Savills : Are buyers paying more for energy efficient homes?

Millions of households are expected to see their energy bill soar this year, as the energy price cap rises.

At the same time, the Government is pushing ahead with its net zero strategy, encouraging homeowners to switch to low-carbon alternatives before 2035 as part of its plan to cut Britain's reliance on fossil fuel heating.

How much are buyers paying for cleaner homes?

In the face of these changes, buyers are increasingly looking at ways to reduce their bills. Our latest survey of home buyers revealed that 71 per cent consider EPC ratings to be an important factor in choosing their new home, with almost a third stating that they place more importance on EPC ratings than they did a year ago.

As a result, homes that offer more cost-efficient energy alternatives - such as those with heat pumps - are climbing higher up buyers' wish lists.

However, analysis of the average values of homes transacted between 2019 and 2021 shows that newer, cleaner, methods of energy still demand a higher price tag.

Although heat pumps are predicted to become the main source of low-carbon heating for new homes, across England and Wales, homes with heat pumps fitted demand the highest premium compared with the regional average.

Buyers are paying on average 59 per cent more for the offer of cleaner energy. This premium is most acute in the South East, with homes on average 84 per cent more expensive. This comes as the Government sets out ambitions of installing 600,000 heat pumps a year by 2028.

The rural-urban heating disconnect

Currently, more than five out of six (84 per cent) homes in urban areas rely on mains gas supply, compared with just a third (34 per cent) in rural areas. In rural areas, almost half (43 per cent) of homes are fuelled by oil.

This reliance is most prevalent in the North East, where 87 per cent of homes use mains gas, while London (30 per cent) and the South West (19 per cent) have the highest number of homes using 'cleaner' methods, including electricity, heat networks and heat pumps.

CO2 emissions from residential properties rose by 9 per cent between 2014 and 2020, according to government data, and we estimate that £330 billion is needed to implement all advised energy efficiency improvements to the UK residential housing sector as it seeks to meet targets set by the Government.

This highlights the enormous challenge set by the zero carbon agenda targets and the uphill battle ahead that we face.

While government subsidy will undoubtedly go some way in supporting people in reducing their home's environmental footprint, more resources and investment is needed to significantly reduce our reliance on fossil fuel heating.

Further information

Contact Lawrence Bowles

Savills Energy & Efficiency