Sustainable real estate: build cheaper with more climate protection

As of: 06/22/2022 4:41 p.m

The real estate industry is struggling with the consequences of rising construction interest rates. At the same time, it should make a contribution to climate protection. The result: In many cases there are better credit conditions when buying more sustainable real estate.

By Constantin Röse, ARD Stock Exchange Studio

The concerns are great in the real estate industry: The focus is particularly on the rapidly increasing construction interest rates. In the first half of the year, they rose from less than one percent to more than three percent. As a result, home loans are becoming significantly more expensive.

Hermann-Josef Tenhagen from “Finanztipp” does the math: “If I take out a 400,000 euro loan, nine months ago I had to pay 1,300 euros a month, now I have to pay 2,000 euros a month,” he says.

Further rises in interest rates likely

Overall, building is becoming more expensive – also because of the dramatically increased costs for materials and raw materials. For many, the dream of owning their own home has become a distant dream. Because banks base interest rates on inflation expectations, interest rates could rise even further. Experts consider four to five percent to be realistic.

are becoming more and more important funding – for example from the state development bank KfW. The demand is so great that many funds have already been exhausted. But there is movement, especially when it comes to sustainable building. More and more banks are giving customers lower interest rates if they choose energy-efficient houses or apartments.

This also applies to the GLS Bank. “The interest is made up of refinancing costs and risk costs,” explains Benedikt Altrogge, industry coordinator in the housing department at GLS: “Of course, there are also sustainability risks, because we assume that if we have a sustainable property, we also have it a lower risk of default when granting credit. And this means that we can also offer other conditions than with purely conventional buildings.”

Refurbishment of buildings is gaining in importance

This is lucrative for customers and also helps to get closer to the climate goals. So far, real estate has tended to be one of the major problems in climate protection. As the University of Stuttgart has calculated, buildings are responsible for a good third of global energy consumption.

Even more important than economical construction is the renovation of existing buildings, says Wolfgang Schuster from the Institute for Sustainable Urban Development in Stuttgart. “The crucial thing is that we rehabilitate the existing building both ecologically and socially. I say that very consciously. Because technically you can of course do whatever you want,” says Schuster. “But in the end it has to pay off. Count on the fact that the tenant has to help finance it to a large extent and that has to be socially acceptable.”

Real estate companies with problems

This is also a problem for real estate groups like Vonovia. The refurbishment of existing apartments is becoming more complicated and new construction projects are becoming less attractive due to the difficult financing. This is also reflected in the stock market. The prospect of higher interest rates is driving investors out of real estate securities. Vonovia shares have lost almost a quarter of their value since the beginning of the year. TAG Immobilien even half.

Another problem for the industry is real estate prices. In recent years they have only known one direction: upwards. That is changing now. Rising interest rates would also have an impact on prices, says Ralph Henger, real estate expert at the German Economic Institute IW. “We can definitely imagine that prices will fall or stagnate in the coming months and then perhaps in the medium to long term,” says Henger. Not only because the demand for apartments and houses is declining, but also because other forms of investment are becoming more attractive to investors.

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