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Value increase through sustainability

solar panels
Seven million homes must be made more sustainable to comply with the Paris Climate Agreement by 2050. Housing associations play an important role in this. They own more than two million of the houses. Corporations take this social task very seriously, because they are already taking major steps in that direction. For example, it has been agreed to achieve an average energy label B this year.

Housing association Woonzorg Nederland is also on its way to a climate-neutral housing portfolio in 2050. The ambitions are great and that is why millions are being earmarked for it in the coming years. The corporation wanted to know what impact these investments would have on the market value of the homes. To answer that question, we examined ten complexes. The homes first had an average energy label D and after making them more sustainable, energy label A.

Effect on market value
The market values before and after sustainability have been determined by an appraiser on the basis of three possible scenarios for the rent adjustment. In the first scenario, we assume that only the rental amount is increased based on the Aedes fee table. This is an increase in value of more than 43% in relation to the costs of the energy-saving measures. A house is worth € 7,933 more on average. In the second scenario, the market rent also rises and the house becomes worth € 8,965 more, approximately 48% of the costs incurred.

In the latter scenario, the rent is adjusted according to the home valuation system. The energy label has a major influence on the number of WWS points and therefore on the maximum rent that can be charged. In this scenario, 95% of the investment is recovered and the house is worth € 18,169 more on average.

Effect on return
We also investigated the effects of sustainability on the gross initial yield using a price model we developed that is based on 371 comparable investment transactions over the period 2012 to 2020. This shows that the gross initial yield of the investigated complexes falls by an average of 0.23%, which means that the market value increases. This is in line with the first two scenarios with which we calculated the effect on the market value. There the gross initial yield decreased by 0.19% and 0.23%.

Our research shows that investing in sustainability pays off. The housing association's rental policy determines the immediate return on investment. 
Would you like to know what the business case looks like in your case? Please contact Paul Nelisse.
 

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Paul Nelisse

Director Valuations

Amsterdam

Paul has both practical and academic expertise in the field of groundleasing. Furthermore he has extensive experience with the valuation of residential and commercial property in The Netherlands. As an associate director he is responsible for several managerial tasks, such as maintaining the in-house database with market evidence. 

Paul started his career in 1991 and worked at Syntrus Achmea, Aberdeen Property Investors, Bouwinvest and ROZ/IPD before joining Colliers in 2007. His experience includes research, investment analysis and portfolio management.

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