Real Estate News - November 2022

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November 2022

Still some time to go before subsidies are available again

Anyone who still wants to get hold of a KfW subsidy should hurry: Applications can still be submitted until the end of the year to receive funds from the current funding pot for the new construction of a building with the EH40-Plus sustainability standard. To date, according to the Ministry of Economics, funding amounting to just under 340 million euros has been approved from the program, which will be relaunched in April 2022, meaning that just under two-thirds of the funds have been approved.

It will be some time before fresh funding is available again: a new funding program is not expected to be launched before March 2023. According to statements by representatives of the Lower Saxony and Bremen Association of the Housing and Real Estate Industry (vdw), this is a bitter blow for all those who want the construction of climate-friendly housing to remain affordable. This year, the funds still available in the existing subsidy program can only be claimed by those who build a house according to the so-called EH40-Plus standard with a quality seal for sustainable construction (QNG). Such a new building must not consume more than 40 percent of the energy of a standard house and must also qualify for a sustainability seal.

Low-income families are also to receive further assistance in the coming year. However, they will have to wait longer for government assistance: A newly launched homeownership subsidy is not expected before June 2023. Under this program, low-income households are to be granted particularly low-interest KfW loans of between 140,000 and 240,000 euros to enable them to afford home ownership. The subsidy is intended to replace the Baukindergeld, which expires at the end of this year.

The conditions for receiving funds from this subsidy pot include that the family has a minor child and that their annual income does not exceed 60,000 euros. For each additional child who is not yet of age, the annual income may be 10,000 euros higher.

First draft laws for gas and electricity price brakes finalized

The German government wants to give private households and smaller companies a helping hand by capping prices for gas, electricity and district heating. These measures are scheduled to be introduced in March of next year. However, they are also to apply retroactively, so that consumers will be relieved from January 2023 - and, as of today, until April 2024.

Corresponding draft laws have now been approved by the federal cabinet. However, they have not yet been finally adopted, as the decision in Parliament and the Bundesrat is still pending. The bodies intend to discuss them in December. A final decision is expected to be made by Christmas.

In its current form, the gas cap is to guarantee a gross price of twelve cents per kilowatt hour. However, this only applies to 80 percent of annual consumption; the remaining 20 percent must still be paid at the contractually applicable price. No more than 9.5 cents per kilowatt hour may be charged for district heating. The federal government wants to finance this by taking on new debt and providing a 200 billion rescue package. As early as December, private households and businesses heating with gas will receive support from the government: the federal government will cover the gas bill for this month on a non-recurring basis.

CO2 tax: Landlords will pay share in the future

Soon, the days when tenants were left to pay the CO2 tax on their own will be over. From January, landlords will also have to pay their share. A new law, already passed by the Bundestag, reorganizes the way costs are shared. How much landlords pay depends on the energy quality of the property. Since 2021, everyone who heats with oil or gas has been paying the levy for the CO2 emissions of a building.

From January 1, 2023, the share of the costs will be regulated on the basis of a ten-stage model. Accordingly, landlords will have to pay less if a building is more climate-friendly. Conversely, if a property emits a particularly high level of CO2 per square meter, landlords will have to pay up to 95 percent of the levy. If a building meets the high EH55 energy standard, tenants must pay the levy entirely themselves. There are also to be exceptions if, for example, a building cannot be brought into a better energy condition through renovation due to its status as a listed building, or if milieu protection applies in an area.

For now, the regulations mentioned above will only apply to residential buildings. In commercial properties, tenants and landlords will each be required to pay a flat rate of half of the CO2 levy, unless other arrangements are agreed in the contract. There is also to be a phased model for commercial properties, which is to be finalized by the end of 2025.

Construction interest rates at least temporarily on a downward trend

After construction interest rates soared this year following the first increase in the prime rate in many years, they are now dropping slightly again. As reported by Handelsblatt with reference to figures from the online portal Check24, interest rates are now back below three percent, after they had shot up to over four percent in some cases.

The reason for this at least temporary low is the fall in the value of ten-year federal bonds, on which the construction interest rates are based, down by 60 basis points.

According to the report, a financing rate of 2.98 percent is possible for a construction loan of 300,000 euros. However, these are rather exceptional cases, as the financier portal Dr. Klein shows. On average it lies far over it.

However, it is still too early to breathe a sigh of relief for real estate buyers, warns the Handelsblatt. The shaky period for investors and buyers has not yet ended, as interest rates can change constantly in the current uncertain situation and are likely to rise again. Private buyers, however, can take advantage of the fluctuations by monitoring the situation and buying when interest rates are as low as possible.

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