Dynamics of apartment building renovation investment costs based on Estonian reovation grant scheme

Abstract

While energy prices have increased substantially recently, we also observe that renovation prices have increased twofold wihtin last decade. This could seriously affect the motivation to invest in building renovations because of negative yield and in turn jeopardise the carbon reduction plans. Therefore, we attempt to show some evidence of renovation cost dynamics based on sample of 112 apartment buildings which received state support for deep energy renovations during 2010 and 2017. We found that investments started out very cautiously in 2010. Eventually renovations were embraced as rational investment and renovations ambitions grow with prices. Construction price index grow during the~study period 20 percent and renovations over two times. We could not confirm the popular hypothesis that demand pressure will also increase prices. However, most significant increase of renovation price was due to the additional construction works and quality improvement. This was especially evident after the redesign of grant rules in 2015 which allowed more indirect construction works to be eligible for the subsidy.