Future Growth and Regulatory Drivers in the Renovation Market
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Costs of house improvement slightly higher than inflation
Monthly price development of all consumer goods (HICP) and renovation (maintenance and repair of dwellings) eurozone, (Index Jan 2018=100)
Optimism remains
The R&M market is likely to show future growth driven by sustainable and energy-related factors. Many governments support sustainability measures, and high energy prices act as an extra trigger.
As mentioned above, R&M data are often scarce. However, we can look at the specialised construction sector to know how the R&M market is currently doing. This subsector consists of many construction branches that are active in R&M, such as installation, plasterers, carpenters, painters and glaziers. The data are a bit blurred as many of these companies are likewise also active in the construction of new buildings. Nevertheless, if we consult the EU construction confidence indicator, we see that specialised construction companies have been optimistic for a long time. In June it was a bit lower, but still neutral and not negative. Whereas the confidence of companies in the building sector as a whole has been in negative territory for almost a year.
Confidence indicator neutral in specialised construction
Development EU confidence indicator
New EU regulation EPBD IV will be a structural growth driver
The European Union has set a goal of achieving climate neutrality by 2050. To reach this target, particular attention is being given to buildings. Buildings currently contribute to 40% of energy consumption and 36% of greenhouse gas emissions in the EU. However, the current rate of building renovation in Europe is inadequate to meet the required targets.
To address this, the European Parliament passed a comprehensive revision of the 2010 Energy Performance of Buildings Directive (EPBD IV) in March. This proposal aims to increase the renovation rate by introducing significant changes. One key change involves replacing the existing energy performance certification system with a more comprehensive assessment of a building's environmental performance.
The proposal places a strong emphasis on ambitious targets for renovating existing buildings, including the establishment of minimum energy performance requirements that all buildings must meet within a specified timeframe. However, the scope of the proposal extends beyond merely improving energy efficiency. It also introduces a new certification system for evaluating the environmental performance of buildings throughout their entire life cycle. This certification considers emissions generated during the production of construction and insulation materials, the construction process itself, as well as the renovation and operation of buildings.
These regulations will stimulate the renovation market in the EU, as they will trigger a wave of renovations and create a greater demand for energy-efficient upgrades.
