The relationship between energy efficiency of homes and their future value
In summary in this article explains why you should invest in energy efficiency improvements for your home and why it affects home values. Please note some of the calculations are approximate and are base on information that is publicly out there. Each and everyones actual payback may be different.
Energy Performance Certificate.
We will start with the EPC. The EPC (Energy Performance Certificate) is two metrics in one.
1. Energy performance or Energy Rating Score
2. The Environmental impact of the property
The first is mostly to do with energy efficiency, and the second the CO2 production of the property.
Why do these metrics matter. Simply because the government has global mandates to reduce CO2 emissions of dwellings. The government will be penalised if it does not meet the set targets, so it is important for encouragement to reach these target in the forms of schemes, subsidies and support where possible.
EPC Minimum standards for rentals
- Since April 2023 all rentals are subject to minimum E rating
- There are proposals for a minimum EPC requirement of C by 2025 for new tenancies and 2028 for all existing tenancies.
- This will then rise to EPC requirement of B by 2030.
Mortgage Providers and EPC ratings
Mortgage providers are starting to emerge which provide better rates of mortgate for higher EPC ratings. Currently the best mortgage rate is still similar to a EPC linked mortgage, although you can bet this won’t remain the case for too long, as mortgage providers, banks and developers liability will increase if their homes are not energy efficient when the goverment start increasing the pressure on higher energy efficiency. At this point, lower mortgage rates will be provided to better efficient homes.
A home that costs more to run in energy is more of a liability to home owners and renters, therefore a home with low energy needs will command more value. So with the information provided in the previous paragrahps, you can see that a more energy efficient home will command higher value due to demand by consumers and also due to the set targets. The question becomes if you have 2 identical homes with one of them with higher efficiency and therefore lower longterm liability, you will be prepared to pay a higher premium for that home.