There has been a sharp rise in the number of buy-to-let landlords investing in energy-efficient properties.
According to research by estate agent Hamptons International, 50% of all homes bought by landlords fall into the top three ratings of energy efficiency. Just two years ago, this figure was just one third.
There are, however, regional differences. In London, 66% of homes bought by investors fell into the top three energy efficiency categories. The figure for the North East of England, however, was as low as 34%.
Why are landlords buying energy-efficient properties?
Currently, all rental properties must have an energy performance certificate (EPC). This assigns the property an energy efficiency rating between ‘A’ and ‘G’. ‘A’ is the most energy efficient, while ‘G’ is the least.
Since April 2020, landlords have mostly not been able to let properties with an energy rating below ‘E’. There are a few exemptions.
However, if government proposals are implemented, all new tenancies must be in bands A-C by 2025. All rented homes will have to be in those bands by 2028.
The rising popularity of energy-efficient properties, therefore, is being driven by landlords who are looking ahead to the future. The Telegraph says that the cost of upgrading less efficient properties will be in the region of £10,000. In addition, landlords who miss deadlines to upgrade properties will face fines of up to £30,000.
It’s no surprise, therefore, that landlords are investing in new builds and upgraded properties. By doing so, they are avoiding potentially hefty bills in the near future.
Another motivation for landlords is the growing number of lenders offering lower mortgage rates for energy efficient homes. Lower finance costs combined with no upgrade costs is an attractive package for many landlords. The Financial Times reports that research from Shawbrook Bank found that one in five landlords did not have the funds to improve their properties in line with EPC requirements.
Should I consider investing in energy-efficient homes?
If you’re a landlord, it’s certainly a good time to look at your portfolio. A quarter of landlords don’t know the EPC rating of their properties, while over a third of privately rented homes were built before 1940.
If the government energy rating proposals come into force, landlords of older, less energy efficient properties, could well be facing large bills. Add to this the plans to ban the sale of new gas boilers by 2035 and many landlords already face the cost of installing heat pumps.
So, if you’re a THP client you’d like help reviewing your portfolio, get in touch today. If you’re looking for a new accountant, then we’d also like to hear from you.
About Jon Pryse-Jones
Since joining THP in 1978, Jon Pryse-Jones has been hands on with every area of the business. Now specialising in strategy, business planning, and marketing, Jon remains at the forefront of the growth and development at THP.
An ideas man, Jon enjoys getting the most out of all situations, “I act as a catalyst for creative people and encourage them to think outside the box,” he says, “and I’m not afraid of being confrontational. It often leads to a better result for THP and its clients.”
Jon’s appreciation for THP extends to his fellow team members and the board. “They really know how to run a successful business,” he says. He’s keen on IT and systems development as critical to success, and he continues to guide THP to be at the cutting edge and effective.