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Buyers could start demanding discounts on homes with poor energy ratings – Rightmove

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  • 27/07/2022
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Energy performance certificates will become a property purchase deal-breaker in the same way poor broadband has in recent years, according to Rightmove’s Green Homes report.

Buyers are becoming more conscious of green features and will try to negotiate discounts on the asking price of homes with the poorest Energy Performance Certificate (EPC) ratings in the next 10 years, it predicted.

Homeowners who have made green improvements before selling have made as much as 16 per cent extra on average, compared to those who haven’t made any improvements, Rightmove said.

The online property portal said the number of buyers searching for green terms rose from 500th to 98th most popular keyword search, while heat pumps – which are used to make homes more eco friendly – rose from 1,000th to 190th.

The biggest incentives for homeowners to make green improvements are reducing their energy bills, 89 per cent, improving insulation in their home, 55 per cent and reducing their carbon footprint, 49 per cent.

Government proposals for landlords to improve homes up to an EPC rating of C would lead to further stock shortages and rising rents in the short-term, with one in five landlords saying they would sell up.

Net zero homes

Making homes greener is a critical part the UK’s goal to reach Net Zero by 2050, but Rightmove found there was a lack of understanding about what improvements to make and minimal financial incentives to do so. 

While four in 10 homeowners , 41 per cent, had already made changes to improve their home, for the remaining 59 per cent the biggest reasons for not doing so are was because they did not feel they need to make improvements or the renovations were too expensive. 

The study analysed over 200,000 homes listed on Rightmove that had sold twice, with an improved EPC rating the second time.

Those who had upgraded their rating from an F to a C added an average of 16 per cent to the price achieved for their home.

Moving from an E to a C banked sellers an extra eight per cent on average, and moving from a D to a C resulted in an average of four per cent extra.

Buyers are already becoming more conscious of 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. 

Plus, there are now 73 per cent 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 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, overtaking EPC D-rated houses for the first time although the difference so far is only one day quicker.

The average EPC rating of a home in the UK is a D, so the homes with the lowest ratings of an E to a G are likely to be the first to start seeing buyers trying to negotiate discounts.

Tim Bannister (pictured), director of property science at Rightmove said improving a property’s green credentials was critically important but the immediate challenge was the costs involved to fix the number of properties currently below an EPC rating of C.

He said: “There has been much debate about what could happen in the future to homes with poor energy efficiency, and the government has said it 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.”

If the government brings in legislation for landlords to improve their properties, and if the sums don’t add up to make the improvements, then some will sell up. This is especially likely among those with smaller portfolios and those who would need to make significant changes to cheaper homes. If a number do sell up then it could exacerbate what is already a severely stock-constrained rental market, increasing rents for available homes in the short-term, before the benefits of greener properties filter through.”

 

EPCs as the ‘new broadband’

Kate Eales, head of regional estate agency at Strutt and Parker’s, said “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.

She added: “That said, houses are ultimately homes and character continues to hold huge value for many. What remains to be seen is how affordable and straightforward sustainable changes to period properties will become in the longer term, as this will ultimately help preserve the value of historic homes.”

“If buying a home was purely a financial decision, a house with a strong EPC would be top of the list. But a purchase of a period home is often driven by the heart, and not just the head. EPCs create more transparency so buyers know what’s what when they become the custodian of an older home. We’re beginning to see increasing numbers of sustainable new homes and schemes built in a period style.

“These sustainable character homes have seen growing popularity in recent months – perhaps signalling a confluence of the nation’s adoration of quintessential looking houses with the rise in cost of living and greater eco-consciousness.”

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