A newly built property and a house from the 1960s can stand on the same street and nevertheless have very different values. The reason lies less in the year of construction itself than in the remaining useful life – the number of years for which a building still has economic use ahead of it. In the cost approach, it determines the so-called depreciation due to age and thus a significant part of the building value. We explain how the year of construction, modernizations and remaining useful life interact, how depreciation due to age is calculated and what this means for buyers and sellers.
Remaining Useful Life, Total Useful Life and Depreciation Due to Age – the Basic Terms
Three terms form the foundation. Their definitions are set out in the Real Estate Valuation Ordinance (ImmoWertV), which has been the binding basis for determining market value since 2022.
- Total useful life (GND): the period during which a structural facility can normally be used economically, calculated from the year of construction, when properly managed (Section 4 ImmoWertV). It is not a physical service life, but a standardized model parameter.
- Remaining useful life (RND): the number of years during which the building can presumably still be used economically. It is generally calculated as the total useful life minus the age – but can be extended through modernizations and shortened through neglected maintenance.
- Depreciation due to age: the reduction in value applied to the building value as age increases. It reflects the loss of value a structure experiences over the years.
The relationship is regulated briefly and clearly in the ordinance:
The depreciation-due-to-age factor corresponds to the ratio of the remaining useful life to the total useful life. (Section 38 ImmoWertV)
The factor therefore indicates what share of the building value remains after deduction of age-related wear and tear. It is thus the central time and condition factor in every cost-based valuation.
How Depreciation Due to Age Is Calculated in the Cost Approach
The cost approach determines value from the building’s construction costs plus the land value. Depreciation due to age is deducted from the construction costs. The prescribed method is linear: the loss of value is distributed uniformly over the entire useful life.
Two simple formulas are sufficient:
- Age depreciation factor = remaining useful life ÷ total useful life
- Age depreciation in percent = age ÷ total useful life × 100
An example: A detached house was completed in 2006, and the valuation date is 2026. Its age is therefore 20 years, and its total useful life is 80 years. Without significant modernizations, the remaining useful life is 80 − 20 = 60 years.
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Age depreciation factor:
60 ÷ 80 = 0.75 -
Age depreciation:
20 ÷ 80 = 25 percent
Thus, 75 percent of the building’s production costs remain as the building value, while 25 percent must be deducted as age depreciation. It is immediately apparent: It is not the year of construction as a number that determines the result, but rather the relationship between age and remaining useful life and the assumed total useful life.
Total useful life by building type: the model values in Annex 1
To ensure that the valuation remains transparent and consistent, the ImmoWertV specifies the total useful life for each type of building as a model assumption (Annex 1 ImmoWertV). The most important values:
- Detached and semi-detached houses, duplexes and row houses: 80 years
- Apartment buildings and mixed-use residential buildings: 80 years
- Office and administrative buildings, banks, commercial buildings: 60 years
- Department stores and retail stores: 50 years
- Supermarkets and car dealerships: 30 years
- Individual garages: 60 years, underground and multi-storey garages: 40 years
For residential buildings, a uniform total useful life of 80 years has therefore applied since the reform of valuation law. This does not mean that a house would be worthless after 80 years—the useful life is a calculation parameter, not an expiry date. Well-maintained and modernized older buildings are practically used far beyond this period.
How modernizations extend the remaining useful life
This is precisely where the condition factor comes into play. Anyone who invests in the roof, windows, heating system or insulation extends the economic remaining useful life—the building is mathematically made “younger.” For residential buildings, the ImmoWertV describes a points-based model for this purpose (Annex 2 ImmoWertV). Points are assigned to each modernized building component:
- Roof replacement, including improved thermal insulation: up to 4 points
- Thermal insulation of exterior walls: up to 4 points
- Modernization of the windows and exterior doors: up to 2 points
- Modernization of utility systems (electricity, gas, water, wastewater): up to 2 points
- Modernization of the heating system: up to 2 points
- Modernization of the bathrooms: up to 2 points
- Modernization of the interior fit-out (ceilings, floors, stairs): up to 2 points
- Significant improvement to the floor plan layout: up to 2 points
The modernization level is determined from the total – a maximum of 20 points:
- 0–1 point: not modernized
- 2–5 points: minor modernization as part of maintenance
- 6–10 points: moderate level of modernization
- 11–17 points: predominantly modernized
- 18–20 points: comprehensively modernized
The higher the modernization level, the longer the remaining useful life to be applied. However, the model extends it to a maximum of 70 percent of the total useful life. In the case of a genuine gut renovation that largely restores the building to a condition comparable to a new build, up to 90 percent is even possible.
