June 7, 2023, 3:30 am | Read time: 3 minutes
Buyers value energy efficiency in real estate. With high energy prices and concerns about the proposed heating law, the trend has intensified, according to a recent analysis. Owners are facing significant value losses.
Expensive energy and uncertainty about the proposed heating law are leading to increasing value loss for properties with poor energy ratings, according to a study. The gap in market value between highly energy-efficient residential properties and buildings with poor energy ratings is widening. This is at least according to a new analysis. Owners are facing price reductions of nearly 30 percent at the peak. The “Handelsblatt” previously reported on this.
Greater Price Difference Between Energy Classes
For the analysis, real estate specialist Jones Lang LaSalle (JLL) evaluated around 5,000 listings of multi-family homes. In the first quarter, according to JLL, the asking prices for multi-family homes in the lowest energy classes G and H were on average about 28 percent below those of the best energy classes A and A+. A year earlier, the difference was a good fifth (21.6 percent), according to the analysis published on Friday.
Compared to the previous quarter, the price reduction for properties with the worst energy efficiency has noticeably increased by about 3.6 percentage points from the previous 24.5 percent. Also, on average across the individual energy efficiency classes, the reduction has increased by about 2.6 percentage points, according to JLL.
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Uncertainty Reflects in Price
“With the sharp rise in energy prices in 2022, the issue of building energy efficiency has gained significant relevance among investors,” said JLL expert Roman Heidrich. On one hand, properties with poor energy ratings are expected to have lower rental income and poorer marketability. On the other hand, a heated debate has erupted over the planned law on heating replacement. It concerns the future viability of particularly poor existing properties. This uncertainty is reflected in the demand for such properties and thus in the price.
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Existing Buildings with Low Energy Efficiency Struggle
Other real estate agents have also recently observed that not only rising interest rates are troubling property buyers, but also increased energy requirements with the heating law. Older existing buildings with low energy efficiency are increasingly struggling–especially since the real estate market is already under pressure and prices are crumbling.
According to Helge Scheunemann, Head of Research at JLL Germany, there is much to suggest that the value loss due to poor energy ratings of properties is a permanent trend. On one hand, the building sector is particularly relevant for climate goals. “On the other hand, we expect construction costs to remain high in the medium term.” The sharp rise in construction costs has led to higher costs for energy renovations. This is reflected in the market price, according to Scheunemann.
with material from dpa