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House market faces rising profile of energy ratings on homes as buyers track cost of living

·2-min read
Energy ratings look set to play a bigger role in the housing market as the cost of living rises  (Rightmove)
Energy ratings look set to play a bigger role in the housing market as the cost of living rises (Rightmove)

As home owners face rising interest rates and the soaring cost of living, fresh research suggests the energy rating on homes is becoming a more important part of the housing market, while government plans for minimum green standards could hit renters.

Rightmove, the online property platform, has found that buyers are calling for price cuts on homes with the lowest energy performance ratings as they become more conscious of the green features of buildings. The trend comes ahead of potential government moves to make UK homes more energy efficient as part of national plans to reach net zero carbon emissions by 2050.

The findings come from Rightmove’s Green Homes Report, out today. It says sellers who have improved the environmental performance of their property have secured higher prices, typically by about 16% compared with those with no improvements. The study covered 200,000 homes listed on Rightmove that had sold twice, with an improved Energy Performance Certificate (EPC) rating the second time.

“It’s likely to be a gradual rather than a swift change, but we can already see the green price premium when improvements are made,” said Tim Bannister, Rightmove’s Director of Property Science.

Searches for green terms on Rightmove are becoming more popular with buyers, with “solar panels” rising from position 500 in its leaderboard of keyword queries to 98. “Heat Pumps” rose to 190 from 1000. The company said there are now 73% 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 also incentives for homeowners to make changes even if they are not intending to sell. Rightmove found the most popular one was lowering energy bills, followed by improving insulation and then reducing carbon footprints.

Government plans for rental homes to have minimum energy ratings -- set at a C-level EPC -- could mean that the remedial works required will cut the already limited amount of stock in the market, potentially lifting rents.

“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,” warned Bannister. “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.”

For buyers, it could be that as the UK moves towards its net-zero future, the energy ratings of homes will develop a more direct link with lenders.

“I don’t think it would be a surprise if in ten 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,” Bannister added.

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