Landlords scramble to buy eco properties to avoid £10k upgrade costs
Green Energy, Renewable and Sustainable Resources. Environmental and Ecology Care Concept.

Landlords scramble to buy eco properties to avoid £10k upgrade costs

Buy-to-let investors in London buy the most energy efficient homes.

Landlords are scrambling to buy energy-efficient properties in a bid to get ahead of costly eco upgrades that could potentially land them with a £10,000 refurbishment bill.

Half of all homes bought by investors in 2021 had an energy Performance Rating of C or above.  This was a record high, and up from a third of buy-to-let purchases in 2020, according to London estate agency Hamptons.

Landlords are unsurprisingly steering to more eco-friendly investments ahead of Government targets to ensure all new lets have an EPC rating of at least C by 2025, and by 2028 for existing lets.

The new rules are still to be finalised so there is still a little confusion as to the finer details, but they are expected to land investors with a potential bill of £10,000 per property to make any required upgrades. Landlords who miss these deadlines could be fined up to £30,000.

Given it will prove impossible for all homes to secure an EPC rating of at least a C without significant cost, it’s very likely that older homes will become considerably less attractive to landlords.

Investors will therefore focus their strategy on buying new-builds, with rental homes becoming concentrated in blocks or streets where properties already hold a C rated EPC certificate, or where it’s possible to achieve this without significant work.

The share of landlords purchasing property with an EPC rating of A to C surged last year.

The share of landlords purchasing property with an EPC rating of A to C surged last year which is understandable given the potential cost of meeting EPC targets by 2025.

Investors are increasingly turning their attention to newer build homes, especially flats, which typically have better EPC ratings.

This trend has contributed to a North-South divide between the energy efficiency of rental homes, with landlords in London buying the most efficient buy-to-lets in England and Wales.

In the capital, over 65% of homes bought by investors during 2021 already had an EPC rating of C or above. Meanwhile, just 34% of Landlords in the North East bought a buy-to-let with a rating of between A to C.

Investors keen to get ahead of the incoming eco rules have been buoyed by a growing number of banks and building societies offering lower mortgage rates to landlords buying more energy efficient properties.

More and more lenders are offering these ‘green mortgages’ to landlords according to buy-to-let brokers.

Lenders are now willing to offer landlords preferential mortgage rates if they are buying a property with a higher EPC rating, so there is an increase in investors doing just that.

Landlords are saving on their finance costs and avoiding having to do work on properties they are buying now, to make sure they meet these requirements when the regulations change in 2025.

 

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