EPC ratings having a big impact on house prices
A recent report by Savills says that new buyers are more attentive than ever to the energy rating of properties, and those with higher scores and heat pumps are selling for higher values.
One of the most important considerations for new buyers has become the energy saving credentials of the properties that are deciding to buy. 59% of enquiries told Savills that they were willing to pay a premium for any properties that were primarily powered by renewable energy. This comes as more consumers are aware of the environmental impact from housing, but also as traditional energy bills soar.
On top of this almost three quarters (71%) said that the EPC rating (energy performance certificate) plays an important role as to whether they purchase a property or not, and this number has been increasing rapidly. Nearly a third more people are putting more importance on the rating this year compared to last.
“Faced with increasing energy prices, homes that offer more cost-efficient monthly alternatives – such as homes with heat pumps – are climbing higher up buyers’ wish lists when searching for a new home,” said Lawrence Bowles, residential research analyst at Savills.
Despite the governments new emission reduction plans most homes in the UK still use oil and gas for cooking, heating and hot water, which has a combined impact of creating a fifth of the UK’s carbon emissions.
Especially as household energy bills spiral due to market conditions, and Autumn promising to bring further increases, homeowners and renters are looking for ways to reduce the outgoings on heating and electricity bills. One way to do this is to live in properties with lower reliance on fossil fuels and inefficient heating.
Recent government considerations have started to be implemented, with talks of banning gas boilers in all new-built homes from 2025, and the potential to ban all sales of new gas boilers from 2035. This would mean that all new heating installations would have to be either converted to use fuels such as hydrogen, or replaced entirely with new low-carbon systems.
One of these systems is electrical heat pumps – whereby residual heat from the outside is collected and concentrated before being pumped indoors. In fact, the government has set a target of installing 600,000 heat pumps in the next 6 years, and is planning to offer grants of up to £5,000 to allow people to install the pumps and other low-carbon boiler replacements.
An impact of this, however, is that property values tend to be higher with these systems installed, potentially due to the cost of installation. Savills found that there was a marked difference between the price of these and traditional heating systems in analysis of the average house transaction value between 2019 and 2021.
There is also still a large north / south divide when it comes to property heating. In London and the southwest there are more properties with low emission heating, whereas in the northeast almost 90% of houses still use mains gas.
Community heating schemes – where heat from a central source supplies multiple dwellings via a network such as in a newer development – obtain the highest average prices. These homes typically have average prices of over £550,000, and those with heat pumps have an average value of £483,935, according to Savills.
“In many areas housing values would not necessarily support the investment in newer and cleaner forms of heating,” Bowles said. “It also highlights the enormous challenge set by the zero-carbon agenda targets and the uphill battle ahead that we face.”
The proposed subsidies from the government, allowing improved home insulation or adding solar panels, may assist homeowners in lowering their homes’ environmental impact, however more investment will almost definitely be needed to allow the UK to reduce its reliance on fossil fuels.
This is especially true in the countryside, where almost half of all properties use oil for heating. This reliance is causing concern in rural communities, and their dependence on oil deliveries. This is shown in the Savills report as more and more buyers in the countryside are looking for places with heat pumps already installed, or the space to add them post purchase.