Energetic renovations increase the value

First of all, the positive news for owners of investment properties: they have been among the big winners in recent years. For owners of mixed-use investment properties in Switzerland, the total return calculated by Fahrländer Partner last year was 6 percent. That was even 3 percent more than in the Corona crisis year 2020. The Zurich region recorded the highest total return last year (+8.6 percent). Although this region has the lowest cash flow yield (+3 percent), the return on change in value of 5.6 percent was higher than in the other regions.

Stable demand for rental apartments

According to the 2021 real estate study by the major bank Credit Suisse, demand for rental apartments also remained stable during the corona pandemic. The authors of the study see the reason above all in the “robust immigration” in the past year. In addition, the number of emigrants has fallen sharply, since the Swiss labor market has proven to be particularly crisis-resistant compared to other countries.

The high barriers to entry for home ownership also supported demand for rental apartments. According to data from the real estate consulting firm Wüest Partner in “Immo-Monitoring 2022-2”, vacancies in rental apartments also fell again in 2021.

The CO₂law is known to have failed at the ballot box in the summer of 2021. Nevertheless, necessary energetic renovations due to climate change and massive increases in heating oil and gas prices should not be put off for too long. Finally, Switzerland has set itself the goal of becoming climate-neutral by 2050. In order to achieve this goal, real estate will have to CO₂– be operated neutrally.

In addition, individual cantons have already tightened their regulations. In the canton of Zurich, for example, an amendment to the energy law was approved at the ballot box in November 2021: from mid-2022, oil and gas heating systems are to be replaced by climate-neutral heating systems at the end of their service life.

Energetic refurbishments pay off in several ways

Ideally, the energetic refurbishment of a property pays off in several ways: It is good for the climate, lowers energy costs, increases living comfort and helps to maintain the value of the building. The catch: renovation is expensive, and homeowners often lack the necessary funds. After all, the Confederation and the cantons promote investments to reduce energy consumption with tax breaks (see tips).

However, the sharp rise in mortgage interest rates is now making borrowing more expensive. According to the index of the online brokerage platform Hypotheke.ch, interest rates for residential real estate have risen since the beginning of the year from an average of 1.07 to 2.52 percent at the end of June 2022. A mortgage of 800,000 francs became 11,600 francs more expensive in around six months. In the worst case, anyone who waits a few more years to carry out energy-related refurbishments will be “punished” with significantly higher mortgage interest rates.

Finally, it is to be expected that the Swiss National Bank (SNB) will continue to tighten interest rates due to high inflation. The era of record-low negative interest rates could be coming to an end. Good to know: Energetic refurbishments can generally be financed by raising mortgages. For the banks, such reorganizations are a verifiable increase in value. In addition, there are subsidies from the municipality or the canton for almost all energetically sensible measures. An overview of the funding programs of cantons, municipalities and cities can be found on the website «Energy Experts» (https://www.energie-experten.ch).

Old apartment buildings lose thermal energy through the roof

Anyone who owns a house or apartment building built between 1950 and 1980 should know that an average single-family house loses around a third of the heat energy generated through the roof. A third fizzles out over the facade. The residual heat escapes through the windows or through the basement.

If you want to renovate a house to be energy efficient, it is best to start with these energy leaks. Lorenz Deppeler, Head of Energy Consulting at the Zurich Canton Electricity Works (EKZ), writes on the specialist portal energie-experten.ch: “A comprehensive energy-related renovation or modernization of the building shell often reduces the energy consumption of old buildings by 50 to 60 percent.” But how exactly to proceed?

Nadim Chammas is spokesman for the Swiss association Casafair. This describes itself as an association for “environmentally conscious and fair homeowners” and stands for “climate protection, land use and fair rents”. «When renovating a property, it is always important to create an overall concept. This can also be implemented in several steps,” says Chammas. Any utilization reserves, changes to the building zones and the building regulations should be checked. This may result in an extension of the property.

Tenant-friendly renovation in several steps

L. Perincioli (80) is the owner of an apartment building (MFH) from the 1960s with twelve apartments. His property is in Murten near Bern. Perincioli has refurbished his property in several stages using every trick in the book. According to his own statements, he has not increased the rents and was able to keep all tenants in the house. The Casafair member used to have an engineering office and mainly did consulting in the energy sector. The long-retired construction professional says: “In 1997, the MFH was in a poor general condition. It had insufficient insulation and an old oil heater. The consumption of heating oil was painfully high at 20,000 liters per year.”

In 1997 there were still no so-called GEAK experts who could have advised Perincioli on the remedial measures. And the building program as a contact point for all questions about subsidies for renovations and more energy efficiency did not yet exist (https://www.dasgebaeudeprogramm.ch).

Nowadays, GEAK experts are a good place to go for an initial inventory of a property (cf. https://www.geak.ch/experten/experten-suchen). Perincioli, with the help of an architect and an experienced property manager, made a detailed assessment of the condition of the building. The optimization of the MFH then took place in several stages. He financed the construction stages with a fixed-rate mortgage.

Renovations over many years

The property owner Perincioli says: “During the first renovation, the exterior insulation was done, the kitchens renewed, the balconies deepened, a heat storage tank installed and 31 square meters of solar panels installed.” In a further step, he had the bathrooms and the sewage system renovated in 2009 and 2010. Finally, in 2014, he installed a pellet heating system and a photovoltaic system with an area of ​​109 square meters. In 2020, the tenants joined together to form their own electricity community.

In retrospect, Perincioli basically advises the following for MFH renovations: “You should organize meetings with the tenants at an early stage and explain the project and ask where the shoe pinches. If possible, suggestions from tenants should then be taken into account in the construction project.» Any rent increases must also be announced in good time.

Chammas also has advice for builders who want to tackle energy-related renovations now. «Anyone who is not an architect or energy specialist should first clarify with the municipality or the canton whether they offer advice and possibly even co-finance it. Then an energy coach has to be commissioned with an expert opinion, such as a GEAK report, so that an overall concept can be developed and the resources used achieve the desired effect.»

The Casafair spokesman advises against a plaster policy for renovations: “Every year doing something will end up being more expensive.” Because individual measures are not coordinated with each other. An overall concept is always needed. Also good to know: Energetic refurbishments, whether on the building envelope, a heating replacement or a solar system, can usually always be carried out when the house is inhabited.