Homebuyers are willing to pay a “green premium” of nearly 10% in order to secure a more energy efficient home, according to a new report from Santander.
The study – Buying into the Green Homes Revolution – surveyed more than 2,300 UK-based homebuyers and owners, estate agents, and mortgage brokers, finding that buyers are placing an average 9.4% premium on homes that have already been retrofitted with energy efficiency upgrades.
This equates to an average increase of £26,600 based on the average UK house price of £283,000 – over twice as much as the average £10,000 it costs to make energy efficient upgrades to a property.
Hitting high marks on energy efficiency standards reportedly leads to an even bigger premium, with estate agents reporting that this is securing sellers an average of 15.5% more for such a home, with over a third of agents reporting that the premium is over 20% in their area. 79% also said more buyers are asking about energy efficiency than 12 months prior.
It therefore comes as no surprise that the study also found that would-be buyers now rate energy efficiency as one of the most desirable features of a home. While there was a trend during the Covid-19 pandemic for buyers to want a bigger garden or home office, energy efficiency is now cited as more attractive than these features as rising energy costs become a concern.
“There appears to be a clear increase in the desirability of energy efficient properties as people face the reality of rapidly increasing energy bills, with today’s buyers more likely to pay a premium for a retrofit than a fitted kitchen,” said Graham Sellar, Head of Mortgages at Santander UK.
As part of its net zero aims, the UK Government has a stated aspirational target that all homes should have an EPC rating of C or above by 2035. Currently only one third of UK homes meets this target, meaning an estimated 19 million homes need retrofitting, yet three in five respondents did not know the rating of their property. Sellar added:
“There is a huge amount of work to be done to ensure homeowners understand the changes they need to make and the importance of both the economic and environmental benefits of making them. Lenders, government, construction companies and others in the housing industry need to come together to support people and policies that will drive forward widespread change.”
Santander has put together five recommendations for Government to deliver the support needed to ensure net zero targets are met:
- Enhance the existing EPC ratings framework while working to develop a more robust and accurate energy performance certification scheme. EPC ratings need to be independently verified, more consumer friendly, and regularly updated, to allow timely data to be accessed from an easily accessible central database.
- Introduce a standardised toolkit backed by the Energy Savings Trust (EST) that could be given to consumers at every home financing and refinancing opportunity. This would be supported by a government-led awareness raising campaign to launch the introduction of the toolkit and signpost to it as a central source of information
- Explore how taxation could be used as a lever to drive demand, for example Stamp Duty rebates for homebuyers who have invested in retrofitting property they have bought
- A clear and realistic timeline for improving minimum energy efficiency standards (MEES) for domestic private rented and owner-occupied properties
- Establish the skills infrastructure and capacity for retrofitting at the necessary scale. This should include introducing a new qualification
