In the Springer Study 2020, sustainability was counted as one of the three megatrends of the coming decade, but the effects of the ESG regulations that are coming soon or that already exist are not yet entirely clear to most real estate investors.
old buildings
The assessment of the real estate market recently published by the real estate consultant Savills primarily sees old buildings as an investment under criticism. In its outlook, the company leaves little doubt that the current EU sustainability taxonomy (ESG for short) will be very difficult and very expensive to implement, especially in old buildings. On the contrary, according to Savills, one can see clearly that future requirements can be implemented much more easily with new buildings. As a result, asscompact.de concludes, for example, the prices for newer properties or construction projects would have to skyrocket, since the market itself was very sluggish and could hardly react with increases in supply.
construction prices
In general, according to T-Online, both the Federal Environment Agency and most experts agree that the climate targets can only be achieved with an extremely high renovation rate. However, the consequences are already being felt. The dpa news agency reported a 14.4 percent increase in construction prices in November 2021 compared to the same month last year. In addition to the rising raw material prices and personnel costs, a distortion caused by the reduction in VAT is also included. Nevertheless, according to T-Online, this is the strongest price increase in 50 years.
consequences
These developments will also have an impact on rental and purchase prices, according to “FinanzNachrichten.de”. Old buildings will increasingly suffer from the regulatory and renovation burden of the EU and the federal government, while higher prices can be expected for new buildings due to strong demand. Despite higher valuations and costs, Savills does not see any risk for the real estate asset class per se, even if these have already increased in value rapidly in what was admittedly a good market environment over the past decade. In the outlook, the real estate consultancy sees somewhat weaker years, but is convinced of the long-term value development despite all the adversities.
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