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Business

Home renovation props up building industry

In a bid to save energy, Germany has gone renovation crazy. Window fitters and roofers may be reaping the rewards, but tenants aren't so happy about the prospect of rent increases.

Roofers in Germany

Tradesmen are doing a roaring trade from the renovation boom

Building industry experts say a boom in renovation, spurred on by the government's economic stimulus package, has helped Germany come through the recession relatively well in comparison to other countries.

According to Erich Gluch, an expert for building and property at the Institute for Economic Research (ifo Institute), overall building investment in Germany has been declining for the past 10 to 15 years, although house building has declined less than the rest of the sector.

"In the last 15 years the share and importance of maintenance - primarily modernization and renovation - has markedly increased," Gluch told Deutsche Welle.

Ten years ago, this kind of renovation work was worth an estimated 1 billion euros a year in Germany, but by 2009 that figure had ballooned to 9 billion euros, according to ifo Institute figures. While big building companies specializing in large projects have been flagging somewhat, Gluch said this renovation boom has been particularly profitable for small businesses, like tradesmen.

"I would say that not only has it saved a lot of these companies, but it has also been possible for many new companies to come into business. There have been a lot of new businesses formed in this area," Gluch said

A construction worker in Germany

The boom has given independent contractors plenty of work, but competition has also increased

And the sector is likely to continue growing, despite government funding drying up, according to Gluch.

By 2050 the German government wants to reduce national energy consumption by 80%, which means that 12 million of Germany's 18 million buildings have to be renovated. In the last 5 years alone around two million apartments have been adapted so that they use less energy.

Boom time for energy savers

According to Andreas Scholz, who advises people on how to make their homes more energy efficient, a "boom" for energy advisors is underway. But with it comes increased competition, he said.

Each improvement Scholz advises on also means more money in the pockets of small local businesses, like window fitters, joiners, painters and roof fitters. Scholz said that these businesses have been doing so well, it's often quite difficult to get ahold of a tradesman.

"It seems that they have a lot to do at the moment. If you need a new tradesman, it's not that easy to find one because all the good ones are booked up with all these things like window installation, exterior wall and roof insulation," Scholz told Deutsche Welle.

Germany's construction materials manufacturing industry has also noticed a change. For instance, Sto AG, an insulation manufacturer, is expanding worldwide.

A key in a lock

Rents will go up if landlords are allowed to pass more of renovation costs on to tenants

"The main reason for this continual growth is rising energy costs. And for this reason it's a market that's growing, especially in countries where a lot of heating energy is used," Uli Geisel of Sto AG told Deutsche Welle.

Geisel also said that economic incentives play a key role in owners' decision-making because optimizing the energy efficiency of a property isn't compulsory in Germany. He would like for renovation to become a more lucrative investment for property owners, especially landlords.

Depending what needs to be done - whether insulating, changing windows or installing an efficient heating system - refitting a 75 square meter apartment can cost around 40,000 euros. About 10 percent of that could be financed by government grants.

Tenants may be squeezed

When homeowners want to sell, renovation makes sense because it increases the value of a property when it's put on the market.

But for landlords and Germany's 23 million tenants it's a bit more complicated. German law only allows landlords to raise annual rents by a maximum of 11 percent of total renovation costs.

Geisel wants the government to make it easier for landlords to apportion their costs onto the lease holder. After all, the home occupier benefits from reduced heating bills, which are often cut by 50 percent, depending on what is done to the house.

A high rise in Cologne

Some 12 million of Germany's 18 million buildings need to be renovated

Ulrich Ropertz of the German Tenants Association said tenants do not necessarily end up paying less. Rents are increasing to cover the cost of renovations, and energy prices are rising in parallel, according to him.

"If the government's energy concept, which was decided at the end of the last year, is implemented, then energy optimizing renovation is going to be very expensive for tenants. Tenants could theoretically expect rent increases of 100 to 200 euros each month. Everyone knows that that's not affordable. "

Unsurprisingly, Ropertz wants the government and property owners to foot the bill. He's unhappy that the government has reduced its funding from 1.4 billion euros last year to 935 million euros in 2011.

"This means that the government is trying to initiate double the amount of renovations as in the past, with half the money. That can't work. It's crazy," he said.

Whilst the row over who pays may continue for some time, with energy saving so high up on the political agenda, it's full steam ahead for the building industry.

Author: Natalia Dannenberg
Editor: Gerhard Schneibel

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