Investing in the renovation of existing buildings, by carrying out energy remediation, helps to improve the environment. On the financial level, it can also take care of the profitability of its property.
Along with industry and transport, buildings are among the biggest emitters of CO2 in Switzerland. About a quarter of our country’s carbon dioxide emissions are produced by real estate. In addition, buildings alone account for around 45% of final energy consumption in Switzerland, according to estimates by the Federal Office of Energy (SFOE). In view of this situation, it is not surprising that the Confederation and the cantons have put in place numerous incentives to encourage owners to improve the energy efficiency of their buildings, in addition to the measures which apply during the conversion. construction of new real estate.
For building owners and investors, the amounts spent on energy remediation are also interesting from a financial point of view — and this precisely when the initial returns of new buildings tend to erode and so that alternatives to investments deemed safe, such as bonds, offer anemic returns on investment. «This drop in initial yields now allows owners to consider this energy remediation work as an economic opportunity and no longer as a necessary cost», puts in perspective David Michaud, real estate economist at the Banque cantonale vaudoise (BCV) .
Falling returns
This situation is explained in particular by the situation prevailing on the real estate market. «Prices have risen sharply over the past decades — in the canton of Vaud, the value of yield-based residential real estate has more than doubled since 1998 — while yields have themselves fallen as a corollary», summarizes David. Michaud. Today, production has increased in certain regions, such as the west of Lausanne, but demand remains high due in particular to migratory movements. Housing construction also largely concerns rental properties — in other words investment properties — highly sought after by investors. The rental prices offered on the market have therefore been falling since 2015 — especially in the canton of Vaud (-20%), he continues.
Investing in energy renovation can represent an alternative to the acquisition of a new property. «Not only is the value of the property potentially increased over the long term and allows it to participate in the country’s energy and climate objectives, but the investment can also contribute, from another point of view, to the valuation of the entire market. , since the improvement of the building does not contribute to a possible oversupply, ”adds David Michaud.
Numerous support programs
On the financing side, in addition to the current level of interest rates, homeowners can also count on various supports. These programs exist in all the cantons of French-speaking Switzerland, with the main source of financial contribution being the Buildings Program, resulting from the CO2 law. They detail the amounts allocated for villas and buildings, the various measures intended to reduce energy consumption or the aid granted to replace electric, oil or gas heaters in favor of production not derived from fossil fuels. On its site, the State of Vaud details, for example, the amounts of subsidies granted for the year 2021.
Rather than evaluating the subsidies that can be obtained for each installation carried out, it is possible to establish an energy audit of the CECB + type (Cantonal energy certificate for buildings). The latter provides an assessment of the current state of the building, but also sanitation scenarios. Generally, there are three of them and include, among other contents, the evaluation of the cost of the work and the subsidies available. Note that the establishment of a CECB certificate is mandatory when transferring real estate in certain French-speaking cantons (Friborg and Vaud). In addition, certain municipalities sometimes still grant additional aid for renovation.
It then remains to be able to value these investments. While they help improve energy efficiency and reduce CO2 emissions, they also benefit from broad support from society and the authorities. That said, says David Michaud, “improving the energy efficiency of buildings also involves an element of risk for the owners who undertake them. Indeed, it can be difficult to pass the costs of this work on to the rents, given the various rules provided for under tenancy law. ”
Added value that goes beyond simple maintenance work
At the federal level, the regulations are very clear: energy purification works are to be considered as works which generate added value for the property and not as works which compensate for its obsolescence. Consequently, the investments made for this work can be passed on to the rents. In some cantons, cantonal laws limit the repercussions authorized at the federal level, such as the Geneva law on the demolitions, alterations and renovations of residential houses (LDTR). Their main goal is to maintain a balance between preserving a stock of affordable housing and making the investments made profitable.
Coming into force in the canton of Vaud in 2018, the law on the preservation and promotion of the rental stock (LPPPL or «L3PL» as we often call it) also sets the adjustment of rents following the work. renovation. Within the framework of the L3PL, a rate of return of 3.2% can be obtained for the energy purification works carried out.
Renovate: where to start?
Once convinced, the owner must then define what renovation work to undertake to reduce the energy consumption of his building and limit its CO2 emissions. “Reducing the ecological footprint of buildings involves renovating the existing stock. In fact, the energy consumption of a recent building is four times less than a standard 20th century building, ”recalls David Michaud.
With this in mind, it is possible, on the one hand, to undertake work on the building envelope, in order to improve its insulation. Typically, these are renovations that can involve the facade, windows or roof.
On the other hand, there are all the measures which concern the production of heat. Here, the goal is to promote solutions to replace oil, gas or electric heating installations. The use of renewable energies is encouraged, whether through the installation of heat pumps, solar collectors, wood-fired (pellet) boilers or through connection to a district heating network.
High levels of support in the event of a comprehensive renovation
In terms of the support granted, should we better opt for work aimed at improving the insulation of buildings or, on the contrary, investing in measures relating to heat production? «This question is complex, because it depends as much on the subsidies allocated at the cantonal level as on the specific features of each building.» In general, better insulation will help limit energy needs for heating. Regarding the production of heat, the ecological interest lies above all in the limitation of CO2 emissions from fossil fuels, that is to say fuel oil or gas. Certain heat productions, such as heat pumps or photovoltaic panels, are partly supplied by free energies: heat included in the ground or in the air — solar radiation. In the canton of Vaud, the Energy Department estimates that in the event of a comprehensive renovation, the aid can represent up to 30% of the investment. The owner can, moreover, count on a consequent reduction of his energy bill.
Possible tax deductions
In addition, it must also be taken into account that the investments devoted to energy renovation of buildings are also already largely deductible from income taxes in most cantons. In this regard, attention must be paid to the criterion used to take into account the costs of the work carried out: depending on the cantons, it is the date on which the work was carried out that is decisive, while in others, it is this is the date of the invoice or payment.
«Alignment of the planets»
Undertaking renovations to improve energy efficiency is demanding, both technically and administratively. You have to be aware of this before taking any steps. Still, the benefits obtained in the long term are worth it, is convinced David Michaud. “There are high expectations when it comes to sustainability in real estate. Many tenants have become more sensitive to the energy dimension of the buildings in which they live. Investors, whether private or institutional, are now also watching, just like society as a whole, ”observes the expert. For him, no doubt, there is currently an «alignment of the planets» favorable to the energy renovation of buildings.