Is it worth it to increase the EPC Rating of my home? How much value does a higher rating add to the price of my house? If you're entering these on your favourite search engine, then you've come to the right place. In this blog, we will be discussing the effects of a EPC higher rating to the desirability, market price, and rent of your property.
EPC Rating as an Investment Outline:
The Greener Homes Movement
According to Wikipedia, the United Kingdom is experiencing drier summers and wetter winters, and three heatwaves ravaged the country in 2022 alone. Couple that with the ever-increasing energy prices and you've got the perfect recipe for tenants getting more and more conscious about the sustainability of their homes.
In case you're not familiar, sustainable and environmentally friendly housing has been on the rise in the UK, and this movement has been gaining traction in recent times, especially in 2022. This is partly due to the growing awareness of the impact of climate change, which has been made more evident by heat waves and worsening weather conditions.
How does this affect the UK Property Market?
1. Higher EPC Rating Commands Higher Price
Rightmove's Green Homes Report, published in July 2022, indicates that upgrading your home's Energy Performance Certificate (EPC) rating from F to C could increase your property's value by an additional 16%. This increase in value is in addition to the appreciation in the housing market and as such, landlords should consider improving their EPC rating before putting their property up for sale.
…upgrading your home's Energy Performance Certificate (EPC) rating from F to C could increase your property's value by an additional 16%.
For properties with ratings in the middle, the report has also provided this diagram below to show the estimated value added when improving your home:
Source: Rightmove Green Homes Report July 2022
From the image above, small steps could lead to a 4% increase in the value of your home. Focusing on smaller green renovations may yield you a small profit while helping the environment.
2. Higher EPC Rating Homes are Sold Faster
A vacant house that's awaiting sale is simply incurring costs. By obtaining a higher EPC rating, not only can you potentially earn more, but you're also more likely to attract potential buyers. The report also states that, on average, houses with a B rating are now being sold faster than those with a D rating.
3. Tenants are Willing to Pay a Premium for Greener Homes.
In 2022, renters are willing to pay a premium of 13% for an energy-efficient home.
How much of an effect do you think have the energy prices affected tenants? How about the recent heat waves? In 2022, renters are willing to pay a premium of 13% for an energy-efficient home. Similar to house appreciation, this premium is also on top of the rental growth of the market.
As people become increasingly conscious of their impact on the environment, they may be more inclined to pay a higher rent for a home that has been constructed/renovated with eco-friendliness in mind. Paying a higher rent for a home that offers superior energy efficiency can benefit you financially, as the money that would have been spent on utility bills can now be kept in your pocket.
Green Initiatives
Sustainable homes often require a higher upfront investment than traditional homes, which can be a barrier for some property owners. However, there are several financing options available, such as green mortgages and government grants, which can help to make sustainable housing more accessible.
Green Mortgages
According to the World Green Building Council: "As an incentive for the borrower to either buy a green building or renovate an existing one to make it greener, the bank would offer them either a lower interest rate or an increased loan amount." With this, your monthly repayments might be comparable to a regular mortgage but with the added benefit of a higher EPC rating, which translates to higher property value and rent.
Government Grants
In light of England's net zero goal for 2050, the government is making substantial investments in grants such as "Help to Heat." Property owners are highly encouraged to check the requirements to determine their eligibility for any of the grants available.
As an Investor, is it Worth it to Pursue a Higher EPC Rating?
We can't give you a straight answer as it will depend on your circumstances. Do note that new tenancies must have an EPC rating of C by 2025 (2028 for existing tenancies) so you may not have much of a choice. Consider your options right now to avoid the headaches in the future.
Now that you have obtained the estimated increase in rent and property value, you should be able to calculate and assess if the green investment will generate profits. If you're not sure how to do it or just feeling like you need some assistance, then why not check out Property Store?!
How can Property Store help?
Property Store is a Property Management CRM Software designed by property investors for property investors. With our Investment Calculator, you can check the profits (or losses) in making your properties greener. Whether its for a Buy-to-Let or Flips, you can make sure that each of your investments is profitable.
For new investors, Property Store will help you by lowering the barriers to entry into the industry since our CRM is currently the best property management CRM in the market to build your portfolio.
What are you waiting for?! Sign up to Property Store now and get your first week free!
Still not convinced? Click here to attend our free webinar where we will show you how Property Store can support you in your property investing business.
Want to see more? Head over to our features page where we recorded a live demo that you can watch to see Property Store in action.
Got a question? Check out our Frequently Asked Questions Page for answers to common concerns or you can contact us here.
Looking to sell your home? Check out our blog about Property Valuation that will help you determine the market price of houses in the UK!
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