Buyers will expect discounts on homes with poor energy ratings while sellers will demand more for better rated ones
Buyers are likely to try and negotiate asking price discounts to factor in the cost of making green improvements in the next 10 years, a new report from property listing platform Rightmove has suggested.
The Rightmove Green Homes report has found that sellers who have already made changes that have improved the EPC rating of their home are pocketing as much as one-sixth more on average when selling their home.
Rightmove analysed over 200,000 homes listed on its website that had sold twice, with an improved EPC rating the second time.
This analysis has shown that those who had upgraded their rating from an “F” to a “C” added an average of 16% to the price achieved for their home. Moving from an “E” to a “C” banked sellers an extra 8% on average, while moving from a “D” to a “C” resulted in an average of 4% extra.
Read more: Check your property’s EPC rating, homeowners are told.
Tim Bannister, director of property science at Rightmove, said buyers are becoming much more aware of the green improvements that are needed, and factor this in when they consider how much to offer a seller.
“It’s likely to be a gradual rather than a swift change, but we can already see the green price premium when improvements are made,” Bannister noted.
“Of course, improvements that make a home more energy efficient often also means the condition improves, such as installing new windows. But the end result of making improvements is not just a refurbished home worth more money, it’s often also a greener home.”
Read more: Why are households focusing on improving their homes?
Andy Sutton, co-founder of SERO, said the discount that arises from the works that need to be carried out in a home could in the future be considered by a lender when they value a property.
“If this was the case, a seller would want to know what works are going to be flagged up first, and a buyer might use it as a way to ask for a discount on the asking price,” he added.
Buyers are also thinking about green features when looking for their next home, with features such as solar panels and heat pumps climbing the rankings in Rightmove’s keyword sort tool.
Searches for solar panels have risen from position 500 in November 2020 to position 98 in June 2022, and heat pumps have risen from 1,000 to 190.
Meanwhile, there are now 73% more green terms such as “sustainable” and “low carbon” being used by agents as selling points in their property descriptions on Rightmove compared with the start of 2020.
There are very early signs that better rated homes could sell more quickly than poorly rated ones. EPC B-rated houses were the fastest type of home to sell over the last few months (30 days), overtaking EPC D-rated houses for the first time (31 days), although the difference so far is only one day quicker.
Rightmove said that while making homes greener is a critical part of helping the UK reach Net Zero by 2050, there is still a lack of understanding about what improvements to make and minimal financial incentives for people to act now.
Four in 10 homeowners (41%) have already made changes to improve their home, but of the remaining 59%, the biggest reasons for not doing so are that they don’t feel they need to make improvements (40%), or that the improvements are too expensive to make (33%).
Read more: Homeowners put off by cost of green renovation.
“Improving a property’s green credentials is critically important as the UK strives to hit Net Zero. The immediate challenge is the sheer number of properties that are currently below an EPC rating of ‘C’ and the costs involved to fix this,” Bannister said.
“There has been much debate about what could happen in the future to homes with poor energy efficiency, and the government has said they will make sure these homes can still get mortgages.
“But I don’t think it would be a surprise if in 10 years’ time, we see that people taking out mortgages or remortgaging a home with the lowest EPC ratings find that they miss out on the best mortgage rates.”
Bannister added that many homeowners want to make improvements, but the complexity and costs of the changes means that people need more help and financial assistance to know which changes to make and when.
“We know saving on energy bills is the biggest motivator to make changes, and in future, we’ll need to consider costs for cooling our homes as much as heating them, as we found during the recent heatwave. This opens up more questions about the best systems that people should be installing to futureproof their homes,” he stated.
“Where poor broadband became a common deal-breaker in recent years, good sustainability credentials are rising up the consideration list, especially in the face of rising energy prices,” Kate Eales, Strutt & Parker’s head of regional estate agency, said. “If buying a home was purely a financial decision, a house with a strong EPC would be top of the list.”
