Governments across the world have come together to create a more sustainable future, at events such as the COP and through initiatives such as the Paris Agreement. These developments are already having an impact on energy prices and will have an impact on real estate prices too. Whether you are buying or selling a residential, commercial, or industrial property, sustainability targets and energy efficiency ratings will affect your investment. In the next decade there are going to be huge changes to the way we live our lives, trade, and invest.
The Demand Is There
Sustainability, energy efficiency, and green credentials are all becoming increasingly important to house buyers. The UK government is doing its part to make energy efficiency a concern for buyers with initiatives like the Energy Performance Certificate (EPC) which accompanies any house built or sold in the United Kingdom.
This has helped to put sustainability front and centre in the minds of house buyers and sellers. Sustainability is a desirable feature for potential house buyers, and demand for houses with better energy efficiency as well as solar or wind power generation is increasing. Houses with greener, cleaner features and a reduced carbon footprint already command a premium on the housing market.
Green initiatives, global and regional sustainability targets, and rising energy prices will impact real estate economics and finance. Not only will the demand for sustainably designed houses increase, but so will the demand for financing from responsible lenders who take sustainability seriously. Real estate agents, mortgage providers, and house sellers all need to take note and plan for the greener and cleaner future that is on the horizon. Buyers are becoming more environmentally conscious and sustainability savvy, and the properties on the market need to reflect this.
Signing up for a real estate course focused on economics from the London School of Economics and Political Science will help boost your knowledge if you’re interested in learning more about real estate finance and trends. This course will also help you build up key skills, such as how to value properties, invest in property and calculate the value of sustainable features, to help you navigate the real estate market more confidently.
Green Energy Will Power Real Estate Sales
Whether in the commercial, industrial, or residential sector, future real estate sales are going to be boosted by the green energy credentials of a property. The rising costs of energy are a growing concern for all buyers. Property that has a power generation capability will lead the markets in sales and value. Solar panels, battery power storage, wind power generators, and energy-efficient heating systems will overtake gardens, parking, and spare bedrooms as ‘must-have’ features for house hunters.
Sustainability is no longer a niche in the market; it is leading it. With the environmental targets set by governments for the rest of the decade and beyond, buyers cannot afford to ignore the green credentials of properties. Many in the real estate industry would previously recommend a change in decor, a landscaped garden, or an improved exterior to help boost property value and increase interest. Now, the recommendations are shifting to solar panels, heat pumps, or energy-efficient windows and insulation.
House buyers, sellers, and real estate agents need to become better versed in green tech and energy efficiency. Construction companies and architectural firms have to become better at planning properties that use sustainable building materials. This will include recycling materials from demolished properties that would once have been considered waste, reducing construction’s impact on landfill sites.
The Millennial Effect
One of the biggest drivers in the switch to sustainability is the millennial generation, which is now reaching the age to become homebuyers and homeowners. This generation is incredibly socially conscious, and a sustainable future is very important to them. If real estate agents are going to service this generation, they are going to have to push for sustainable and environmentally responsible upgrades and improvements to properties as they hit the market.
Soon this generation and the ‘Gen Z’ that follows them will become the largest pool of house buyers. The property market has to sharpen its focus on sustainability to offer these young and upwardly mobile people properties that meet their priorities. These generations have also demonstrated that they will not participate in systems they do not agree with or do not meet their social standards. For the housing market to have a future, houses need to be more sustainable and energy efficient.
This effect will also impact home financing. The younger generations of potential house buyers are wary of financial institutions and the financial vehicles that enable home ownership. Many people in this generation are investment averse, after having lived through the credit crunch of the mid-2000s, amassed student loan debt through their higher education, and facing runaway inflation in the early-2020s.
Not only are properties going to have to change to be more environmentally sustainable, but mortgages and house financing solutions will also have to be economically sustainable. Younger property buyers will demand responsible lending from ‘green mortgages‘ that empower them to reduce the carbon footprint of a home. The major lenders are going to have to adapt to these demands to keep the market afloat and protect the value of their existing property assets.
The 2030s are going to bring huge changes to many different markets, and the property market will be no exception. Real estate investors, agents, and house buyers all need to prepare for the disruption sustainability targets will cause by taking environmental and social concerns seriously now.