Trends in the real estate market in 2024: focus on sustainability and energy efficiency
Describing sustainability and the pursuit of energy efficiency in real estate as a simple trend hardly does justice to the size and importance of the development. Climate change, with more and more severe weather events, makes it clear that reducing energy consumption in real estate is an unavoidable necessity. In this article, we show what trends await the real estate market in relation to sustainability and energy efficiency in 2024 and what this development means for real estate investors.
Energy saving remains the number one topic
The key factor for greater sustainability in real estate is saving energy through greater energy efficiency. This is because 35 to 40 percent of energy is consumed in apartments and houses, 90 percent of which is used for heating and hot water. Insulation, modern heating systems with renewable energy sources and windows with high insulation values are already common practice and are basically “old hat” when it comes to sustainability. In the future, new products and new technologies will raise sustainability in the real estate market to a higher level.
The concept of sustainability is moving further up the real estate market chain
Even in the production of building materials for real estate, the issues of sustainability and energy efficiency now carry more weight. For example, a prerequisite for a sustainability certificate as part of the funding provided by the Kreditanstalt für Wiederaufbau (KfW) is that the materials used also comply with the concept of sustainability. Manufacturers are responding to this and are paying more attention to compliance with social and environmental standards in the supply chains of their raw materials. The careful use of resources and investments to save energy are also current topics.
Recycled building materials: turning old into new
When it comes to building materials, the use of recycled materials is certainly one of the newer real estate trends. This refers to building materials that are produced entirely or partially from recycled materials. Concrete, glass and steel from the demolition of buildings can now be processed in such a way that the materials can be used again in the construction of apartments. The reuse of these recycled materials is good for the environment in two ways. Less rubble accumulates at landfill sites and at the same time, fewer new resources need to be used in the production of new building materials.
Biomaterials on the rise
At the same time, biological materials are becoming increasingly fashionable in the real estate market when it comes to building materials. Wood in particular is a renewable raw material. This and other natural building materials are being used in the real estate market not only as secondary materials, but now (once again) as main materials. Biologically produced materials are already established and are becoming increasingly popular in the field of property insulation. Grass, hemp, wood and jute fibers as well as straw are the main materials used here.
Energy-efficient construction also means optimizing processes
An important factor for sustainability in the construction and renovation of real estate is energy efficiency in the design of processes on construction sites. DFK Bau GmbH – the construction company of the DFK Group – is constantly working on optimization in this area. The goals are: To work as resource-efficiently as possible while consuming a minimum of energy. This not only saves money during the construction phase, which ultimately lowers real estate prices for investors, but also protects the environment. Digitalization is one of the major real estate trends here.
Smart building technology
Modern technology not only ensures greater sustainability and energy efficiency in the real estate market during the construction phase, but also during the use phase. This is because technology, usually already supported by artificial intelligence, now controls heating and ventilation systems, for example. This ensures lower ancillary costs through energy savings and increases living comfort at the same time. This real estate trend towards automation will continue in 2024. These are excellent conditions for investors, as smart building technology increases the chances of renting out an apartment permanently and profitably.
The role of energy efficiency in the real estate market
As part of the concept of sustainability, energy efficiency has become an integral part of the planning of new buildings and the refurbishment of old buildings. The topic is an inseparable part of this. Subsidies, without which it would be almost impossible to finance the construction of new buildings or the renovation of existing ones, are largely dependent on the energy efficiency of the building.
What does “energy-efficient building” mean?
The energy efficiency of a property is measured by the level of energy consumption. The benchmark here is how much energy is required by a so-called “reference building” that meets the minimum legal standards. This auxiliary building corresponds to the newly planned house in terms of geometry, usable space and orientation. However, in terms of the insulation of the exterior walls, ceilings and basement, as well as the window fittings and heating technology, it only meets the minimum requirements of the law.
The level of the energy efficiency house is determined by the statutory minimum standard
The energy efficiency of a newly planned property is determined according to the percentage of energy it consumes compared to the reference building. This determines, for example, which energy efficiency level a building achieves for KfW funding. Accordingly, an Energy Efficiency House 40 consumes only 40 percent of the energy of a reference building in accordance with the statutory minimum standards. In principle, the higher the energy efficiency, the more funding an investor can claim. The degree of energy efficiency is therefore a decisive factor for investments in real estate, as it has a decisive influence on real estate prices.
