Energy efficiency has become a more important factor as heating costs rise
House prices have declined in recent months, but properties with higher energy efficiency ratings are more likely to sustain their value among cost-conscious buyers.
Graham Seller (pictured), head of business development – mortgages at Santander, expects an overall decline in prices into next year. However, the cost-of-living crisis has increased awareness of Energy Performance Certificate (EPC) ratings, Seller said, which should support prices for highly rated properties.
“I am expecting to see a 5% drop in house prices to begin with,” Seller said. “However, after that I am anticipating a significant recovery in property prices after a few years.”
According to data collected by Halifax, the average UK house price was £285,579 in November, falling 2.3% from £292,406 the previous month. It was the largest monthly drop since October 2008 and the third consecutive monthly price fall.
Less energy-efficient properties are struggling even more, Sellers said. As energy prices continue to rise, landlords are steering clear, and even residential homeowners are looking to more efficient properties.
Energy performance in focus
“An A- or B-rated property would cost half as much as an E-rated home in terms of monthly bills. And with budgets tight at the moment, this is something very much on homeowners’ radars,” he said.
According to research conducted by Santander over Summer 2022, homeowners would pay 9.4% more for a property with a high EPC rating, over other desirables such as large storage space or a big garden.
This is also evidenced by the speed at which higher EPC-rated homes are being sold, he said, with estate agents selling high-rated rated properties more quickly than low-rated one by a difference of three months.
The outlook: EPC ratings to exert even more market influence
Government targets for EPC ratings are likely to influence markets as well.
Less than half of UK homes are rated C or better right now, but there is a deadline of 2025 for new rental properties rate a C or better. By 2028 that minimum will apply to exiting tenancies as well.
“This is putting further pressure on the market, and is encouraging more people to look toward energy efficient properties to save the hassle of improving a home later down the line,” Seller said.
Seller believes landlords may choose to exit the market entirely in some cases.
“This could present a good opportunity for first-time buyers to sweep in and get a good deal, however they will eventually be stuck with improving the properties EPC rating if they intend to hold the home until 2035,” he said.
Sellers said more education is needed for homeowners on how to improve EPC ratings.
But with market conditions as they are, Seller said remortgaging to take money out of the home in order to improve the EPC rating is not an option, despite an easing of rate levels.
Have you noticed customers prioritising high EPC rated homes despite affordability restrictions tightening? Let us know in the comments below.
