Page 298 - 2019 6th AFIS & ASMMA

» Panelist | Luca Bertalot
This is a very relevant question. We believe that we have to review
the entire value chain of the production of the mortgages. An essential
part is the evaluation. Because nowadays, if you go to Europe, if you go
to evaluate their property and the energy efficiency, the valuers are not
factoring in the valuation of the changing of the heating system or the
changing of the windows. So, investing today, if you invest money on
energy efficiency, you are a bit wasting money in the sense that the valuer
doesn't see this as a kind of monetary impact. For us, this is very wrong,
because on the contrary valuation methods should capture the increase
of energy performance in the evaluation. So we are asking the valuation
committee to propose new parameters that include energy efficiency
parameters in the evaluation.
Just to take a very concrete example; I just bought a house, and I wanted
to isolate the facade of my house. The gentleman who came to me said he
wanted to make the work, but they advised against it, because if you resell
the house, no one is putting value on the works that you are doing. So
nowadays the real-estate agencies are not capturing this kind of evaluation.
Why this? Because the value chain is not ready to give money for this kind
of improvement. What we would like to do in Europe is that if the bank
is requiring you to make the changes, the bank will give you a special
condition. So automatically, there will be a real value into the market in
making the innovation in your house. Nowadays, it's not working like
we would like to see it, and as long as we don't remove this problem for
devaluation, we cannot push for real risk assessment procedures.
So, here is what we are doing; we are proposing to all the European
banks or all the pilot phase banks new valuation methods to help
banks to support this kind of monetization of the energy efficiency
improvement. Only by doing this, we can create more energy efficiency
assets that can be used for green cover bonds or green securitization.
Because the reality is, nowadays, we have a very little amount of asset
fully eligible for energy efficiency purposes. So, the demand for investors
is quite limited, because we don't have certified asset to demonstrate to
the investors that the residential space is really green.
300
Sorry for taking a bit of time but in valuation, it's a key element that
has to be modified. Also the technological aspects, like Fintech, Block-
chain technology, should come in our market to improve transparency at
the end of the day.
» Moderator | You Tay Lee Session I
Yes, I hope you solve the 'Heat or Eat' dilemma. Any more comments
on this?
» Panelist | Maureen Schuller
Yeah, I think, Luca, you addressed this. Like if you have energy
efficient mortgage loans, you are likely to have a lower probability of
default and a lower probability of default is driven by the fact that the
potential price rise or potential price decline question for an energy-
efficient house is better, but also on the energy use. So, you pay less
on your energy bill and have more disposable income. I think these
two concepts are really important. The only thing where I have my
question mark is once the house transfers from owner, so once the
energy efficiency is already built in the price, so owner A has actually
managed to benefit from that potential price rise, and owner B that buys
a house has a lower loan-to-value ratio. So, for that particular owner,
the probability of default prospects from more stable LTVs or potential
further rising LTV levels may disappear. That's the only question.
» Panelist | Luca Bertalot
We are also very aware that we cannot move a house from G to B in
one go, so what we would like to propose is that by working together,
public institution and banks, we can create a green incentive package
for borrowers, in order to move up gradually. So, the first borrower will
move the house from G to F; they're the one that will move the house
from F to E. That's the idea. Then we have to be aware that in Europe
the transaction costs for a house can be quite high. So, for example, in
Belgium, transaction costs when you buy a house is 18 percent of the
2019 6th AFIS & ASMMA Annual Meeting 301