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 FUßZEILESEITE 2

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  10kWh/m 2 a  15kWh/m 2 a  25kWh/m 2 a  50kWh/m 2 a  100kWh/m 2 a  150kWh/m 2 a  200kWh/m 2 a  250kWh/m 2 a > 250kWh/m 2 a

8. Example: Non-residential buildings FUßZEILESEITE 8  10kWh/m 2 a  15kWh/m 2 a  25kWh/m 2 a  50kWh/m 2 a  100kWh/m 2 a  150kWh/m 2 a  200kWh/m 2 a  250kWh/m 2 a > 250kWh/m 2 a

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 (20°C)  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 FUßZEILESEITE 9

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/m 2 a

13. 94kWh/m 2 a +38.24%

14. HWB = 68kWh/m 2 a 142kWh/m 2 a +108.82%

15. HWB = 68kWh/m 2 a 41kWh/m 2 a -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 JanuaryJune appraisals361326 "Energie" mentioned4572 "EA not available"2250 INFO-A128 INFO-T61 Evaluation17 EA generated01

22. Energy directive and real estate appraisal  Results  Energy efficiency is rarely an issue in appraisals; most appraisals don‘t 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 FUßZEILESEITE 23

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 FUßZEILESEITE 24

25. 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@wu.ac.at www.wu.ac.at Thank you for your attention