Landlords are buying greener properties before the government legislates in this area, meaning tenants can pay lower utility bills than owner-occupiers, saving up to £844m a year, according to Hamptons.
The real estate agent says that so far this year, the share of homes bought by investors with an A to C energy performance certificate is 50%, the highest figure ever, compared to 39% in 2021 and 33% in 2020.
This comes ahead of government proposals, which have yet to be enacted, to apply a mandatory EPC rating of C on new lettings by December 2025 and on all let properties by December 2028.
The Realtor’s January Monthly Rental Index indicates that this change in landlords was driven by two factors.
He says: “First, homeowners have purchased more energy-efficient homes where upgrades have already been done.
“Secondly, there has been a shift towards investors buying newer homes, particularly apartments, built within the last decade. These properties generally have much better EPC ratings, with almost all earning a B or C rating. . »
According to Hamptons, investors’ move to buy new flats means London landlords tend to buy the most energy-efficient rentals in England and Wales.
In the capital, two-thirds of new purchases made this year already have an EPC rating of C or higher.
Further north, investors are more likely to buy higher-yielding, but older, less energy-efficient townhouses. Only 34% of North East investors have purchased a BTL property with an EPC rating of C or higher.
The push for higher EPC ratings will save tenants money, the estate agent said.
It says the average tenant upgrading from a D-rated home to a C-rated home will save an average of £285 a year on their gas, electricity and water bill at current prices.
A tenant who moves from an E-rated house to a C-rated house will save £725 a year. While most homes with an F or G rating can no longer be rented out, the savings from upgrading to C are £1,348 and £2,404 respectively.
The firm says: ‘If all privately let homes with an existing D to G EPC rating were upgraded to at least a C, it would save tenants in England £844 million in utility bills each year, or £396 per household. These improvements would leave the average privately rented household paying £326 less in utility bills than the average homeowner.
On rental growth, the estate agent says yields have continued to fall after hitting record highs in the summer months.
In January 2022, average rents rose 7% across the UK compared to the same period last year, with the rate of growth decreasing in all but one month since a peak of 8.7% was was registered in July 2021.
The moderation in growth was supported by slower rental growth in the north of England, which was partly offset by faster growth in London in recent months.
After 21 consecutive months, January saw rents in central London return to pre-Covid levels. Rents have risen by a record 17.3% a year in central London to average £2,546 per calendar month – same as the March 2020 figure and 29.6% above the mid-term low. £1,964 Covid.
Meanwhile, in the outskirts of London, where rents are now 9.9% above their pre-pandemic peak, average rents rose 4% year-on-year to £1,851 per calendar month.
Aneisha Beveridge, head of research at Hamptons, says: “By removing the least energy-efficient rental units from the market, government policy has already reaped the lowest rewards.
“But extending this plan to upgrade homes with a D or E rating down to C will impact a much larger number of households, while generating smaller savings for tenants.
“The policy will mean that the average renter will end up paying lower energy bills than the average homeowner, although some rental homes are likely to be taken off the market, putting further pressure on inventory levels.
“Given that it will be impossible for all homes to achieve an EPC rating of at least a C without significant cost, this will likely mean that older homes will become considerably less attractive to owners.
“Instead, investors can focus their strategy on buying new construction, with rental units focusing on blocks or streets where properties already hold a C-rated EPC certificate or where there is potential for achieve this without major work.
“Resuming central London rents to where they were on the eve of the pandemic marks an important milestone for London landlords.
“With central London seeing the biggest ever month-on-month increase between December and January, it looks like the recovery in rents still has a lot of strength.
“The level of pent-up demand coupled with a lack of inventory is likely to support strong rates of rental growth over the coming months.”