Correlation between higher energy ratings and higher property values
More home buyers looking for green features
Clear link between making green improvements to a home and its value increasing
The importance of improving the green credentials of our homes is highlighted in a newly-published report, not only in relation to tackling climate change and rising energy costs, but due to a correlation between higher energy ratings and higher property values.
The Rightmove Green Homes Report July 2022 shows that there is a clear link between making green improvements to a home and its value increasing. The report states that an analysis of 200,000 homes which were listed for sale on Rightmove, and later came up for sale again with an improved energy rating, showed that homes going from an EPC (Energy Performance Certificate) F rating to a C rating added 16% to the home’s value. This premium is over and above the local house price growth the home may have benefitted from since it was previously sold.
The average EPC rating of a home in the UK is D, so the homes with the lowest ratings of an E to a G are likely to be the first to begin seeing buyers trying to negotiate discounts.
Other key takeaways from the report are:
- More home-hunters are taking notice and looking for green features on Rightmove, and more agents are using them as selling points.
- Recently EPC B-rated houses became the quickest type to find a buyer, overtaking D-rated houses.
- There’s a clear wish from home-owners to make improvements such as installing solar panels, but there are many obstacles.
- People want to make changes. A number can’t afford the changes, and many don’t know what to do.
It’s interesting to note that there are now 73% more green features in property listings compared to 2020.
Buyers are becoming more conscious of green features when looking for their next home, with features such as solar panels and heat pumps climbing the rankings in Rightmove’s keyword sort tool.
Searches for solar panels have risen from position 500 in November 2020 to position 98 in June 2022, and heat pumps have risen from 1,000 to 190.
Green terms such as ‘sustainable’ and ‘low carbon’ are being used by agents as selling points in their property descriptions on Rightmove.
Better rated homes could sell more quickly
There are very early signs that better rated homes could sell more quickly than poorly rated ones. EPC B-rated houses were the fastest type of home to sell over the last few months (30 days), overtaking EPC D-rated houses for the first time (31 days), although the difference so far is only one day quicker.
A total of 89% of home-owners say saving money on energy bills is the biggest reason for making improvements, while 62% of home-owners would consider installing solar panels in their home.
Saving money on energy bills is a main reason for people to make green improvements, however there are many people who want to make these changes to help increase the value of their home, and to futureproof it for when they come to put it on the market.
The report gives the top five reasons people would make green improvements as:
1 (89%) To save money on energy bills
2 (55%) To improve the insulation in their home
3 (49%) To reduce their carbon footprint
4 (41%) To add value to their home
5 (28%) To help sell their home in the future
The report states that green improvements not only command a higher price, but are also likely to create more buyer interest in the coming years.
More energy efficient home reason for moving
It also says that around one in 10 people actively looking to move home in 2022 give moving to a more energy efficient home as their reason for moving. It’s clearly not the main reason yet, with space and moving nearer to family and friends a higher priority, but it does show that an EPC rating may move up in their key considerations.
Rightmove’s Director of Property Science, Tim Bannister, said:
“Improving a property’s green credentials is critically important as the UK strives to hit Net Zero.
“The immediate challenge is the sheer number of properties that are currently below an EPC rating of C and the costs involved to fix this.
“There has been much debate about what could happen in the future to homes with poor energy efficiency, and the government has said they will make sure these homes can still get mortgages.
“But 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.”