Old homes may face an “inefficiency tax”

Banks may finance prefabricated and brick homes built before 2007 at only one-third of their price, warns Yordan Yordanov, co-owner and managing director of the Nov Dom 1 real estate agency.

With Bulgaria’s accession to the eurozone, Bulgarian banks are subject to stricter supervision by the European Central Bank. Along with the focus on climate risks, the building’s energy efficiency may become an increasingly important issue. In the coming years, it may become a determining factor for lending.

Mandatory certificate for every transaction

In Bulgaria, an energy performance certificate is a required document for new buildings and major renovations, and is usually included in the notarial documentation for real estate transactions. It shows the extent to which the building meets the efficient heating requirements, for cooling, ventilation, lighting, and domestic hot water, as well as how much energy has been lost through facades, windows, roofs, and floors.
At the European level, there are discussions about the possibility of most buildings achieving at least class C energy efficiency by 2030. If such a policy is implemented, the old housing stock could find itself in a particularly vulnerable position.

Which buildings are most at risk?

The most vulnerable could be prefabricated blocks, old brick apartment buildings, and buildings constructed before the introduction of stricter standards after 2007.

“I am warning you about the danger facing old buildings constructed before 1989, including buildings constructed before 2007,” commented Yordan Yordanov, co-owner and managing director of the Nov Dom 1 agency. According to him, the fact that many of them have external insulation and window frames does not guarantee that they will be recognized as energy efficient.

Energy efficiency means that the building has low heating, cooling, ventilation, domestic hot water, and lighting requirements, as well as minimal losses through structural elements. These criteria form the basis of the certificate.

Financing – the new dividing line

According to Yordanov, in the absence of high energy efficiency, properties may receive a lower rating from banks and, accordingly, a lower financing rate and a more expensive loan.

There are early indications on the market that differentiation may be emerging. “Green” mortgages offer preferential interest rates for new construction and for homes with a certified A/A+ rating.

“Banks may impose restrictions and finance such buildings at one-third or one-quarter of their sale price,” predicts Yordan Yordanov. Apartments in new buildings can be financed at €2,000-3,000 per square meter, while older buildings can be financed at only €500-800 per square meter.

Where will the blow be most painful, according to the expert?

The most painful blow could be felt by buildings with unknown or low energy ratings, where the lack of a certificate could become a serious disadvantage.

Panel, PC, RPC, and old brick blocks with outdated installations and no proven renovation may also be at risk.
Homes with fossil fuel heating and inefficient systems, where maintenance costs are likely to increase, could also be vulnerable.

“Inefficiency tax” for old homes

The difference will probably not be in a ban on financing, but rather in a new differentiation that could gradually reshape the market. While new construction benefits from cheaper credit and higher liquidity, the old housing stock, if not renovated, may find itself burdened with a kind of “inefficiency tax” – not in the form of an official tax, but through less favorable lending conditions.

“The challenge facing old buildings could prove to be serious, and the market will probably have to be prepared for such a possible development, especially in the context of our future accession to the eurozone. That is why at Nov Dom 1 we are carefully monitoring the market and legislative changes,” concludes Yordan Yordanov.