Green homes: the future of the real estate market
10 May 2023 - Insights

Green homes: the future of the real estate market

Given the recent European directives and the growing interest in green homes, the future of the environmentally conscious real estate market appears more promising than ever.

Residential buildings are responsible for a significant portion of CO2 emissions, with negative consequences for the environment. For this reason, raising awareness about green homes and sustainable building practices is becoming a priority for governments and international institutions.

This phenomenon is having a significant impact on the real estate market, with more and more people looking to buy an eco-friendly home or invest in this type of asset.

What are green homes?

Green homes are designed to minimize environmental impact through the use of innovative technologies, recyclable materials, and tools such as thermal insulation and solar panels for renewable energy production.

The appeal of sustainable housing is also increasing thanks to the benefits they offer to owners and tenants. They indeed provide significant energy savings, resulting in reduced utility bills and maintenance costs.

Living in a green home also has positive impacts on the quality of life. These buildings adhere to strict standards in terms of materials, water management, and indoor air quality, thus ensuring a high level of comfort.

The EU Green Homes Directive

The recent European directive on green housing is a clear signal of global commitment to promoting environmental sustainability, as it encourages the adoption of ecological criteria in the design, construction, and management of properties.

The new regulations, still being defined, state that existing buildings must be brought up to energy class E by 2030 (2027 for public buildings) and energy class D by 2033. The ultimate goal is to reduce emissions to zero by 2050.

In a country like Italy, where the building stock is among the oldest (and most restricted) in Europe and where over 70% of residential buildings need green renovation work, the economic impact on citizens will be significant. They will be required to cover the costs of upgrading their homes to comply with these regulations, which could vary in magnitude.

To achieve the energy transition within the scheduled time frame, it is therefore desirable that the implementation of the European directive takes local specificities into account and that the government provides an adequate fiscal incentive strategy.

Green homes and the real estate market

The real estate sector is experiencing the growing influence of this green wave: companies are increasing their investments in ESG initiatives, and individuals searching for their ideal home are paying particular attention to energy classes and green features of properties.

This growing focus on eco-friendly housing solutions is thus driving demand towards more efficient homes, with an increase in sales of this type of property. Confirmation also comes from a recent Assoimmobiliare SWG survey, according to which 56% of those who want to buy a house prefer high energy efficiency homes.

As for residential properties with lower energy classes, there is a risk that they may experience a significant loss in value over time. Not to mention that, in all likelihood, banks will tend to limit access to credit for the purchase of lower quality properties.

Investing in green homes

Green homes represent an increasingly appreciated and sought-after investment opportunity in the real estate market,

whether they are new constructions or green renovations. Although the initial cost of green homes is typically higher than that of traditional properties, the current regulatory push towards adopting eco-friendly solutions in the construction sector makes them a smart investment in line with future market trends. In other words, investing in a green home is a decision that not only benefits the planet but also brings financial rewards.

It is also worth noting that there are tax incentives that can make the investment particularly advantageous. Among these, Italy’s Green Homes Bonus provides a 50% reduction in VAT for the purchase of energy class A or B properties directly from construction companies until December 31, 2023.

Lastly, those who want to invest in a green home have a higher chance of obtaining a mortgage. Banks are interested in financing sustainable projects, in line with directives on energy efficiency in buildings, and offer particularly advantageous conditions for the purchase of these properties.