Energy efficiency renovations pay off in sales prices and rents

"Market participants are willing to pay a reasonable price premium for energy-efficient renovations—but only if the relevant information is transparent. This is crucial for combating climate change, as buildings account for about 30 percent of Germany's CO₂ emissions," says Steffen Zetzmann, Kiel Institute researcher and co-author of the study "Green Signals: Energy Efficiency and German Housing Markets."

The study shows that sales price and rent premiums almost exactly reflect the costs of energy-efficient renovations and the associated energy cost savings. The prerequisite for this is that the energy performance of the building is documented in a Bedarfsausweis, which is based on an assessment by an independent expert.

An apartment with an energy efficiency rating of A+/A is about €650 per square meter more expensive than an apartment with a rating of D/E, based on data since 2022, i.e. after the Russian invasion of Ukraine.

According to the study, improving energy efficiency from D/E to A+/A costs on average around €700 per square meter. Not included—though relevant for practical investment decisions—are government subsidies for renovation, which would likely reduce the actual expenses for property owners.

Significantly lower premiums with Verbrauchsausweis

With a Verbrauchsausweis, the achievable sales price premium is significantly lower, with the price increase for an A+/A apartment compared to a D/E apartment being just €225 per square meter. Verbrauchsausweise are based on past energy use and are thus influenced by individual heating behaviors.

Since 2022, rental apartments with an A/A+ energy rating are about €0.85 per square meter more expensive per month than D/E-rated apartments—using a Bedarfsausweis. This premium is offset by energy cost savings of nearly €0.80 per square meter achieved by upgrading from D/E to A+/A. As such, following an energy upgrade, tenants pay about 5 cents more per square meter than they save in energy costs.

With a Verbrauchsausweis, the premium is only around €0.45 per square meter.

The authors did not find any clear price discounts in sales or rentals for apartments with an energy rating below D/E. Only rents for properties with a Bedarfsausweis rated F-H are slightly lower in comparison.

Policymakers should make Bedarfsausweis standard

"When price premiums roughly match the costs or savings of energy-efficient renovations, it is an encouraging result from an economic perspective. It means the market functions effectively and sets the right incentives. The deviations we observed, both upward and downward, fall within normal statistical ranges. Whether an investment will pay off, and whether a refurbishment will yield a positive return, depends on the specifics of each case, as well as future energy costs," Zetzmann adds.

"The government should establish the Bedarfsausweis as the standard; currently, energy certificates are missing in half of all cases. This could significantly increase the renovation rate for properties in Germany."

For their analysis, the authors examined sales prices and rents of apartments from 2014 to 2024 in 19 German cities. The data is provided by Value AG and the GREIX database, a joint project of the local expert committees (Gutachterausschüsse für Grundstückswerte), ECONtribute, and the Kiel Institute.