House prices only ‘modestly’ affected by a higher energy rating says Nationwide

Higher energy efficiency ratings have a ‘modest influence’ on house prices, according to data by Nationwide Building Society.

An energy efficient property rated A or B has a premium of 1.7 per cent compared to a similar property rated D, the most commonly occurring rating, Britain’s biggest mutual says. 

The 1.7 per cent premium is the equivalent to £4,150, based on the £244,229 average value of a home.

It comes as the Government attempts to have as many homes as possible with an energy efficiency rating of C by 2035.

Among measures it wants to introduce are a ban on the installation of gas boilers and the fitting of more heat pumps.

But for some, such energy efficiency changes may not be practical or affordable given their cost.

The average cost to improve a property to an energy efficiency of band C is £8,100, although the cost is considerably higher for properties rated F or G, according to separate figures from the Government’s English Housing Survey.

The Government also wants to to enforce a compulsory energy performance certificate rating of ‘C’ on new tenancies by December 2025, and on all rented properties by December 2028.

However, one third of landlords are ‘not confident’ they would be able to get their properties up to code.

Nationwide’s research also suggested that there is little difference for properties rated C or E compared with D. 

It compared the price paid for a property with its various property characteristics, such as the property type, age, and number of bedrooms, as well as its energy efficiency rating.

It said that this allowed it to isolate and measure the price impact of the energy efficiency rating.

There is a more noticeable discount for properties rated F or G, the lowest energy efficient ratings, equivalent to 3.5 per cent compared to a similar D-rated property.

There is a more noticeable house price discount for properties rated F or G, according to Nationwide

Figures show that 40 per cent of homes are rated C or higher, up from 14 per cent in 2009

Andrew Harvey, Nationwide’s senior economist, said homes needed to be adapted if the country was going to meet its emission targets.

He said: ‘Decarbonising 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.’ 

‘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,’ he said.

‘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.

While Nationwide said that the energy efficiency of the country’s housing is gradually improving, it claimed there was still a way to go.

Mr Harvey said: ‘In the past 10 years energy efficiency has improved significantly thanks to the higher energy rating of newly-built properties, and the improvements carried out on many existing homes, such as loft and cavity wall insulation.’

The most recent data from the Government’s English Housing Survey in 2019 revealed that 40 per cent of homes are rated C or higher, up from 14 per cent in 2009. However, it means that 60 per cent is still rated D or below.

Mr Harvey concluded: ‘The pace of energy efficiency improvements is relatively slow given the scale of the challenge.’