Northern landlords see strongest returns with energy efficient properties, study finds
The Mortgage Works highlighted a growing regional divide, with northern markets delivering the most compelling case for investing in energy efficiency.
Landlords in the North of England are seeing the strongest financial returns from energy-efficient rental properties, with higher house price and rental premiums helping many recoup upgrade costs within five years, according to data from The Mortgage Works.
The research highlighted a growing regional divide, with northern markets delivering the most compelling case for investing in energy efficiency, while returns remain more limited in the South.
Properties with top energy ratings, Energy Performance Ceritificate ratings (EPCs) of A or B, now command a 12.2% price premium compared to D-rated homes, alongside an 8.1% rental premium.
This is equivalent to around £85 per month.
Both figures have increased year-on-year.
In the North of England, the benefits are even more pronounced.
A or B-rated properties attracted a 19.1% price premium and around a 13% rental uplift, the highest in the country.
This compared with more modest gains in London (6.9% price premium) and the South (9.4%).
The findings revealed that, when combined with relatively lower upgrade costs in northern regions, many landlords are able to recover their initial investment within five years, particularly when improving properties from EPC band D to C.
However, the cost of upgrading varies significantly depending on property type and age. #
Pre-1919 homes – making up nearly a third of the private rented sector (PRS) – require an average investment of around £10,700 to reach EPC band C, compared to just £2,500 for homes built between 2003 and 2013.
Terraced properties, which account for around a third of rental stock, required approximately £7,900 on average.
Encouragingly, energy efficiency across the sector has improved over time, with 51% of private rented homes now rated EPC A to C, up from just 25% a decade ago.
London has the highest proportion of efficient homes, with around 65% rated C or above, while regions such as the East Midlands and Yorkshire and the Humber lag behind, with just over a third meeting that standard.
Dan Clinton, head of buy-to-let at The Mortgage Works, said: “Decarbonising and adapting the UK’s housing stock remains critical if the UK is to meet its net zero target by 2050, especially given that emissions from residential buildings account for 15% of the country’s greenhouse gas emissions.
“Government policy requiring landlords to improve the energy efficiency of their properties forms part of these efforts.
“Current proposals for the minimum energy efficiency standards (MEES) will require all rental properties to meet EPC band C from 2030 (subject to a cost cap and some specific exemptions).”
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