EPC Ratings Influence Property Value New Research Suggests

6 June 2024 – Location and property type may have been the most significant factors affecting a property’s value. However, a new green feature has become a non-negotiable for many buyers in recent years.

In light of recent reports, EPC ratings may have more weight than sellers initially think.

What are Energy Performance ratings?

An Energy Performance Rating indicates how energy efficient a property is. The rating considers all aspects that may contribute to energy use, including windows (triple-glazed or not), insulation, heating, and other related factors.

A grade-A home will have the lowest costs because it is the most energy-efficient out of the lot.

Meanwhile, a property with a G rating has the lowest classification and will likely incur the highest running costs.

Furthermore, the certificate will also specify which areas need improvement (if any).

How important is an EPC rating?

It’s no secret that an Energy Performance Rating is a legal requirement before an owner can rent or sell a home. For example, letting out a property with a rating below E is illegal (of course, this comes with exemptions).

The importance lies in making sure your property has higher energy efficiency ratings.

Despite the recent Ofgem energy price cap, energy and gas bills are still expensive. Most buyers nowadays seek homes that can save them money in the long run. Utility costs may be significantly reduced if a home already has energy upgrades or has the potential for one.

Aside from this, environmental awareness is now becoming a deciding factor in many buyers’ minds. It’s understandable why many are looking for energy efficient properties.

How will EPC ratings affect me as a seller?

If that’s not enough to persuade you, research by Morningstar revealed that energy efficiency can heavily influence a property’s value.

An analysis of housing transactions from 2013 to 2023 revealed that the average price per square metre of an E, F, or G EPC rating was £3,508.

On the other hand, those that had an A, B, or C rating went for £3,643 per square metre.

A difference of £135 per square metre may not seem much. But, considering that an average UK home is around 97 square metres, it adds up.

Sellers may miss out on a price difference of more than £13,000 between a lower and higher EPC-rated property.

Nigel Bishop of the buying agency Recoco Property Search also mentions a rising trend of EPC-related inquiries by buyers. Depending on the rating, properties can fetch as high as 15% on a premium.

Overall, it seems pretty clear-cut. As a seller, it would be best to ensure your property has the highest EPC rating you can manage or at least have the capacity for eco-related upgrades.

How can I improve my EPC rating?

Your certificate has a section dedicated entirely to recommended changes. You may make improvements based on these suggestions.

In general, there are many small changes you can implement. Even switching your light bulbs to LEDs can make a difference. You may also upgrade your windows to double—or triple-glazed ones. Check your insulation and ventilation to see if everything works as intended.

If you’re ready to splurge, you can purchase renewable energy technology, such as solar panels and wind turbines.

Realistically, making these changes isn’t for everyone.

Knight Frank analysed 30,000 properties that recorded better energy performance within five years. These improvements were based on recommended measures indicated on the EPC certificates.

The report estimated that upgrading a home from a D to a C rating could cost homeowners around £5,500. This figure doubles for properties currently with an F or G rating. 

If this is too hefty, there are plenty of options to finance your home improvement plans. One of them is remortgaging your property to release the equity. But as with all major decisions, this has to be made under careful consideration.

Our opinion

It’s not really a surprise that buyers are looking for homes with good EPC ratings. The shock of soaring energy bills after Russia’s invasion of Ukraine has brought energy efficiency in the home into focus.

More than ever, people want homes that are cost-effective to run to prevent soaring bills in the event of anything happening in the world. Environmental concerns have been in people’s minds for a while, which is proven by the above-mentioned research.

Because the installation of solar panels or heat pumps is rather expensive, many people look for homes that already have them. We were certainly pleased to find a house that already had solar panels installed.

So if you are considering improving the energy efficiency of your home, but are concerned about the investment needed, you now can be more confident, knowing that your home is likely to fetch a higher price if you do make the improvements.

And that’s surely a good thing.