model and the state model for property tax?

Calculate your property tax yourself

For all 16 federal states – in the federal model, the property tax value from your tax notice is sufficient; in the state models, you calculate directly using area and standard land value:

Why do the values often differ significantly?

Because the property tax value is deliberately calculated using standardized methods, it can be significantly below or above the actual market value depending on the property. Deviations of 20% or more are not uncommon, particularly for buildings in need of renovation, unusually shaped plots, or strongly fluctuating regional standard land values.

Four factors account for the majority of the difference:

• Flat rates instead of the actual property

  • Statistical rents per rent level, without consideration of fittings or condition
  • Two highly dissimilar properties of identical size and construction year are assigned the same property tax value

• A frozen valuation date

  • All property tax values reflect the value relationships as of 1 January 2022
  • Subsequent market developments will only be reflected in the next official reassessment in 2029

• Standard land value as a zone value

  • The standard land value applies to an entire zone, not to individual plots
  • Sloping site, unfavorable plot configuration, or restricted buildability are disregarded

• Model diversity across the federal states

  • Federal model, area-based model, land value model: Depending on the federal state, the property tax value is based on different criteria
  • In the area-based models, it provides no information whatsoever regarding the property's value.

The 40 per cent threshold: when the property tax value is too high

If the determined property tax value significantly exceeds the actual value, this need not be accepted: Should it exceed the substantiated market value by at least 40 per cent, the tax office will apply the lower common value (§ 220(2) BewG). The Federal Fiscal Court indicated this evidentiary option in two expedited proceedings in May 2024; the Annual Tax Act 2024 has now explicitly codified it into law.

A market value appraisal from the competent expert committee (Gutachterausschuss) or a qualified valuer serves as proof, alternatively also a purchase price achieved in due course in ordinary market transactions. All requirements are addressed in detail. What is the proof of a lower fair market value for property tax purposes?

Discusses the two resolutions and their consequences in detail. II B 78/23, II B 79/23: The 40 per cent threshold for the property tax value – BFH enforces the right to prove a lower value

When is an individual appraisal report advisable?

Anyone who considers the value determined in the property tax value notice to be significantly too high can, under certain conditions, prove a lower fair market value and thereby have the assessment basis for the property tax corrected. An independent market value appraisal provides the robust basis for this – as it does for objections against the notice filed within the statutory deadline.

Whether the effort is worthwhile can be determined through a simple comparison of annual savings and one-time appraisal costs – a contextual assessment is provided Is an appraisal report worthwhile if the deviation from the market value is only minor?

The documents required for verification are listed What documents do I need for an appraisal report to prove a lower property tax value?

Property tax value, assessed real property value, market value: three values, one property

In tax and valuation law, multiple official value concepts exist side by side for the same property – confusing them can quickly lead to incorrect conclusions:

• Property tax value

  • Basis for the annual property tax, established as a standardized value by the tax office
  • It provides no information regarding the achievable market price

• Assessed real property value

  • Basis for inheritance and gift tax, derived from the standardized needs-based valuation
  • A lower value can be substantiated under § 198 BewG without any 40 per cent threshold

• Market value

  • The market standard under § 194 BauGB, determined individually
  • Reference for both tax substantiation requirements and for any decision regarding sale, inheritance, or divorce

Explains how the needs-based valuation process works and where its limitations lie. What is the tax assessment valuation (Bedarfsbewertung) and how does it differ from a market value appraisal?

If both tax valuation procedures are conducted concurrently, special provisions apply: What are the tax implications if an appeal against the property tax value and inheritance tax proceedings are running in parallel?

Conclusion

The property tax value and the market value should not be equated. For sales, inheritance, divorce, or financing, the individually determined market value is always decisive – the property tax value serves solely to calculate the annual property tax.

And where the property tax value is clearly out of line, only the market value determined by an expert provides a defensible figure for negotiations with the tax office.

The only remedy against an excessive property tax assessment is a market value report.