Real estate: Energy efficiency doesn’t push the market higher (yet), 56% of sales in lowest energy category

Although energy efficiency hasn’t become a key factor in property purchases yet, it’s gaining ground as compared to the past. This is the mixed picture emerging from a study conducted by ENEA (National Agency for New Technologies, Energy and a Sustainable Economic Development), FIAP (Italian Federation of Realtors) and I-Com (Institute for Competitiveness), a snapshot of the impact the so called “E Factor” (energy efficiency) has had on the sector in the last five years.  In fact, if in 2017 there was a growth (+0.5%) in housing upgrading interventions, 56% of the total purchases fell in the energy class G, the lowest class, 24% in E and F, 13 % in D and just 7% in the most efficient energy classes, A and B. Furthermore, one real-estate broker out of two thinks that the APE (Energy Performance Certificate) -which provides the energy assessment of buildings- won’t influence potential buyers’ and sellers’ choices.

Looking at the type of buildings sold in 2017, the least energy efficient are detached houses, (over one out of two, that is 54.7%) and, even more, two-room apartments (66.7%), while just 4.4% of two-room apartments and 8.7% of detached houses falls into the most efficient energy classes (A+, A and B).  Contrary to the general trend, in 2017 sales of prestigious properties falling into the three most efficient energy  classes rose from the 14.1 % of 2016 to 22.1%.  The percentage of buildings falling in the energy classes A+, A and B, purchased and sold in historical city centers,  have also increased, rising from  6.4% in 2016 to 10.8% in 2017., whereas in the suburbs ,  this percentage decreases. This data seems to suggest that energy efficiency is an affecting factor in higher value buildings, while it still doesn’t “make the difference” in less expensive houses.

But that’s not all. Real estate market dynamics, particularly a significant unsold housing stock, strongly affect the “E Factor”: that’s why in 2017 only 40% of new buildings bought and sold met high energy efficiency standards (A+, A and B), against 60% in 2016. A surprising fact, considering the high energy standards required by law for new buildings, which can be attributed to the housing downturn occurred over the last years, and the significant unsold housing stock resulting therefrom: a percentage due to the purchase and sale of buildings built in the past and never alienated by the original builders.

The data on building renovations is particularly worrying: just 10% of the buildings undergoing renovation falls in the first three energy classes, proving that the Italians still fail to exploit that fundamental window of opportunity offered by building renovation in the case of deep energy efficiency interventions.

This is further impacted by the difficulty in accessing the credit necessary to see to the energy improvements: according to a sample of real estate agents interviewed, 32% believe that the market does not adequately account for the value added by energy efficiency, 28% believe that banks find energy improvements insufficiently attractive especially in smaller and medium sized projects, another 22% points at the absence of instruments to evaluate energy efficient projects, while 18% is convinced that it depends on a precautionary attitude on the part of lenders with respect to the risk of fraud or insolvency.

The analysis also reports the opinion of real estate agents on various specific items. As for APE, for example, 50% of those interviewed think that it is not utilized to influence the choices of buyers or sellers; in order to increase its usefulness 44% of real estate agents think it should be transformed into a more dynamic instrument capable of showing the user what his real energy consumption will be when he moves into his new home. And 48% of real estate agents do not think that adding a note in the listing informing of the “green restructuring” would have an appreciable effect on clients.

Finally, always according to real estate agents, the lack of attention of buyers to the energy class of buildings is related to their family composition, their spending capacity and their environmental awareness.

“Real estate market dynamics don’t show significant progress with regard to the energy efficiency variable, which remains an undervalued and scarcely promoted factor” Franco D’Amore, Vice President of I-Com and Director of the  Energy Area, pointed out. He then added: It’s necessary to review and strenghten some stimulating tools for addressing the main theme for the Italian real estate market:  the effective upgrading of the existing building stock”. In this respect- D’Amore concluded- “ the strategic guidelines provided by the National Energy Strategy 2017 seem to bring well into focus  the themes: review and strenghten the ecobonus, access the credit and set minimum performance standards for renovations”.

In order to find a way out of the impasse, we need to focus on the quality of the supply of new and existing buildings: therefore, in addition to  encouraging the purchase of well designed and well located buildings, the offer of safe and comfortable buildings, equipped with  the best technologies for reducing energy consumption should be strenghtened and promoted.

The regulatory instruments and the incentive measures  are there but they must be made known and made attractive to potential users.

At ENEA we’re committed to inform the final consumers and  the possible investors of  their advantages”.

“The real estate market can be considered a litmus test for the effectiveness of the energy efficiency measures in the residential building sector and, at the same time, an essential driver for strenghtening the effectiveness of those measures”, Antonio Disi, expert at the ENEA Energy Efficiency Department , pointed out. He then added: One only needs to think that APE, although being obligatory for buying, selling and renting, is still hardly perceived as capable of increasing the market value of a building.