According to Hamptons latest monthly index, this is also up from 33 per cent in 2020. While not yet final, the government’s EPC plan has spurred many landlords to hedge their bets when it comes to new purchases, the estate agent and property services company said.
Hamptons tied the recent increase to landlords and other investors either buying more energy-efficient homes and flats where the energy upgrades had already taken place, or shifting their buying power towards properties built within the last decade so typically rank at a B or C.
While current law requires a rental property to be EPC rated E or above, the proposal before the House of Lords says new tenancies have to be EPC rated C or higher by 2025.
In London, where investors lean towards new build buy-to-let (BTL) flats, 66 per cent of new purchases made thus far this year already had an EPC rating of C or above. In the North East, just 34 per cent of investors bought a BTL with an EPC rating of C or above as they preferred higher yielding but older terraced housing.
Cheaper energy bills
Tenants could secure savings on their bills if the proposed changes become law. For instance, someone moving from a D-rated space to a C-rated one could save an estimated £285 per year on their gas, electricity and water bills at current prices, Hamptons said.
If moving from an E to a C, the estimated savings would be £725 per year and upgrading all rented homes with an existing EPC rating of D to G would save tenants in England and Wales a total of £844m in utility bills each year.
Overall, the average annual savings would amount to £396 per household for all rented homes rated EPC D to G being upgraded to EPC C.
Aneisha Beveridge (pictured), head of research at Hamptons, said: “By removing the least energy efficient rental homes from the market, government policy has already picked the lowest hanging fruit. But extending this plan to upgrade homes with a D or E rating up to C will impact a far larger number of households, while generating smaller savings for tenants. The policy will mean that the average tenant will eventually pay lower energy bills than the average homeowner, although it’s likely to remove some rental homes from the market, putting further pressure on stock levels.”
The changes, however, could hurt the market for older less energy-efficient properties.
“Given it will prove impossible for all homes to secure an EPC rating of at least a C without significant cost”, Beveridge said, “it’s likely to mean older homes will become considerably less attractive to landlords. Instead, investors may focus their strategy on buying new builds, with rental homes becoming concentrated in blocks or streets where properties already hold a C rated EPC certificate or where it’s possible to achieve this without significant work.”
Rents rose seven per cent
The Hamptons lettings index looks at data from the 90,000 homes let and managed by Countrywide Group to chart changes to the cost of renting. It also found that rents rose seven per cent across Great Britain compared to the same time last year as rental growth continued to slow after peaking in July 2021, and that rents in central London had recovered to pre-pandemic levels.
Beveridge said: “The recovery in inner London rents back to where they were on the eve of the pandemic marks a milestone for London’s landlords. With inner London recording the largest ever month-on-month increase between December and January, it appears the recovery in rents still has plenty of steam. The level of pent-up demand coupled with a lack of stock is likely to support high rates of rental growth over the coming months.”
