In recent times, the UK property market has witnessed a significant shift in landlord preferences regarding property energy efficiency. This shift primarily concerns the Energy Performance Certificate (EPC) rating, which plays a pivotal role in determining the energy efficiency of properties. If you’re an investor or someone merely interested in the property market, here’s a deep dive into this trend.
The Importance of EPC
An Energy Performance Certificate (EPC) rates a property’s energy efficiency, with the ratings spanning from A (most efficient) to G (least efficient). New research has recently highlighted an interesting trend among landlords: properties with EPCs falling below a Band C are becoming harder to sell to other landlords.
The Current Landscape
A study spearheaded by BVA BDRC, on behalf of Foundation Home Loans, has brought some revealing statistics to light:
- Reluctance to Buy: A staggering 71% of nearly 1,000 landlords stated that they would hesitate to purchase a property with an EPC rating lower than C. This sentiment was even more pronounced among portfolio landlords, those who own multiple properties.
- Minority Unconcerned: On the other end of the spectrum, only 18% of the landlords were indifferent to the EPC rating when considering a purchase.
- Awareness Levels High: The government’s impending changes to EPC rules are well-known. A robust 75% of the respondents were fully abreast of these imminent changes. While a smaller 24% knew something was on the horizon, a minuscule 4% were entirely oblivious.
The challenge of selling properties with an EPC rating below C is set to grow, affecting millions of homes. The survey noted that portfolio landlords, on average, owned 3.3 properties rated EPC D or below. This number jumped to 9.5 for landlords boasting more than 11 properties.
In 2021, The English Housing Survey shed light on the distribution of EPC ratings among the private rented sector’s nine million households:
- 44% of private renters occupied homes rated between A to C.
- 42% resided in Band D rated homes.
- The remaining 14% lived in homes rated E to G.
A Call for Clarity
The impending shift in government policy on EPC levels for the private rental sector is clear to many industry experts. Grant Hendry, Director of Sales at Foundation Home Loans, remarks, “Landlords are clearly anticipating the upcoming changes and are considering the future of their portfolios.”
The anticipated cost for improving a property’s EPC to Level C hovers around £10,000. It’s no wonder, then, that landlords are increasingly cautious about acquiring properties that already fall below this threshold. Many are actively future-proofing their assets. They are leaning towards purchasing properties rated C and above now and will likely focus on upgrading their existing below-C-rated properties in the foreseeable future.
Conclusion
The emphasis on energy efficiency in the UK property market is evident. Landlords, both new and seasoned, are prioritising green, energy-efficient homes. As the government prepares to roll out its revised EPC policies, property investors should remain informed and adapt accordingly. After all, an energy-efficient property landscape not only ensures a sustainable environment but also promises substantial long-term returns for those who invest wisely.