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Do ‘Environmental’ improvements add value to your house?

25 October 2021 Category: Residential Conveyancing

Solar panel on a roof of a house and wind turbins arround - concept of sustainable resources

With the focus strongly on environmental issues in Scotland, especially as COP 26, the UN Climate Change Conference, takes place in Glasgow in November 2021, we take a look at whether “environmental” improvements will add value to your house.

Generally, environmental measures include things like double glazing, loft and wall insulation and adding solar panels to your roof and we’ll look at these things in turn.

Essentially, with rising energy prices and a strong focus on climate change, any efforts to improve the energy efficiency of your home may help financially contribute to reducing your carbon footprint and, potentially, increase its value.

Energy Performance Certificates

Properties being advertised for sale in Scotland need to have an Energy Performance Certificate (EPC). The EPC contains information about the property’s energy use and typical energy costs as well as recommendations about how to reduce energy use and save money. In addition, the EPC will apply an energy efficiency rating to the house ranging from A (being the most efficient) to G (being the least efficient). An EPC is valid for 10 years.

Energy Performance Certificates were introduced in 2008 and are needed when a property comes onto the market. This means we have over 13 years’ worth of data from which we can deduce some information on whether environmental improvements can add value to your house.

We also believe that as the focus on climate change and energy efficiency intensifies, the EPC rating will feature strongly in buyers consideration when they’re looking to purchase their next house.

Does having a good energy efficiency rating mean my house is worth more?

The short answer to the question appears to be “yes”. It does seem to be clear from the evidence available that the more energy efficient a home is, the higher price it will be able to command.

With rising energy costs, having a more energy efficient home means it costs you less to heat and light your home each year. When budgeting to buy, purchasers also consider running costs as well as the cost of any improvements required.

In addition, the Scottish Government has set a target of bringing all residential properties in Scotland into at least a “C” EPC rating by 2040. The current average rating in Scotland is “D”. That means those properties with a rating of “D” or lower will need to have money spent on them to improve their energy rating and that is likely to make them less attractive to potential buyers.

We are also aware that the UK Government is considering requiring mortgage lenders to publish average EPC ratings of the properties they lend on. This is likely to create new pressure on them to favour more energy efficient homes when making their lending decisions. This may also lead to lenders lending more to buyers for energy efficient measures.

As a result, the better the EPC energy rating, the cheaper it will be to heat and light each year and having a lesser requirement to carry out environmental improvements.

There are no hard or fast statistics available at the moment but analysis from price comparison website, MoneySupermarket.com suggests that moving a house from EPC ranging "D" to "C" might increase the value of a property by around 2%. That equates to around £3,500 for the average Scottish Property. If the EPC rating is improved from "D" to "A"/"B", this is likely to increase the value by 6% which would mean a premium of £10,000 for the average Scottish Home.

What environmental measures can I take to improve my EPC Rating?

Typical environmental measures include double glazing, loft and wall insulation. You could add to that more efficient heating systems or installing solar panels or a wind turbine – although most residential properties simply don’t have the space required to erect a wind turbine and it’s unlikely you’ll get planning permission even if you wanted to!

Whist the EPC will indicate the improved rating you will be able to achieve by installing, say, double glazing, it may take many, many years to realise the return on that investment. In fact, double glazing might give you the least return on your investment because in terms of energy payback, it could take you nearly 100 years to recover the initial outlay. However, most buyers see double glazing as an essential element when considering a house purchase and would be willing to pay more for a house that is double glazed, than one that isn’t.

There are some relatively inexpensive things you can do to improve your energy rating. You could ensure you have the correct level of insulation in your loft or make sure you are using low energy lighting throughout your house. You need to be careful with cavity wall insulation because you shouldn’t do that with timber framed houses!

There is much debate at the moment about solar panels and the return you will get from them. The installation costs of solar photovoltaic panels will cost you around £5,000 but will only save you around £300 each year in your energy bills. Based on those figures, it is likely that the return on the investment would take nearly 17 years. However, if the installation of solar panels were to raise the value of your house by, say, £2,500, then that would mean the payback period would reduce to around 8 years.

So, as climate change remains a “hot topic”, the EPC rating of your home might become a critical factor for buyers. What does seem to be clear from the statistics is that properties with a higher EPC rating tend to command a higher price than the equivalent properties with a lower EPC rating.

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