An example: An apartment building from 1970 is 56 years old mathematically as of the valuation date in 2026. Without modernization, a remaining useful life of only 80 − 56 = 24 years would remain. However, if the roof, façade, windows, heating system, utility lines and bathrooms have been renovated, the property may be “comprehensively modernized” – the remaining useful life then increases toward the 70-percent limit, i.e. to up to 0.7 × 80 = 56 years. Experts refer to the fictitious year of construction in this context: the hypothetical year of construction corresponding to the modernized condition and lying significantly after the actual year.
Advantages and disadvantages: What age and remaining useful life mean for buyers and sellers
The year of construction and remaining useful life affect both sides – depending on the perspective, as an opportunity or a risk.
- For sellers – documentation pays off: Anyone who documents modernization measures with invoices and dates can substantiate a longer remaining useful life and thus a higher value. Undocumented work means giving away cash.
- For sellers – be honest: Deferred maintenance, such as a roof requiring renovation, shortens the remaining useful life and must be disclosed.
- For buyers – a basis for calculation: A short remaining useful life signals foreseeable renovation needs. This belongs in the purchase price negotiations and financing planning.
- For buyers – modernization as leverage: An older building bought at a low price and in need of renovation can be improved through targeted measures increase the value – the remaining useful life and the value rise accordingly.
- For both – financing impact: Banks base the loan-to-value ratio and the loan term on the remaining useful life. A short period can make financing more difficult.
FAQ on Year of Construction and Remaining Useful Life
Is an old house automatically worth less?
No. The year of construction alone says little. The decisive factor is the remaining useful life, which depends on the condition. A well-maintained, modernized house from 1965 may have a longer remaining useful life than a neglected building from 1995.
How can I determine the remaining useful life of my property?
As a starting value, subtract the age from the total useful life according to Annex 1 (80 years for residential buildings). Then adjust the value based on the modernization measures carried out. For a reliable figure, an expert assessment is advisable, particularly for older buildings with extensive renovations.
Does the actual or a fictitious year of construction count for the remaining useful life?
The actual condition is decisive. Significant modernizations result in a fictitious year of construction that is more recent than the real one. The extended remaining useful life is determined on this basis.
Is there a minimum for the remaining useful life?
That depends on the purpose. For the market value under the ImmoWertV, there is no fixed minimum; the individual circumstances of the property are decisive. Under tax valuation law, however, the remaining useful life of a still usable building is at least 30 percent of its total useful life (Section 253 BewG).
Does every renovation extend the remaining useful life?
No. Purely cosmetic repairs, such as a new coat of paint, do not count. Substantial measures affecting the building components listed in Annex 2 are recognized – for example, the roof, façade insulation, windows, heating system, pipes, or bathrooms.
Does the remaining useful life also play a role outside the cost approach?
Yes. In the income approach, the remaining useful life determines the present value factor and therefore the capitalized income. In tax depreciation (AfA), too, a proven shorter useful life can increase the annual depreciation allowances.
Conclusion: The condition, not the year of construction, is decisive
The age does not reduce the value of a property merely as a calendar year, but through the remaining useful life. It is calculated from the total useful life minus the age and can be significantly extended through modernization – with comprehensive measures to as much as 70, and with a complete renovation to as much as 90 percent of the total useful life. Anyone who can document modernizations secures a higher value; buyers should take the remaining useful life seriously as a calculation factor for renovation and financing. This turns the time and condition factor from an abstract formula into one of the most important levers in property valuation.