The future mandatory renovation: Essential knowledge for owners of older properties

Is an environmental turnaround in our heating systems imminent? A crucial question currently being discussed in Germany is whether a new Building Energy Act will be passed soon. This law could oblige homeowners to install more environmentally friendly heating systems, such as heat pumps, in their properties. Nevertheless, it is important to note that alongside the national political debate surrounding the heating law, a potential EU regulation also plays a significant role and is currently less in the public focus. In this context, substantial costs could also face property owners, which is why the construction industry is increasingly alarmed.

We recommend that owners of older buildings intensively address the aspect of thermal insulation now in order to be prepared for potential legislative changes. Against this background, the European Union (EU) is planning major efforts to reduce the energy consumption of buildings. A planned tool for this is the classification of residential buildings into efficiency classes based on their heating intensity. Even though there is no official obligation yet to renovate to a specific efficiency level, a clear trend in this direction is emerging, and the EU is already working on drafting a corresponding building directive.

In our dynamic environment of environmental policy regulations and technological breakthroughs, it is essential for property owners to stay well-informed. What this means for owners and what information they need in order to do so will be explained below. Welcome to the future of real estate!

Background knowledge: The creation of a new building directive that can lead to a renovation obligation

of buildings and to introduce a classification system for efficiency assessment. Although there is currently no obligation to renovate older, inefficient buildings, a corresponding EU directive is in the works.

The EU is developing a new buildings directive that aims to improve the energy performance of all types of buildings, independently of existing national regulations. This primarily means that buildings with the worst insulation must be prioritized for renovation. Measures such as the insulation of exterior walls and roofs, the replacement of windows, or the insulation of basement ceilings are among the possibilities. The average costs for such renovations can exceed EUR 100,000, even for single-family homes.

In Germany, real estate is divided into nine different energy efficiency classes, which are defined by the Building Energy Act. These classes range from A+ to H and depend on the amount of energy required for heating, ventilation, cooling, and domestic hot water preparation. An efficiency class A+ building requires a maximum of 30 kilowatt-hours annually per square meter of usable floor space, whereas a class H building consumes more than 250 kilowatt-hours per square meter per year. However, the exact energy efficiency value of the 19 million residential buildings in Germany is still unknown.

Thus, older, energy-inefficient buildings could soon be a thing of the past, at least according to the EU's plans. Should the European Parliament adopt its planned building renovation mandate, many owners in the European Union would have to brace themselves for a flood of new building regulations. What could this impending renovation mandate mean?

It is clear that the implementation of the necessary renovations will be costly. Many owners are already looking ahead with concern to the costs involved. Especially those homeowners who do not act as investors, meaning they occupy their living space themselves and have only limited financial reserves, will not be able to get by without financial support. Experts assume that the new guidelines could represent a greater burden than the government's recently passed heating law.

Typical renovations for older buildings

Energy-efficient renovation involves various measures to save energy and improve living comfort. Here are a few examples:

• Thermal insulation This refers to the insulation of walls, roofs, and ceilings. The ceilings can be located between the living area and the basement, or between the various floors of a house.
• Heating system: Replacing the heating system can also contribute to energy savings. If a heating system is older than two years, optimization can also help make it more efficient.
• Window and Door Replacement: Old windows and exterior doors can be replaced to reduce heat loss.
• Ventilation systems: The installation or renewal of ventilation systems can help bring fresh air into the house while saving energy.
• Improvement of summer thermal insulation: Here, it is important to prevent unwanted heating in the summer.
• Digital systems: The installation of digital systems can help to better monitor and optimize energy consumption.

Renovation obligation: Costs and financing options

To implement the new requirements of the new building directive at the federal level, the annual investment volume would have to rise to more than 180 billion euros. Currently, this volume is around 50 million euros per year. The energy savings that can be achieved through these investments often do not cover the costs of the modernizations carried out.

State institutions offer financial support for owners who want to energetically renovate their building. KfW provides various funding programs that support energy-efficient modernization measures. The amount of the potential grants depends on the planned measures and other factors. Please note that many funding programs must be applied for before construction begins.

However, some banks, such as Umweltbank, also offer special loans with reduced interest rates for energy-efficient renovation projects. What exactly is funded by these programs depends in each case on the conditions of the financial partner.

Real estate agents can also help owners find a regional energy consultant. Likewise, a financial advisor can advise and help find the best possible loan or funding program for your project.

We work with independent financing partners who can help you secure funding for the renovation of your property. These partners are not tied to specific banks or financial institutions and can therefore offer a wide range of financing products. Their goal is to ensure that you, as the owner, get the best possible terms for your renovation project. This can help you save a significant amount of money on both interest costs and loan repayment. They analyze your individual situation and find the most suitable financing solution to enable maximum financial savings for you. Contact us if you would like a non-binding consultation. Our financing partners are very happy to assist you.

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Escape the renovation obligation – Sale as an option for renovation

Not every property owner is willing or able to carry out energy-efficient renovations and is therefore considering selling their existing property. Especially owners who do not fall under the exemption rule of the new heating law are facing a difficult decision – both financially and emotionally. When selling an older property, it becomes clear that the energy efficiency shown on the energy performance certificate is becoming increasingly relevant for potential buyers and banks.

Demand for properties with poor energy performance is falling. If interested buyers are still found for the property, the renovation costs are included as a major factor in negotiations and are often factored into the selling price. However, energy efficiency is just one of many evaluation criteria. A real estate agent can professionally assess the actual value of the property and has excellent knowledge of the real estate market in your region. They can help you determine a market-compliant selling price.

Whether you need support with energy-efficient renovations or are thinking about selling your property, we are at your disposal. Contact us, and we are happy to advise you!

Strategies for property owners

Nowadays, it is becoming increasingly important for property owners to address the issues of compulsory renovation and energy-saving measures. Both national and European initiatives are currently aimed at a more sustainable, energy-efficient design of our living space. A wide range of measures are conceivable in this regard – from thermal insulation and the modernization of the heating system to the implementation of digital systems for energy optimization.

However, these energy efficiency requirements and renovation obligations can cause significant costs. It is therefore sensible and necessary to consider existing financing options, such as KfW subsidy programs or loans from environmental banks.

Early engagement with these issues is of crucial importance. On the one hand, it allows property owners to prepare for potential legislative changes. On the other hand, early modernization of the building infrastructure can also mean an increase in value for the property. Especially in the case of a planned sale, a high energy efficiency rating can be an asset and potentially enable higher selling prices.

It is therefore worthwhile to take action and view energy-saving measures not just as a mandatory task, but also as an opportunity. The goal is to actively help shape the future of the real estate industry and contribute to a more environmentally friendly, sustainable world.

Real Estate Sales Strategies

Another important aspect to consider is the timing of selling a property. If an energy-efficient renovation of one's own property is not feasible for various reasons, the Sell a suitable alternative represent.

It is advisable to aim for an early sale, especially if the property has not yet been renovated. With an increasing number of mandatory energy-efficient renovations, it is foreseeable that more and more unrenovated properties will flood the market. In the long term, this could lead to a devaluation of unrenovated properties and significantly reduce their market value.

This can be countered by selling your unrenovated property at a time when the market is not oversaturated with similar objects. This may make it possible to achieve a higher selling price than might be the case in the future. It is advisable to seek professional advice for this. An experienced real estate agent can assess when the ideal time for a sale has come and how you can achieve the best possible price for your property.