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The closer REFIRE monitors the German residential property market, the more it's becoming increasingly clear that energy efficiency is no longer just a box to tick—it's a critical factor shaping property values. In a market where every euro counts, the energy performance of a property can make or break a deal. Higher energy efficiency ratings are now commanding premium prices, while properties with poor energy ratings are languishing on the market, often at steep discounts.
Some concrete examples. In Frankfurt, a modern apartment with top-notch energy efficiency (rated A+ to D) is fetching an average of €7,056 per square metre. Compare that to an older apartment with poor energy values (rated E to H), which averages just €5,479 per square metre. That’s a staggering €126,000 difference for an 80-square-metre apartment. And it’s not just Frankfurt. Munich sees a similar trend, with a difference of €1,727 per square metre, while Berlin’s gap stands at €1,116 per square metre, according to the latest Postbank Housing Atlas.
The market is sending a clear message: energy efficiency pays—quite literally. With energy costs rising and regulations tightening, buyers are increasingly willing to pay a premium for properties that won’t burn a hole in their wallets every winter.
The numbers don’t lie, and there’s a growing body of evidence to back this up. Take ImmoScout24’s analysis, which shows that older single-family homes with a dismal energy efficiency rating of H are being offered at around €2,289 per square metre. On the flip side, similar properties with a sparkling A rating are going for €3,412 per square metre—a whopping 49% increase. This isn’t just a blip; it’s a trend that’s here to stay.
Regional differences in impact
But not all regions are created equal when it comes to energy efficiency. In the Ruhr area, cities like Gelsenkirchen and Herne, which are riddled with unrenovated buildings, are seeing some of the steepest price discounts. Buyers are shying away from properties that haven’t been brought up to scratch, and the discounts are getting harder to ignore.
Contrast this with parts of eastern Germany, where many prefabricated buildings have already undergone energy-efficient refurbishments. In these areas, the price impact of lower energy efficiency isn’t as severe. Meanwhile, in rural regions like Vogelsberg and Uckermark, where homes with good energy ratings are as rare as hens' teeth, the market for energy-efficient properties is still underdeveloped, and price differences are less pronounced.
And it’s not just the purchase prices. Rental values are also taking a hit. The Bundesverband energieeffiziente Gebäudehülle (Federal Association for Energy-Efficient Building Envelopes) and Wüest Partner found that rents drop by an average of €0.21 per square metre for every step down in energy efficiency class. Over time, that adds up, making the difference between a cozy nest egg and a money pit. For landlords, investing in energy efficiency could be the key to maintaining or even increasing rental yields.
The role of politics
Of course, politics is never far from the property market, and energy efficiency is no exception. The German government’s efforts to comply with EU directives on energy efficiency are expected to ramp up in the coming years. This could spell trouble for properties with poor energy ratings, as buyers factor in the cost of potential future upgrades. Postbank’s analysis now puts energy efficiency on par with location in terms of importance—a seismic shift in the market dynamics.
Upgrading to a more energy-efficient home isn’t cheap, and the costs can vary widely. The German Institute for Economic Research (DIW) estimates that modernising a residential property can set you back between €600 and €700 per square metre, with energy-related improvements alone costing up to €360 per square metre. For some properties, particularly those built between 1976 and 1990, these costs might be more manageable due to existing insulation. But for older buildings, the price tag can be daunting.
Here’s where it gets interesting: the return on investment can vary dramatically. Consider an investor in Munich who purchased a 1980s-era apartment block. By investing in energy-efficient upgrades, including new insulation and a modern heating system, the investor was able to increase rental income by 20% and saw the property’s market value rise by 35% within three years. The initial outlay was steep, but the long-term gains more than justified the expense.
The influence of photovoltaics and heat pumps
Renewable energy technologies are another game-changer. Houses with photovoltaic systems are commanding prices 20% higher than those without, and homes with heat pumps see a 43% increase in price per square metre, according to ImmoScout24. If you’re lucky enough to have both, you could be looking at a 50% price premium. As the German Building Energy Act (DENA) drives the shift towards renewable energy by 2028, these technologies are likely to become even more valuable.
Recent surveys by Gewos and ImmoScout24 paint a similar picture. Properties with poor energy ratings (E to H) are flooding the market as owners choose selling over costly renovations. For example, properties in energy efficiency class H have seen their average asking price drop from €3,015 per square metre in 2022 to €2,610 in 2024—a 13.4% decline. Empirica’s analysis also shows that the discount for properties in energy efficiency class G has more than doubled in the past two years.
It's evident that many owners are choosing to sell at a discount rather than face the financial burden of upgrades. Buyers are becoming increasingly savvy, and they’re factoring in the cost of future renovations when making offers. The message is clear: if your property is energy inefficient, expect a steep discount, particularly in regions where renovation costs are sky-high.
REFIRE: In today’s market, energy efficiency isn’t just a nice-to-have—it’s a must-have. Whether you’re buying, selling, or renting, energy performance is now a critical factor that can significantly influence property values. As regulations tighten and energy costs continue to rise, the market will increasingly reward energy-efficient properties and penalise those that fall short. For investors and homeowners alike, understanding the dynamics of energy efficiency is no longer optional; it’s essential.
