Energy efficiency has modest influence on house prices

house prices

According to Nationwide, A or B-rated properties attract a 1.7 per cent premium compared to D-rated properties, while a rating of F or G lowers the value of a home by 3.5 per cent

More needs to be done to make houses eco-friendly, according to a Swindon-based building society.

Nationwide analysed how much premium or discount new homeowners pay for a home because of a home’s high or low energy efficiency rating. It found that A or B-rated properties attract a 1.7 per cent premium compared to D-rated properties, while a rating of F or G lowers the value of a home by 3.5 per cent.

Senior economist Andrew Harvey said: Overall, our research suggests that, for now at least, energy efficiency has only a modest influence on house prices for owner occupiers, where an impact is only really evident for the best and worst energy efficiency ratings.

However, the value that people attach to energy efficiency is likely to change over time, especially if the government takes measures to incentivise greater energy efficiency in future to help ensure the UK meets its climate change obligations, he said.

De-carbonising and adapting the UK’s housing stock is critical if the UK is to meet its 2050 emissions targets, especially given that the housing stock accounts for around 15 per cent of the UK’s total carbon emissions, he said.

Energy efficiency has improved over the years due to better new-builds and improvements to existing properties. Nearly 40 per cent of homes sold in 2019 were rated C or higher, compared to 14 per cent in 2009, but 60 per cent are still rated D or below.

Mr Harvey added: The government aims to update as many homes as possible to energy efficiency rating C by 2035 ‘where practical, cost effective and affordable’, and aims for all fuel poor households, and as many rented homes as possible, to reach the same standard by 2030. Energy efficiency is better among the social rented stock i.e. properties owned by local authorities or housing associations due to tighter regulation.

Within the owner occupier sector there are significant differences in energy efficiency between those who own their property outright and those buying with a mortgage. In part, these differences reflect the different types and ages of dwellings within the two groups, he added.

Those with a mortgage are more likely to live in newer properties and flats, whereas those owning outright tend to live in older houses and are likely to be older themselves and have lived in their property for longer, Mr Harvey said.

So, those owning outright are less likely to live in the most energy efficient homes. For example, 31 per cent of properties owned outright by owner occupiers are rated A to C compared to 42 per cent of those owned with a mortgage. Those owning outright are also more likely to live in the least efficient homes – 18 per cent of those owned outright are rated E to G, compared with nine per cent of those owned with a mortgage, he said.

He said: Our housing market survey conducted earlier this year suggested around a third of homeowners looking to enhance their home cited an intention to improve energy efficiency or reduce the carbon footprint of their home.

Disclaimer: The opinions expressed by our writers are their own and do not represent the views of Getting Money Wise. The information provided on Getting Money Wise is intended for informational purposes only. Getting Money Wise is not liable for any financial losses incurred. Conduct your own research by contacting financial experts before making any investment decisions.

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