When thinking about property investment, looking at an asset’s long-term prospects is often the key to maximising your returns.
When viewing UK housing market trends over the past 20 years, or even the past decade, it is clear that property values have risen in a way that is hard to find from other asset classes. For example, Office for National Statistics data shows that house prices increased by an average of 73% between 2013 and 2023.
From a property investment perspective, while choosing the right property in the best location plays a huge role in the ultimate outcome, holding onto the property for as long as possible also leaves the owner with the highest possible price inflation when it comes time to sell or pass the asset on.
But with changing regulations within the UK buy-to-let sector, it is important to invest in a property that is already tailored to the future; and preferably one that isn’t going to require additional expenditure in order for it to keep up with any new rules.
Changes are coming to the rental sector
One of the biggest regulatory changes on the horizon is linked to energy performance certificates (EPCs) in UK rental properties, with new minimum ratings expected to be brought in. This was something that had been on landlords’ radars for some time under the Conservative government, and now Labour have confirmed that new energy efficiency targets are on their way.
Since 2020, the minimum EPC rating for any residential rental property has been E. Yet as energy bills have soared, while newer properties have continually improved, E is now viewed as quite a low rating. Increasingly, tenants are paying attention to EPCs when they’re looking for rental homes, and E-rated properties are already becoming less popular.
While the specifics of Labour’s new rules haven’t been set out, it seems that all rental properties are likely to need to achieve an EPC rating of C by 2030 in order to legally be let to tenants. This will apply to both private landlords and councils and housing associations.
Announcing the upcoming changes at the Labour Party conference, energy secretary Ed Miliband said: “We all know that the poorest people in our country often live in cold, draughty homes, many rent from private landlords whose properties are below decent standards.
“That is a Tory legacy and scandal. This government will not tolerate this injustice and we will end it. Decent energy standards for private rented homes that will mean warmer homes and lower bills for renters.”
However, research shows that the private rented sector as a whole could be ill-prepared for the new minimum energy efficiency standards, as a report from Foundation Home Loans has revealed that two thirds of landlords own at least one property investment with an EPC rated lower than C.
The same survey found that landlords estimate they will have to spend an average of £12,000 per property in order to achieve a C rating. So many are faced with the dilemma of whether to carry out significant and costly works to their property investment portfolio in order to hit the minimum rating – and some homes will not be able to achieve a C – or to sell and invest in a property that meets the standard.
Ensuring a future-proof property investment
Many buyers looking for an energy efficiency property investment to get ahead of the impending EPC rule changes are turning to new-builds. There are numerous advantages to investing in an new-build, but in the current climate, energy efficiency comes out on top.
New-build homes are significantly more energy efficient than older properties due to new building standards, with better window technology, more insulation, and improved draught-proofing. Additionally, they can be pre-fitted with smart appliances and amenities.
Government figures show that 85% of new-build homes in England and Wales achieve EPC ratings of an A or B, which is the highest standard. However, only around 4% of existing homes hit the highest ratings, with the average overall rating across UK property stock being a D.
This means that making your next property investment a new-build is likely to be the most future-proof option, saving you money, time and hassle in the future when the new minimum energy efficiency standards come in in 2030.
As standards across the UK rental sector continue to improve, so too do the expectations of tenants, who are increasingly looking to rent modern, well-insulated homes. From a property investment perspective, there is a double interest in choosing a highly energy efficient home, as you could also boost your long-term rental income by having a highly desirable property to market.
At BuyAssociation, we work with the UK’s most reputable developers to help our clients find the best property investment opportunities, including many exciting new-build developments. Get in touch today to find out more.