Key features of energy efficiency standards
One of the most important factors in the energy efficiency of a property is the thermal insulation of the building envelope. Together with airtightness, this determines how much energy escapes from the interior via the walls as the largest surfaces of a building. Added to this is the heating technology used. The more renewable energy is used, the better a home’s balance sheet will be.
Costs and benefits of the real estate trend towards greater sustainability and energy efficiency
As is usually the case with new trends and technologies, the costs of using new real estate trends are higher than those of conventional and proven standards. This also applies to developments in sustainability in real estate. Find out what this means for investors and real estate prices in this section.
Higher costs yes, but amortization is more important
Analyses show that the cost of building an Efficiency House 40, for example, is between 15 and 25 percent higher than that of an Efficiency House 55. However, the level of additional costs is not so decisive for investors. Rather, it depends on how quickly the investment in a higher standard is amortized. Experience shows that the additional costs are amortized within a period of between ten and 15 years.
Double benefit
The benefits of greater sustainability and energy efficiency in real estate are reflected in two values for investors: In addition to the market value, these are the level of achievable rents. While there are already reliable findings on the market value of properties, there is still uncertainty as to whether tenants are prepared to pay more rent for greater sustainability.
Higher market value
Several studies confirm that properties with high energy efficiency achieve a market value that is up to 30 percent higher. The studies compare houses with the best energy class A with properties in the worst energy classes G and H. On average, energy-efficient properties achieve a market value that is around 20 percent higher. In addition to the purely higher property prices, there are also indications that buildings with better energy efficiency offer more stability in the development of the market price.
Higher rents
The extent to which the sustainability or energy efficiency of an apartment influences the level of achievable rents cannot yet be determined with certainty. Reliable studies are still lacking. The fact is, however, that if an investor renovates a property to make it more energy efficient, some of these costs can be passed on to the tenants. Section 559 of the German Civil Code allows a landlord to increase the rent by a maximum of eight percent of the costs incurred. Depending on the apartment and the amount of the refurbishment costs, rent increases of up to 200 euros per month are therefore possible.
A brief summary of the 2024 real estate trends
Overall, it can be said that sustainability and energy savings through greater energy efficiency will continue to dominate the real estate market in 2024. In the future, more emphasis will be placed on sustainability throughout the entire real estate market chain, from the production of building materials to the design of energy-efficient construction processes. Recycled building materials, digitalization and smart building solutions are the keywords for the real estate market. Increased automation extends from the production of building materials through the construction phase to the use phase of a building.
Sustainability and energy efficiency: an opportunity for real estate investors
For real estate investors, the findings show that sustainable investments pay off in the long term. The advantages: higher market values and more stable price development. In addition, energy-efficient and sustainable apartments become more attractive during the rental phase.
Specific tips for more success with real estate investments
- take advantage of subsidies: Subsidies for new builds or refurbishments are often linked to the energy efficiency of the buildings. As an investor, you should therefore include energy efficiency in your planning in order to benefit from financial incentives.
- don’t shy away from higher initial costs: despite higher initial costs, sustainable construction methods pay for themselves in around ten to 15 years.
- use modern technologies: The integration of modern technologies, such as smart building solutions and artificial intelligence, increase the attractiveness of a property. The resulting lower ancillary costs and increased living comfort increase the chances of a long-term and profitable rental.
Overall, as an investor in real estate, you should integrate the increasing importance of sustainability and energy efficiency in the real estate market into your investment strategies in order to achieve long-term profitability and increases in market value. The good feeling of doing something for the environment and future generations should also not be ignored. Further tips and a detailed explanation of how real estate works as an investment can be found in the article “Apartment as an investment: What to consider?”.
How DFK Group deals with real estate trends
In recent years, DFK Group has developed a high level of expertise in the area of energy efficiency in its new-build and existing properties. Together with our partners, such as energy consultants, we develop our buildings according to modern standards. As a result, DFK properties often achieve the maximum amount of subsidies, which means lower purchase prices for investors. On the other hand, the buildings are presented to an energy standard that meets the requirements of current and future tenants.
Feel free to talk to us about this and get to know the world of sustainability and energy efficiency in our properties.
We have summarized further trends for you in the article “Trends in the real estate market 2024: How will rents, interest rates, construction and property prices develop?”.