They are saving more than £10,000 by avoiding below 'C' BTL purchases
More than seven in 10, or 71% of, landlords are unlikely to buy a property with an energy performance certificate (EPC) rating below ‘C’, buy-to-let lender Foundation Home Loans has revealed.
Research consultancy BVA-BDRC asked landlords how the EPC rating of a property had impacted on their purchasing decisions, and the vast majority of the respondents said they were increasingly unlikely to purchase a rental property if it did not already have an ‘A’, ‘B’, or ‘C’ EPC rating.
The more properties the landlord had within their portfolio, the less likely they were to buy low EPC-rated properties, with 74% of those with six to 10 and 11 to 19 properties, saying this, and 78% of those with over 20 properties. Only 18% of landlords said the EPC rating would make no difference.
The BVA-BDRC research, undertaken on behalf of Foundation Home Loans, comprised of 983 online interviews with landlords.
The study also found that landlords had a strong awareness of the likelihood of future legislation around a minimum EPC level of ‘C’ being introduced for all private rental sector properties.
Around 71% said they were aware and fully understood the details of the potential EPC regulation, 24% were aware but did not understand the details, and just 4% had no awareness.
According to the research, landlords anticipated it would cost over £10,000 per property to carry out the works required to reach an EPC level ‘C’, with this rising to over £11,500 for those with larger portfolio sizes.
A majority, or 57%, said they would fund the works via savings, 33% said they would increase the rent, 18% would access government grants or funding, while 19% said they would either take a further advance from their lender or take out a loan.
“While we still might be waiting for certainty and clarity over when the government is likely to introduce its minimum EPC level legislation for the private rental sector, it’s clear from this research that landlords are aware of what is likely to be coming, and are thinking seriously about their existing portfolios, how they might fund improvements, and what their plans might be when this is introduced,” said Grant Hendry (pictured), director of sales at Foundation Home Loans.
“With landlords anticipating a cost of over £10,000 per property in order to improve its EPC Level to ‘C’, it is perhaps not surprising they are disinclined to buy properties already below this. In effect, they are future-proofing their portfolios by opting only to buy ‘C’ and above properties now, while they will presumably focus on those properties within their portfolio which are not currently at this level.
“Clearly, this presents a significant opportunity for advisers to not only discuss this with their landlord clients, but to also provide solutions about the funding of these improvement works. There are clearly mortgage pricing incentives to be accessed for properties which are already at EPC ‘C’ – we offer such products – and as we move into the future, landlords are likely to see this as a further incentive to ensure the property is above ‘C’.”
Foundation Home Loans said it offered a specific range of green products available for any property with an ‘A’ to ‘C’ EPC rating.
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