According to research from BVA BDRC’s Landlord Panel for Foundation Home Loans, some 68 per cent of landlords will not consider a property which is low rated.
For those planning to buy in the next 12 months, 59 per cent will be looking at a property with an EPC rating of C or above, while 29 per cent will go for properties rated D to E.
The survey also found that those looking to sell were more likely to get rid of inefficient homes.
When asked about the EPC rating of their portfolio, the average landlord was found to have 2.9 properties with a rating of D or below. For those with larger portfolios, the number rose to 9.8 properties.
George Gee, managing director (commercial) at Foundation Home Loans, said: “Interestingly, the EPC level is now a real factor when landlords are looking at purchase opportunities, with over two thirds saying they wouldn’t purchase a property unless it had achieved the necessary level.
“That is a real shift, and one that is likely to filter into values if these higher-rated properties become, as is likely, more desirable.
“Advisers are going to be encountering far more landlords where the EPC is a real determining factor in their purchase/remortgage decisions, and therefore it is imperative they have a good working knowledge of the measures and what products are available in order to support their clients in getting to their end goals.”
Renovation plans
Two thirds of the 752 landlords polled said they were prepared to carry out works to improve the energy efficiency of their stock so they could continue letting it out, but a fifth said they would sell or not re-let.
Some 62 per cent said they would dip into their savings to fund the renovations, while 30 per cent plan to increase rent to cover the cost. Some 19 per cent will seek a government grant or funding, a tenth will consider a loan, eight per cent will release equity and six per cent will go for a further advance. Some 11 per cent of respondents said they could not afford to retrofit their properties.
On average, respondents believe the cost of renovation will be £8,300 per property while those with larger portfolios expect to spend £9,000 per property.
For the most part, landlords seem aware of the proposed rules which suggest new rental properties must have an EPC rating of C or above by 2025, while older stock must reach this deadline by 2028.
Some 68 per cent of respondents said they knew about the proposals and understood what they meant, a quarter knew but did not understand the details and nine per cent were not aware at all.
Gee added: “It’s obvious from this research that existing landlords are not just far more aware of the EPC rating of their properties now, but they are actively making decisions based on those levels and are planning for a future in which many of them will have to spend money in order to improve those ratings.
“Previously, the EPC rating of a property made very little difference to its saleability or indeed the way landlords viewed it for purchase, but a combination of factors including the government’s intended measures in this area plus of course a wider focus on energy efficiency, all things green, and the cost of utility bills, has drawn this into a much sharper spotlight.
He said: “There are clearly very strong levels of awareness here and landlords appear to be actively considering their plans in light of what is likely to hit the statute books. The majority of landlords appear to be relying on savings in order to upgrade any properties below level C, however when they get to this point, that might not be achievable or indeed appealing, and mortgage advisers are likely to have to play a considerable role in helping their clients fund such work.”
