Nobody talks about this risk in real estate

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The real estate industry is in a state of flux, owners:inside inevitably have to deal with their portfolio and make important decisions. But one factor is rarely discussed: Energy-efficient refurbishment. If a property does not meet the required conditions by 2050, the worst-case scenario is that its operating license will be revoked.

The otherwise sluggish real estate sector has been under pressure for weeks and months – and private owners and investors must also expect far-reaching changes in the future. Rising interest rates in particular are playing a decisive role – in two weeks’ time, the SNB is highly likely to announce a further key interest rate hike, which in turn will have an impact on mortgage rates and thus on the entire real estate industry.

If interest rates rise, the question of real estate prices arises. While these were at an all-time high in Switzerland for a long time, price corrections are expected at any time. Are we facing a real estate bubble that threatens to burst? Probably not. The sector has learned from previous mistakes, there is no speculative construction activity in this country as there is in America or Spain, for example, and banks tie mortgage lending to strict regulations regarding affordability and amortization.

Nevertheless, Zürcher Kantonalbank expects the steady rise in real estate prices to slow down next year. Against the backdrop of the turnaround in interest rates, it is assumed that the price increase for Switzerland as a whole will fall from 5.5% in 2022 to 1% in 2023. The main reason for the continued rise in prices is the scarcity of land and resources as well as population growth.

Refurbishment backlog and supply bottlenecks

In addition to all these considerations about interest rates and property prices, one major factor with serious consequences is all too often forgotten: energy-efficient renovations, which most owners will have to face sooner or later and which can involve high costs.

The Paris Agreement requires Switzerland to become climate-neutral by 2050 – to achieve this goal, 3 percent of buildings would have to be renovated each year to make them more energy-efficient. However, the rate has been below 1 percent for years. The refurbishment backlog is thus getting bigger and bigger, and this at a time when planning certainty is hardly possible.

Wann ist ein Gebäude klimaneutral? Wenn es nicht mehr CO2 ausstösst, als es auf der anderen Seite an regenerativer Energie wieder einspeist.

The current situation – i.e. the consequences of the coronavirus crisis, the war in Ukraine, the associated supply chain problems and inflation, which is driving up the construction price index – means that projects that were planned two years ago, for example, are now proving to be much more expensive. The situation is currently so tense that concrete calculations are hardly possible.

The Swiss Construction Price Index is calculated every six months (April and October) and the results are published in June and December.

What does this mean for property owners?

If a property does not meet the required conditions by 2050, this means in the worst case that the property’s operating license will be revoked – i.e. it may no longer be rented out or lived in. Thus, there is a compulsory investment backlog in buildings older than 15 years – the extent of this backlog is quite individual: from the insulation of the building envelope, to the basement ceiling, windows, doors, roof, a heating optimization, to a ventilation system with coupled heat recovery. Increasing demand, as well as the limited capacity of service providers, will then inevitably lead to refurbishments becoming even more expensive.

Are you planning a refurbishment? We will be happy to advise you and provide you with the right partners.

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For owners, this means in concrete terms that action must be taken. Create a roadmap: What needs to be done to achieve a particularly high efficiency class for your property or properties? What costs will you incur? Which funding programs could be suitable for you? Knowing your own property(ies) in detail and knowing which investments are indispensable is the be-all and end-all.

Hold or sell?

Over the past 60 years, real estate has been a tried and tested means of generating a secure income. However, if you have several properties in your portfolio that force you to make additional financial contributions, this can lead to liquidity bottlenecks. For some, this could lead them to consider: Do I want or need to part with this or that object?

When assessing the risks that your own portfolio has with regard to the investment backlog, the question is: Is it still profitable for me to invest? Because no matter how motivated you are to decarbonize and how much you want to take responsibility for climate change, in the end you have to be able to afford it.

Are you thinking about selling? Then arrange a non-binding consultation right now.

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The situation is somewhat different for institutional investors, whose scope for action is significantly greater. In Germany, for example, there are already major investors who are saying: “With 30 percent of our portfolio, it won’t be worth holding on to it.” As a consequence, it must be expected that many investors will sell their properties and the market will be flooded accordingly. This in turn would inevitably have an impact on prices – they would fall.

Will it then be “bargain time”? Not really, because the properties that would then be for sale would be cheap to buy – due to the increased supply and the condition of these properties – but would entail a correspondingly large investment backlog.


Up to now, too little attention has been paid to the energy renovation backlog, although this is more than relevant for both private and institutional investors. Real estate as an investment, i.e. as a rental property, is no longer a sure-fire success. Owners should definitely get to grips with this. Because acting is always better than reacting.

All data are without guarantee. The information on these Internet pages has been carefully researched. Nevertheless, no liability can be assumed for the accuracy of the information provided.

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Properti – we offer simple and understandable real estate expertise. Thanks to our many years of experience and focus on industry trends, we always have our finger on the pulse and can provide our clients with the most important information on real estate.

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