EPCs, sustainability certifications and buildings’ green value

One of the objectives of the first work package (WP1 Baseline assessment and definition for EUB SuperHub) was to identify key elements to raise the impact of energy efficiency improvements and certifications on the market value of buildings within the last task named Task 1.4 Impact of energy efficiency improvements and certifications on the value of buildings. The deliverable entitled "EPCs, sustainability certifications and buildings' green value" presents the work done in Task 1.4. The task was divided into four main parts.

In the first part, the consortium analysed the last editions of international and European valuation standards but also national regulations in the field of real estate valuation in each project partner country (Germany, Italy, Austria, France, Ireland, and Croatia) involved in this task. The main goal was to detect how energy efficiency and sustainability impact the value of buildings and to what extent are taken into consideration through currently available standards and regulations. This review revealed that the last editions of international and European standards (e.g., the 9th edition of the Blue Book published by TEGoVA, and the Red Book published by RICS in January 2022) consider sustainability and energy efficiency devoting the whole chapters to those two topics. This first part also gives an overview of national property prices and lease registers across project partner countries revealing some issues. The existing property price registers (Germany, Italy, France, Ireland, and Croatia) and existing national leases registers (Italy, France, and Ireland) provide transaction prices of buildings being sold and rent prices of buildings being rented but do not contain any data related to building energy efficiency (e.g., EPC label, etc.). 

The second part provided an extensive literature review about the impact of energy efficiency and sustainability features (e.g., EPC rating, sustainability ratings) on the value of buildings in Europe by analysing European projects involved entirely or partly in real estate property valuation (e.g., ZEBRA2020, REVALUE, CA EPBD IV, EeMAP, EeDaPP, ALDREN and LIFE LEVEL(s)), journals dealing with real estate property valuation (e.g., Journal of European Real Estate Research, Journal of Corporate Real Estate, Journal of Housing Research, Journal of Property Research, etc.), journals at national levels, research analysis, surveys (e.g., a survey on Italian real estate market conducted in 2021), initiatives (e.g., Global Real Estate Sustainability Benchmark (GRESB) initiative), reports (e.g., JRC science for policy reports, summary reports published by the French Notaries), insight papers (RICS insight paper published in March 2019), and dissertations. One of many obstacles detected when performing a building valuation in several projects, research analyses and reports is connected to ACCESS TO DATA (limited data availability). Despite the detected positive impact of energy efficiency and sustainability features on the value of buildings, it is still not possible to define the relationship between energy efficiency and the value of a building due to many dependencies and because the existing price and leases registers do not contain either an EPC label or any other data related to the energy efficiency of a sold building/ building unit. Based on the performed literature review, it was concluded that the energy efficiency was certainly beginning to impact value, though at a small scale compared with traditional value drivers (e.g., location). 

In the third part, the consortium performed expert interviews with real estate agents and valuers in project partner countries to analyse the specific impacts of labels and certificates. One well-known and experienced real estate agent and valuer in each project partner country were contacted and kindly asked to share their opinions about the impact of energy efficiency and sustainability on the value of buildings. Afterwards, to speed up collecting answers from real estate agents and valuers, the links to the online questionnaires prepared using Google Forms were forwarded to them. After filling out prepared online questionnaires, small expert interviews, mostly related to open-ended questions, were conducted to discuss issues.

Based on all the work carried out in the previous three parts it was possible to identify the following elements to raise further the impact of the next generation EPCs on the real estate market within the fourth part of D1.4:

1. Making EPCs more understandable and user-friendly to grasp for non-experts

2. Indicating additional data on EPCs

3. Increasing level of trust in the accuracy of EPCs

4. Increasing the rate of quality control of EPCs and improving the quality control of EPCs (assurance of the quality control)

5. Prescribing minimum prices for EPCs issuing

6. Further developing BER certification covering also residential properties

7. Indicating only one EPC label on the first page of an EPC based on the calculated annual primary energy

8. Raising awareness of building sustainability aspects among experts, non-experts and building users – citizens

9. Introducing the obligation to have in place a unified property price register at the national level

10. Introducing the obligation to have in place a unified leases register at the national level

11. Considering energy efficiency and sustainability within the existing regulations

12. Introducing the obligation to have an EPC when performing building valuation

13. Introducing the obligation to control the input of data into the real estate information system

14. Integrating a national database of EPCs with a property price register

15. Integrating a national database of EPCs with a leases register

16. Providing additional education for real estate agents in the field of energy performance certifications, energy efficiency and renewable-based technologies

17. Providing additional education for real estate valuers in the field of energy performance certifications, energy efficiency and renewable-based technologies – if necessary

18. Providing basic education for building users in the field of energy performance certifications, energy efficiency and renewable-based technologies - Promoting widespread communication campaigns among citizenship

19. Introducing digital building logbook (DBL)

It is advisable to introduce the concept of digital building logbooks to overcome the main challenge of a lack of access to sufficient building-related data when performing building valuations. 

NOTE: Some of the identified elements are country specific.

Based on the conducted interviews with real estate agents and valuers across the EUB SuperHub project partner countries in 2022, it is evident that the introduction of EPC had made a marginal contribution to the existing practice of building valuation in the examined countries. Energy efficiency has a rather negligible impact on building value compared with traditional value drivers such as location and accessibility. When buying/renting real estate, the main drivers are still location, transport – infrastructure, services availability, and building age. It is noteworthy that information and communication technologies (ICT), particularly broadband have made an appearance within the first five drivers.

In the context of the current energy crisis and the EU’s climate goals, it is more than ever of utmost importance to reduce EU dependence on fossil fuels in the existing building stock. The need for energy efficiency and the large-scale deployment of renewable-based technologies has never been greater. Energy efficiency and smart building technologies will become more important with higher energy prices. These elements will eventually have a greater impact on the building value.

 

Article written by Francesca Monaco