The level of the 'Warmmiete' playing bigger role in property values
Christian Lindner, Germany's finance minister, said it loud and clear when he spoke to the more than 2,000 delegates at this summer's ZIA gathering of industry representatives in Berlin, including REFIRE. The "Warmmiete" is what tenants are going to have to worry about, he said, referring to the "Kaltmiete" plus the "Wohnnebenkosten", or ancillary charges, that make up the actual amount the tenant has to pay every month.
Tenants are now finding out just how realistic Lindner's warning was. A new report from the Institut der deutschen Wirtschaft in Cologne (IW Köln) commissioned by Deutsche Invest Immobilien (d.i.i), based on advertised apartment new rentals, shows that utility charges have risen by up to 50% over the past year - or up to 56% if the apartment is heated with gas.
The report, "Wohnnebenkosten in Deutschland 2022“, shows that tenants are now paying 11% more for their accomodation than a year ago, including increases in other charges such as garbage disposal and higher costs in services such as cleaning, maintenance and property management. Apart from heating, these other charges have risen by an average of 9%.
For an average-sized apartment of 75 sqm, the increase in utility charges is in a range from €506 to €900 annually. As we report elsewhere in this issue, the 'cold' rents themselves have been rising steadily throughout the year, as potential buyers switch to renting and competition for available housing increases.
Among German federal states, Berlin saw the biggest increase in prices: The average 'cold' ancillary costs rose by 9.8%. The "Top 7" city of Munich also saw a sharp increase of 8.9%. Cost rises were least in Bremen (plus 3.5%) and Lower Saxony (plus 3.1%). In North Rhine-Westphalia, Germany's most populous state, the increase was 4.5%, according to the IW. Across the board, the average price increase for 'cold' operating costs was 6.3 percent.
The IW's Dr. Michael Voigtländer said the 11% increase in housing costs is leading to further unaffordability of housing, particularly among households with lower income levels. The fund management d.i.i.-Gruppe, which commissioned the survey and owns and manages 15,000 apartment units, said it could no longer sustain its lower-rent policies, which were often based on preferable rates with utilities.
CEO Frank Wojtalewicz along with IW's Voigtländer are appealing to the government for more subsidy support for maintenance and refurbishment to help control the spiralling utility charges for tenants. Existing measures, such as the so-called 'Gaspreisbremse' or gas cap, are supposed to put a price ceiling on 80% of previous gas consumption, while the Wohngeldreform is additionally targeted at lower income earners.
Voigtländer of the IW said: "It should be noted, however, that energy prices will remain above the 2021 level in the future and in the longer term despite these measures." Hence all the incentives to renovate buildings to make them energy-efficient. But to get people to really commit to exploiting this potential, he said, policymakers need to set the right framework such a more predictable subsidy policy but also a realistic adjustment of the rules on modernisation levies to reflect the rise in interest rates and construction costs.
A recent study by consultancy JLL highlights just how a poor energy rating for a property is now causing sizeable markdowns for weaker residential buildings. They see a price difference between the worst and best-rated energy-efficient properties of between 12% and 33% on average, rising in some markets with a supply overhang and a poor negotiating position of the sellers to as much as 50% in some cases, according to Roman Heidrich, JLL's head of residential valuation. "It is becoming increasingly clear that properties with better energy efficiency are less sensitive to the current energy crisis and thus are proving to be more resilient," he said.
For its study, JLL evaluated and compared supply data for residential buildings in the respective energy efficiency classes from the first half of 2022 and the same period of the previous year. In addition to purchase prices, the consulting firm also took rents into account. In the case of net rents, however, the discount of 2.5 percentage points on average is significantly lower than in the case of purchase prices.
JLL says this is a new phenomenon, with tenants not previously giving too much weighting to the 'Warmmiete' in their choice of accomodation. Now they are. And residential buildings with poor energy efficiency are being penalised both by prospective tenants and potential buyers, as the relative share of 'warm' housing costs - including heating and electricity - increases as a proportion of the overall costs.
