Could improving the energy efficiency of your home increase its value? Well, possibly yes.
Until now, estate agents have consistently reported that the EPC rating (Energy Performance Certificate) that is now included in every property advertisment has no impact on the choices made by buyers. Given the importance of other factors such as location, size, price and school catchment area, for example, that is hardly a surprise.
But a ‘scoping study’ (you can see the report here) which analysed over 10,000 sales through GSPC since the introduction of EPCs suggests that properties which score well in their EPC may sell faster and for a higher price than less efficient houses.
The study has an impressive pedigree. It was supported by Scotland’s 2020 Climate Group and developed with the help of Professor Gwilym Pryce of the University of Sheffield (previously of the University of Glasgow), Professor Chris Timmins and Ms Ashley Vissing of Duke University, North Carolina and Dr Alasdair Rae of the University of Sheffield. GSPC’s contribution was to provide the raw data the analysis was based on.
The authors are careful to point out that this study was principally designed to establish whether this sort of analysis was even possible. Nevertheless, it does show an initial link between energy efficiency and house prices.
The report suggests that a 1% improvement in energy use per m² floor area was associated with a 0.1% increase in selling price. Likewise a 1% reduction in energy consumed per m² floor area is associated with a 0.1% decrease in time on the market.
Improved energy efficiency = higher prices?
Now, a 0.1% increase in the average selling price may not seem like much. For the average property in the west of Scotland it would equate to £127. But what if you could reduce the energy consumption in your home (per m²) by 50%? If the relationship between price and energy efficiency described in the report held true, that would imply an increase in value running in to the thousands of pounds.
Is the potential significant?
Is that possible? It is frustratingly difficult to get any data on the impact of energy efficiency savings on the amount of energy used per m². But a sample EPC (opens as a PDF) posted by the government provides enough information to give a scale of the energy savings that could be achieved in a typical detached house. If every energy saving measure recommended in that sample EPC was done, then energy consumption per m² would indeed fall by around 50%.
Apply that to average property values in the west of Scotland (see here for the latest GSPC data) and you should, in theory, increase the value of a typical home by over £6,300. There is also the added benefit of a significant reduction in your annual energy bill.
What’s the cost?
But these energy saving measures come at a cost. They include affordable items like better loft insulation and low energy light bulbs, as well as more expensive items such as a new boiler, solar panels for water heating and installing low-E double glazing. The sample EPC provided by the government gives an upper and a lower cost for doing all of these which ranges from £10,230 to £17,520.
These costs, of course, relate to a detached house. The cost for making the same changes to a smaller house or flat (which would be closer to the average value for a property in the west of Scotland) is likely to be lower. In which case, the difference between installation costs and the possible increase in property value could be a good deal narrower.
Will EPC rating become more important to property marketing?
Now, I’m not suggesting that we all rush out to install every possible energy efficiency measure we can. And I’m not suggesting that you will immediately get your money back in a higher property value if you do. But the fact that a thorough study of a large volume of sales in this area suggests that there is a link between selling prices and energy efficiency is significant. And the link is likely to become increasingly important if domestic energy costs continue to rise. Perhaps the time when estate agents highlight energy efficiency as a selling feature is not that far off.