The EU-Energy Directive and Real Estate Appraisal: The Case of Austria

1
The EU-Energy Directive and Real Estate
Appraisal The Case of Austria

• Johann Sebastian Kann, Philipp Kaufmann, Gunther
  Maier

2
Overview

• European Energy Performance of Buildings
  Directive
• Implementation in Austria (Energieausweis EA)
• First results and issues
• Energy Directive and real estate appraisal
• Summary and conclusions

3
EU Energy Directive

• Adopted Dec. 16th, 2002, entered into force Jan
  4th, 2003
• Aims
• protection of climate and reliable information
• reduction of energy use in buildings (minus 20
  through cost efficient measures)
• improving the total energy efficiency of
  buildings
• market transparancy
• energy a factor in real estate appraisal

4
EU Energy Directive

• Content
• determines method of calculation (based on
  structural analysis and building services) for
  existing and new buildings
• minimum requirements for new buildings
• minimum requirements for large renovations
• inspections of heating and cooling systems at
  regular intervals
• certification of energy efficiency

5
EU Energy Directive

• Requirements
• to be implemented by member states by Jan 4th,
  2006
• energy performance certificate (article 7)
• made available at construction, sale or renting
• validity of max. 10 years
• accompanied by recommendations for the
  cost-effective improvement of the energy
  performance
• placed in a prominent place clearly visible to
  the public in buildings with more than 1000 sqm
  occupied by public authorities

6
Implementation in Austria

• Energy performance certificate Energieausweis
• Federal structure ? implementation at different
  levels
• Federal level Energieausweis-Vorlage-Gesetz
  (2006, in effect Jan 1st, 2008, sale and change
  of use)
• Technical standards (methods of computation,
  minimum requirements, design of document)
• 9 federal states building codes (construction,
  renovation)

7
Example Residential Buildings
8
Example Non-residential buildings
9
Implementation in Austria

• Issued for the building
• Different zones of use (living, office,
  restaurant)
• Theoretical value with respect to a reference
  climate and a target temperature (20C)
• Computed from shape and structure of the
  building, materials, level of maintainance, etc.
• NOT based on actual energy use (as in Germany and
  other countries)
• In transactions the EA has to be made available
• No penalty
• In case of non-compliance Energy efficiency
  corresponding to age and type of building assumed

10
Implementation in Austria

• Necessary information
• Detailed maps of the building and its parts
• Information about the structure (materials,
  walls, insulation of walls, top and bottom floor)
• Information about the quality of windows and
  outside doors (have they been renewed)
• Information about heating system (structure of
  installation, type of heating)
• Information about water heating system (type of
  boiler)
• Information about ventilation and air
  conditioning systems (non-res. buildings)
• Information about lighting system (non-res.
  buildings)

11
First results and issues

• Missing penalty selective incentive for
  non-compliance
• Avoid the costs
• Owners of buildings below average standards have
  no interest to make this transparent
• One size fits all instrument
• Value for the building does not necessarily
  reflect the results for individual appartments

12
HWB 68kWh/m2a
13
HWB 68kWh/m2a
94kWh/m2a 38.24
14
HWB 68kWh/m2a
142kWh/m2a 108.82
15
HWB 68kWh/m2a
41kWh/m2a -39.71
16
First results and issues

• Quality of the available documents
• Depends on the age of the building
• Improvements often not adequately documented
• Does the documentation reflect the current
  standard?
• Can the qualities be investigated without damage?
• Technical specifications are typically missing
• Important locations in the buildings are often
  not accessible
• Heating centres, technical installations
• Individual appartments

17
First results and issues

• Interesting legal issue liabilities
• Issuer of EA wrong value and category
  appartment vs. building
• Owner for not initiating and buying an EA (use of
  default)
• Appraiser
• How to take result of the EA into account in an
  appraisal
• How to deal with non-availability of EA?
• Can the appraiser accept the non-availability of
  an EA?
• All these issues will have to be resolved by
  court cases in the future

18
First results and issues

• Can the EA lead to (requests for) changes in
  price or rent?
• Higher energy demand than calculated
• Appartment vs. building
• Deviation from the implicit standards of Austrian
  rent regulations
• Interesting case of asymmetry
• Requests for reduction seem more likely than
  requests for increases

19
First results and issues

• Impression from the industry
• Not all owners comply with the regulation
• Reluctance in acceptance
• Appraisers rarely use the EA as a source of
  information in their appraisals
• Uncertainty in the industry
• EA and sustainability
• The EA does not identify reasons for energy waste
• The EA does not provide any guidance for
  improvements
• Incentive structure

20
Energy directive and real estate appraisal

• In theory, energy efficiency influences value and
  should therefore be a topic in appraisals.
• The EA provides standardized information that
  should be taken into account in appraisals.
• Is this the case?
• Empirical investigation of real estate appraisals
  that are provided for order/edict court cases
  (available at http//www.edikte.justiz.gv.at/)

21
Energy directive and real estate appraisal

• Results
• Only 12 / 22 mention Energie
• Most of them (49, 69) for stating EA not
  available
• No case where EA was available, in 1 case (June)
  it was a by product of the appraisal
• Only 1 / 7 cases where energy was taken into
  account in the valuation

January June
appraisals 361 326
"Energie" mentioned 45 72
"EA not available" 22 50
INFO-A 12 8
INFO-T 6 1
Evaluation 1 7
EA generated 0 1
22
Energy directive and real estate appraisal

• Results
• Energy efficiency is rarely an issue in
  appraisals most appraisals dont even use the
  term energy.
• Increase between January and June 2009 is solely
  attributable to EA not available
• Appraisers became more aware that they need to
  mention the non-availability of an EA (risk of
  liability)
• In no one case an EA was mentioned as being
  available for the appraisal.

23
Summary and conclusions

• EU energy directive
• ambituous initiative to save energy and improve
  the transparency of the market
• Leaves (necessary) room for variations between
  countries
• Austrian implementation
• Based on building characteristics
• Lacks penalty for non-compliance
• Difficult information requirements
• Problematic incentives and design characteristics

24
Summary and conclusions

• Although the EA is an issue for real estate
  appraisal
• EA not used in appraisal
• Non-availability mentioned in few cases (not
  yet standard)
• Energy efficiency is not a topic in insolvency
  related real estate appraisal in Austria

25
Thank you for your attention

• FORSCHUNGSINSTITUT FÜR RAUM- UND
  IMMOBILIENWIRTSCHAFT
• RESEARCH INSTITUTE FOR SPATIAL AND REAL ESTATE
  ECONOMICS
• Augasse 2-6, 1090 Vienna, Austria
• a.o.UNIV.PROF. DR. GUNTHER MAIER
• T 43-1-313 36-4780
• F 43-1-313 36-705
• gunther.maier_at_wu.ac.at
• www.wu.ac.at