Environmental rules loom over European property market

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Home buyers already affected by high interest rates are now facing the prospect of massive write-offs triggered by new European rules.

Homeowners across the country need to invest more in retrofitting their homes to ensure their homes don’t emit too much carbon dioxide or use too much energy, according to lawyers who advise the council.

This is “causing serious problems,” he said Rory Bennettpartner in the real estate business of Linklaters in London. Offices with zero-energy buildings are facing “higher investment costs to achieve this, as well as repayment or renovation at the highest interest rates we’ve seen in decades.”

This month, European Union lawmakers it has passed Energy Performance of Buildings Directive. The release will be slow – more than ten years – but property owners are at risk of having properties that can no longer be sold or rented.

The law aims to force property owners to undertake major renovations to improve the environmental record of European buildings, and ensure that the bloc fulfills its commitments. Treaty of Paris. Meanwhile, renovations in this area reduce annual energy consumption by 1%, according to the European Commission. In order to meet the climate requirements, the EU has said that landowners must increase investment in renovation €275 billion ($300 billion) per year.

“It’s a lot of money,” Bennett said. “The reality is that there will be some who can’t or will choose not to comply with the law because it’s easier to pay a penalty, especially in the short term, than to spend a lot of money. Keep your assets up.”

For real estate agents, the new wave of green requirements adds to the fallout from rising interest rates. This has started to attract short sellers, who are now targeting the weakest links in the global stock market which is struggling in several sectors.

A new European energy law is set to affect thousands of homes in the region. By 2033, homeowners will need to have retrofitted a quarter of the EU’s largest energy-efficient buildings. The oil-fired boilers have gone out and the residential and solar systems have gone in. And by 2030, all new buildings will be smoke-free.

The law is part of the first measures introduced in recent years to green the EU economy, and includes obligations to tackle environmental pollution, as well as proper disclosure of energy, emissions and water use data.

The UK is also preparing legislation that would force homeowners to start improving the environment. Mount Street, a London-based firm that manages €65 billion of European mortgages, says that around 70% of British real estate is currently in debt. energy performance certificate (EPC) grade C or lower. This means a significant upgrade in the future as the UK system gives all landlords until April 2027 to reach a C grade. By April 2030, the building grade cannot fall below B to remain in service.

Jim Gottwho oversees the wealth management team at Mount Street, says current developments suggest a £150 billion ($189 billion) investment is needed.

“In most places, you’re struggling,” Gott said. “If you don’t meet the EPC targets, it becomes illegal to rent the property. It will affect the value of the property.”

Around 60% of UK warehouses are on track to reach B-level by 2030, according to a law firm. Ashurstwhich cited information published in Logistics Matters.

Stricter EPC regulations are becoming “the driving force behind informal office space in Europe,” said Kim Politzer, head of European real estate research at Fidelity International. “The best second-hand properties require very expensive renovations” and “money is getting hard to raise.”

In the EU, about 85% of buildings were built before 2000, according to a European Commission. Due to the scarcity of energy, they are the most energy-intensive at the time when fossil fuels make up two-thirds of the energy needed for heating and cooling. The EU aims to reduce emissions by 60% by 2030.

Such ideas have taken on greater importance in financial discussions and decision-making processes, he said Jean-François Vandenberghereal estate specialist at Baker McKenzie. Some property owners and managers are embracing the new approach, while others are focused on reducing what’s needed, he said.

On the flip side, buildings that are green are more important than ever. In the main EU markets, 22% of offices are guaranteed to be permanent from 2023, up from 15% in 2019, according to CBRE, a real estate consultant. Another study by CBRE found that when the effects of building size, location, age and renovation history are taken into account, certified green buildings command a 7% rental rate.

Demand for green space by large EU companies currently exceeds supply by 50%, according to November. report in The opinion of the company Jones Lang LaSalle Inc.

Bennett at Linklaters said he was always in meetings where “we spent hours discussing what to do.”

In the meantime, investors are just hoping that the general economy will improve and mitigate the shocks of the future.

“If the economy is improving, interest rates will go down and that will help in decision making,” Bennett said. It would give real estate agents “a little breathing room.”

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