Climate crisis: is the residential market still playing catch up?
The built environment accounts for 40% of global carbon emissions, the industry has a critical role to play in reducing these. But is the residential market lagging behind others and what can it do to catch up?
2 minutes to read
The clock is ticking, and the themes encompassed by ESG have taken on a more urgent relevance for investors, developers and homeowners in the last 18 months as the link between sustainable living and wellbeing has come into focus.
But, the bottom line is still critical for global home buyers according to Knight Frank’s Global Buyer Survey. Although 84% of the 900 survey respondents said the energy efficiency of a future home was either important or very important to them, when asked what factors would persuade them to buy an energy efficient home it was clear increased monetary value was the tipping point. Some 28% of respondents confirmed they would be more likely to invest if environmental regulations were introduced that had a direct impact on a property’s value. Another 22% said cheaper mortgage finance for energy efficient homes would appeal.
Knowledge gap
At the top end of the housing market the appetite for green investing is also growing. According to The Wealth Report 2021, some 43% of wealth advisors say their Ultra-high-net-worth clients are more interested in ESG-focused property investments but only 39% feel they have all the information they need to assess ESG investments.
Making it cheaper to go green
While the commercial sector is making great strides in valuing buildings for investors and lenders, and identifying the premium for sustainable buildings, the housing market is playing catch up – the costs continue to be prohibitive for many owner occupiers and private landlords. From heat pumps to retrofitting and from domestic EV charging points to solar panels, to make a real difference the residential sector needs to make it cheaper to go green.
Priorities
The first step toward carbon reduction for the real estate industry is determining which needs are most pressing and where authorities and stakeholders can make the biggest difference.
There will be no one size fits all policy, but cities will be at the forefront of the ‘race to zero’.
The new C40 cities initiative, which counts 30 mayors amongst its members (and 58 million urban citizens), highlights the extent to which their focus is on urban redesign at a neighbourhood level, applying 15-minute city principles. But this approach is not without its critics, Edward Glaeser, chairman of the Department of Economics at Harvard University sees it as an obstacle to greater connectivity, saying: “It’s an enclave – a ghetto – a subdivision.”
The challenge for COP26 attendees this week is to deliver change that will be sufficiently radical as to have an immediate impact on the environment but not homeowner’s pockets, if leaders want mass market appeal.Technology and innovation will be key.
Key topics Knight Frank will be monitoring:
• The impact of ESG on land values and build costs
• Ongoing assessment of global buyers’ attitudes to energy efficient homes, retrofitting and design codes etc.
• How ESG influences the location and spec of luxury new developments
• The policy response of authorities hit hard by extreme weather events to protect their built environment