Smart Living - The Need for Smart Residential Buildings in Europe What is covered? Smart residential buildings - definition Why smart residential buildings? Real estate market for smart homes in Europe Key market drivers Buyer characteristics Key barriers and opportunities

1. SMART LIVING:
MARKET DEMAND FOR
SMART RESIDENTIAL
BUILDINGS
IN EUROPE
C AR O L I N E G L O W K A

2. AGENDA
 Smart residential buildings
 Why smart residential buildings?
 Real estate market for smart homes in
Europe
 Key market drivers
 Buyer characteristics
 Key barriers and opportunities
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3. SMART RESIDENTIAL
BUILDINGS
A smart residential building refers to
any form of residence equipped with
devices and related services allowing
home automation, and remote
monitoring, accessing or controlling of
the building (see Balta-Ozkana,
Botelerb, Amerighic 2014; Statista
2022). The aim of smart home is to
provide homeowners with
convenience and cost savings.
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4. WHY SMART
RESIDENTIAL
BUILDINGS?
Smart residential buildings allow to
reduce over 80% of thermal needs of
standard buildings (Bisello,
Antoniucci, Marella 2020)
Buildings account for 40% of EU total
primary energy consumption and
about 36% greenhouse gases
emissions (Dallamaggiore, Dunphy,
Morrissey 2016)
In case of no actions regarding
energy efficiency of buildings the
energy demand might rise by 50% by
2050 (Bisello, Antoniucci, Marella
2020)
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6. REAL ESTATE MARKET
FOR SMART HOMES IN
EUROPE
OVERVIEW

7.  Only 3% of residential buildings in Europe constructed or improved to
the highest energy standards
 Energy efficiency standard (EPC) introduction in 2002 »
Transparency » Smart Homes value raise
 But technical measurement is under individual jurisdictions » EPC
doesn’t allow to establish comparable values between specific
markets
 Lower level of premiums for highly rated houses and higher levels of
discounts for lower rated buildings (mixed results)
 General tendency: Price premiums (of 5%) the same for higher
classes (ABC) and no statistically significant difference for others
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8.  Lack of strong evidence that capital expenditure on smart homes can
be offset by cost savings and operational efficiency gains
 The average energy demand of inefficient buildings is lower than the
calculated standard demand
 EPC levels strongly influence prices, but traditional value drivers
(location, accessibility, double glazing, heating systems) dominate
transaction prices at housing market
 Smart homes haven’t yielded the economies of scales yet to reduce
average costs
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9. KEY MARKET DRIVERS
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10. Inflation Rate
The increase in CPI Consumer Price Index (CPI) in EU reflects rising prices of goods
and services (May 2023 - 7.12% increase from May 2022)
Consumer Spending in European Union decreased to 1788.66 EUR Billion in the first
quarter of 2023 from 1791.64 EUR Billion in the fourth quarter of 2022 (EUROSTAT,
2023)» consumers may spend less on non-essentials
War in Ukraine and COVID-19
Disruption to production and transport of goods
Pressure on energy prices contributed to rising inflation
But work from home shift in pandemic contributed to the rise in smart technology
demand (Statista 2022)
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12. BUYER CHARACTERISTICS
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14.  Groups most interested in smart homes: professionally active, men,
25-34, households with children and those who already have new
technologies at home
 Sales potential is associated with high earning young technophile
couples
 General attitudes toward new technology strongly and positively
correlated with the interest in smart homes - steeper adoption curve
for newer technologies in recent years can positively impact the
market demand
 Consumers’ interest mainly from DIY/hobbyist segment of the market
– incremental home improvements
 Reluctance to retro-fit existing residences – costs, convertion
challenges, mess, disruption
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15.  Buyers who want to signal their green values and are willing to pay
for premium (40% increase in the top income quartile) (Naess-
Schmidt et al. 2016)
 Lowest income positively correlated with lowest efficiency of homes
 Income positively correlated with environmental awareness
 Consumers familiar to household devices and appliances, but have
low confidence in reliability and security of new technology, are
concerned about complexity of systems
 Only when energy efficiency is a risk factor then have a chance to
affect buyer behaviour
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16. KEY BARRIERS AND OPPORTUNITIES
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17. Key Barriers:
 High transaction costs for smart homes comparing to energy cost
savings
 Fragmentation of the market in Europe
 Individual needs – hard to define consumption baseline
 Sentiment towards protection of old and historic houses – challenge
for retrofitting
 Lack of common standard for smart technologies between
manufacturers and suppliers
 Concerns regarding technologies and their reliability, concerns over
privacy and data protection
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18. Key Opportunities:
 Energy efficiency linked with occupant health and well-being (better
air quality, reduction of damp conditions, psycho-social factors)
 Markets are moving to differentiation not based on cost savings but
on comfort, well-being, security
 Energy efficient buildings present lower credit risk due to value
protection against obsolescence
 Increase in urbanization and industrialization as smart homes allow
for tracking and optimization of energy consumption
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20. THANK YOU
Caroline Glowka
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