Introduction
A new rental market study conducted by Rightmove reveals an encouraging trend in the housing market. A growing number of properties that were previously for sale and are now entering the rental market boast an Energy Performance Certificate (EPC) rating of C or higher. Landlords are proactively investing in higher-rated homes to stay ahead of potential legislation changes. This shift aligns with the latest government plans, which propose that all rental properties should achieve at least an EPC C rating by 2028. Let’s delve into the key findings and understand the implications for the rental market.
Rise in Higher EPC Rated Properties
Since January 2019, the proportion of rental properties entering the market with an EPC rating of A to C, previously intended for sale, has surged by an impressive 16%. Conversely, the proportion of rental homes with a D to G rating, previously on the market for sale, has declined by 11%. These statistics clearly demonstrate the growing preference among landlords for properties with better EPC ratings.
Changing Landlord Attitudes
A survey conducted by Rightmove among landlords further reinforces the findings. Over 61% of landlords stated that they would not consider purchasing a property below a C rating, a significant increase from 47% the previous year. Additionally, a notable 33% of landlords who own lower EPC rated properties expressed their intention to sell rather than undertake improvements to raise their EPC rating. This figure reflects a rise from 20% in the preceding year.
Increased Awareness of Legislation Changes
The survey also revealed that more landlords are now aware of the proposed changes to EPC legislation compared to the previous year. Currently, 80% of landlords possess knowledge regarding new energy efficiency legislation, a considerable jump from 65% in the preceding year. This heightened awareness likely contributes to their decision-making processes, as they prepare for the upcoming regulatory changes.
Challenges and Motivations
Landlords face several challenges in the market, which have influenced their strategies. Factors such as government sentiment towards landlords (47%), rising taxation (41%), increasing compliance requirements (33%), and the escalating cost of buy-to-let mortgages (25%) rank high on their concerns. As a result, some landlords have opted to sell their properties, with 16% of homes on the market having previously been rental properties. This figure marks an increase from 13% recorded in 2019.
Portfolio Size and Varied Attitudes
Interestingly, attitudes towards lower EPC rated properties vary among landlords based on the size of their property portfolios. Landlords with five or more properties are far more likely (27%) to plan on expanding their portfolios over the next 12 months compared to those who own only one property (10%). Moreover, landlords with larger portfolios display a greater willingness to make improvements to properties rated below a C before 2025. They are also more inclined to invest in properties with EPC ratings below a C, potentially aiming to enhance and rent them out in the future.
Implications for the Rental Market
Rightmove’s Tim Bannister highlights the significance of the impending EPC legislation changes, which are increasingly concerning landlords. However, the data suggests that many landlords are proactively investing in properties that will meet the new minimum standards, thereby introducing them to the rental market. While some landlords may choose to sell their properties, those with larger portfolios demonstrate a readiness to carry out necessary improvements to elevate the EPC rating of their lower-rated homes. Moreover, they are more inclined to invest in lower-rated properties, potentially aiming to enhance and rent them out subsequently.
Conclusion
The rental market study by Rightmove indicates a positive shift in the attitudes of landlords toward EPC ratings. A greater proportion of rental properties entering the market were previously for sale, with EPC ratings of C or higher. Landlords are making proactive investments to prepare for anticipated legislation changes, with a particular focus on higher-rated homes. As landlords with smaller portfolios potentially exit the market, those with larger portfolios are keen on acquiring lower EPC-rated properties, improving them, and reintroducing them to the rental market. This changing landscape signifies an evolving rental market in the coming years, driven by increased awareness of energy efficiency and the need for improved EPC ratings.