Integrating energy efficiency and other sustainability aspects into property valuation – methodologies, barriers, impacts

Panel: 5. Saving energy in buildings: The time to act is now

This is a peer-reviewed paper.

Authors:
Walter Hüttler, e7 Energie Markt Analyse GmbH, Austria
Sven Bienert, KPMG Advisory GmbH, Austria
Christian Schützenhofer, KPMG Advisory GmbH, Austria
Gerrit Leopoldsberger, Dr. Leopoldsberger + Partner, Germany
Klemens Leutgöb, Theresianumgasse 7/1/8, Austria

Abstract

Property valuation is a key driver for the development of the property market. Since energy performance and other sustainability aspects are practically not integrated into standard property valuation practice the market gets very little price signals valuing highly energy efficient and sustainable buildings.

Intensive work in a collaborative EU project comes up with the following results:

• There is no need for “new” property valuation approaches. The standard valuation approaches need just a few interventions to enable an improved consideration of energy efficiency and other sustainability aspects.

• Since for most property markets a direct statistical interrelationship between energy performance and value cannot be observed the analysis of energy cost differences resp. of operational cost differences becomes the starting point. Comprehensive and well-structured life-cycle cost assessment (LCCA) thus is a key issue for integration.

• Several pilot project valuations, however, show that the value impact deduced from cost differences is limited. Only very energy efficient and sustainable properties come up with a premium of 5-10%. Higher value impacts depend on an increased market sensitivity towards energy efficiency and sustainability (i.e. if the markets do not only account for cost advantages but account also for better comfort levels, for better productivity etc. to be achieved in sustainable buildings).

• In valuation practice it is the lack of data that sets limits for broad application of the modified valuation approaches. Valuers need reliable data bases on reference buildings (comparables) including also data on energy performance and different operational cost categories.

The paper develops and details these arguments, it presents results of concrete pilot project valuations, and it puts forward ways to overcome the barriers for a higher significance of energy performance and other sustainability aspects in property valuation practice.