Buyers willing to pay 10% premium for energy efficient homes

Its study - which surveyed more than 2,300 UK based homebuyers and owners, estate agents and mortgage brokers - found that buyers are placing an average 9.4% premium on homes that have already been retrofitted. 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.

Estate agents also report that buyers are paying an average 15.5% more for a home that meets high energy efficiency standards, with over a third (36%) reporting buyers are paying more than 20% extra in their area. And the majority (79%) say they are seeing more buyers ask about energy efficiency than they were twelve months ago.

The study 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.

And when asked what they would be most likely to invest in for their home today, 36% of people picked an energy efficient boiler while only 27% chose the more traditional upgrade of a new kitchen.

While the research found evidence that consumers are increasingly aware of the benefits of having and buying a green home, it also suggested a knowledge gap when it comes to understanding what they need to consider to make their homes more energy efficient.

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.

However, more than half (58%) of respondents did not know what EPC stood for, and 60% people did not know the EPC rating of the property they currently live in. Only 15% of people would strongly agree that they have found it easy to access information about energy efficiency.

The importance of getting to grips with an EPC is underlined by the fact that estate agents say, on average, it’s taking them up to four months longer to sell properties with a poor EPC rating.

Graham Sellar, head of mortgages at Santander UK, commented: “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.

“But 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.”