Homeowners could boost the value of their property by around £13,000 on average by improving its energy efficiency, research suggests.
High energy bills and unpredictable weather have made greener homes more desirable when buying a property.
Better-insulated homes can better protect a property and hopefully bring household bills down.
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That is particularly important with the rate of inflation remaining high.
A home’s green credentials are judged by its energy performance certificate (EPC), which provides a rating of A to G.
The certificate highlights how energy efficient a building is by looking at factors such as insulation, heating controls, windows and structure while suggesting areas of improvement.
The highest is A and the lowest is G.
The lower the rating, the more it could cost to heat or ventilate a property, while more work may be required to improve it.
Research by Morningstar has found that while features such as location and property type are the main pricing factors, energy efficiency can play a role in setting house prices when it comes to selling your home.
Its analysis of a decade of housing transactions between 2013 and 2023 found the average price per square metre of an E, F or G EPC rated property was £3,508.
In contrast, homes with an A, B or C rating attracted a price of £3,643 per square metre.
That may not seem like a lot but based on the average size of a UK home of 97 square metres, according to the English Housing Survey, a low-rated EPC home could cost £340,276 on average compared with £353,371 on a highly-rated property – a difference of £13,000.
It is a trend that buyers and even developers are recognising.
A new development in north London called The Luxley, which uses air source heat pumps and has its own living wall green feature to capture and store atmospheric carbon dioxide, already has an EPC rating of A.
Nigel Bishop of buying agency Recoco Property Search say good eco-credentials and sustainability have become a deciding factor in recent years and many buyers are enquiring about EPC ratings or a property’s potential for eco-related upgrades.
“Depending on the EPC rating, some properties can demand a premium of around 15%,” says Bishop.
“We have previously encountered house hunters who put good eco-credentials and low running costs at the top of their list and heard of the ever increasing popularity of today’s modular homes such as Huf Haus and Baufritz.
“These types of properties have evolved drastically over the past years and now impress with highly bespoke, modern designs that are both high-end and eco-friendly.”
Is an EPC a legal requirement?
Currently, properties rented out by landlords must have a minimum EPC rating of E.
There were plans to raise the minimum to C but these proposals were scrapped by Prime Minister Rishi Sunak in October 2023.
UK property listings are also required to have an up to date EPC when being marketed for sale.
EPCs should be included when viewing property listings either on an estate agency website or on portals such as OnTheMarket, Rightmove and Zoopla.
You can also search for EPCs at: https://www.gov.uk/find-energy-certificate.
Does an EPC increase property value?
There is plenty of research that shows greener homes command higher prices when purchasing a property and for tenants.
Premiums for more energy efficient homes range from 6%, according to Barclays, to more than double at 15%, based on Santander research.
A higher EPC rating may therefore attract buyers and convince them to make a higher offer or could encourage tenants to pay higher rents.
Research by Knight Frank last year found that 13% of renters are willing to pay a premium for a low carbon property.
Additionally, the Mortgage Advice Bureau suggests 74% of prospective homebuyers consider properties with an EPC rating of an A or B as more attractive to buy.
“The high energy costs we’ve experienced in the UK over the past couple of years have hit many people’s finances, stretching budgets to the limit,” says Ben Thompson, deputy chief executive at Mortgage Advice Bureau.
“As a result, any means to cut back on spending, particularly on energy bills, has become a bigger priority for prospective homebuyers.”
Jeremy Leaf, north London estate agent and a former RICS residential chairman, says EPCs have an "increasingly important role" in property marketing.
"The steep rises in energy costs recently, partly prompted by the war in Ukraine, have concentrated minds and pushed enquiries on the subject up the list when someone is viewing a property, whether to buy or rent," he says.
"We don’t often see a direct impact on sales prices as such but if the rating is quite low, it tends to draw attention."
Leaf says the uplift in gas and electricity prices has had more impact on lettings where rents can be affected by a good or bad rating.
"If you are renting out a property, it can be worth the effort in improving the EPC because prospects for energy costs are likely to go one way," he adds.
"If you regard yourself as a longer-term landlord you might find you have a more attractive property if it has a good EPC rating, particularly if there is a lot of property on the market at that particular time."
But buyers shouldn’t rely on EPC ratings alone. Recent analysis by Which? questioned how accurate the ratings are.
The consumer watchdog said that while EPCs can be effective in supporting consumers, the information isn’t always clear.
Overall, Morningstar’s research suggests there are better financial rewards for homeowners or landlords if a property has a low EPC rating.
“The increase in value resulting from improving a particularly low EPC level is higher than that obtained by improving higher efficiency properties even more,” the report says.
“The positive impact of higher energy efficiency on price diminishes as the EPC level improves.
“A property with a high efficiency level would have a higher price on average with respect to a property with a low efficiency level.”
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