Half (50%) of properties bought by landlords so far in 2022 have EPC ratings of at least C, suggesting that investors are giving greener homes a higher priority, Hamptons research shows.
This is the highest figure on record, and compares to 39% in 2021 and 33% in 2020.
The government has proposed for all new rental properties to have EPC ratings of at least a C by 2025 or 2026, which is influencing buyer behaviours.
There has been a shift towards investors purchasing newer homes, particularly flats, built within the last decade. These properties typically have an EPC rating of B or C.
Aneisha Beveridge, head of research at Hamptons, said: “By removing the least energy efficient rental homes from the market, government policy has already picked the lowest hanging fruit.
“But extending this plan to upgrade homes with a D or E rating up to C will impact a far larger number of households, while generating smaller savings for tenants.
“The policy will mean that the average tenant will eventually pay lower energy bills than the average homeowner, although it’s likely to remove some rental homes from the market, putting further pressure on stock levels.
“Given it will prove impossible for all homes to secure an EPC rating of at least a C without significant cost, it’s likely to mean older homes will become considerably less attractive to landlords.
“Instead, investors may focus their strategy on buying new builds, with rental homes becoming concentrated in blocks or streets where properties already hold a C rated EPC certificate or where it’s possible to achieve this without significant work.”
Rents rose by 7.0% across Great Britain compared to the same time last year, as rental growth continued to slow after peaking in July 2021.
Growth is lowest in Outer London but highest across Inner London, where they’ve risen by 17.3% year-on-year.
Beveridge added: “The recovery in Inner London rents back to where they were on the eve of the pandemic marks a milestone for London’s landlords.
“With Inner London recording the largest ever month-on-month increase between December and January, it appears the recovery in rents still has plenty of steam. The level of pent-up demand coupled with a lack of stock is likely to support high rates of rental growth over the coming months.”
Investors’ move towards new build flats means London’s landlords tend to buy the most energy efficient buy-to-lets anywhere in England and Wales.
Here, two-thirds (66%) of new purchases made this year already had an EPC rating of C or above.
While further North, investors are more likely to buy higher yielding but older and less energy efficient terraced housing stock.
Just 34% of investors in the North East bought a buy-to-let with an EPC rating of C or above.
The average tenant moving from a home rated D up to one rated C would save £285 per year on their gas, electricity and water bill at current prices.
Meanwhile a tenant who pays energy bills that moves from a home rated E to one rated C would save £725 annually.