Banks anxious of growing energy-related risks in mortgage portfolios
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Lenders across Europe are struggling with a rising concern about energy consumption in residential mortgage portfolios
In Germany, the largest economy in the region, numerous households are hesitant or financially unable to invest in improving their homes’ energy efficiency.
The German Bundesbank has cautioned that neglecting this issue could significantly impact property values, subsequently affecting the broader economy. Deutsche Bank AG has also noted that merely a small portion of its residential clients currently qualify for green loans.
Deutsche Bank, with a residential real estate portfolio valued at around €175 billion ($190 billion), suggests that meeting the European Union’s top energy performance standards could require over €100,000 per home.
This totals about €80 billion for all the bank’s residential real estate customers.
In its latest annual report, Deutsche Bank said that the “largest concentration of credit risk within loans from a regional perspective is in its home market, Germany, with a significant share in households, which includes the majority of the mortgage lending and home loan business.”
Also read: Carbon footprint concerns shake real estate market, investors slash exposure
European banks increasingly recognise the risks of green housing requirements within their residential real estate portfolios.
Earlier this year, EU lawmakers approved the Energy Performance of Buildings Directive. The implementation of this new legislation will be gradual, spanning over a decade.
However, property owners who lag behind too much risk having assets that become unsellable or unrentable.
The EU approximates that roughly 85% of buildings in the bloc were constructed before 2000, with 75% of these having inadequate energy efficiency.
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