Jonathan Fowler of Fowler Smith Mortgages considers the benefits of new-build buy-to-let for property investors, after a rise in landlords looking to buy green properties.
EPC ratings are a hot topic at the moment. The Labour government, as part of their Net Zero agenda, want rental properties to achieve an Energy Performance Certificate rating of C as a minimum by 2030. Although for some, this would mean reasonable adjustments to a property – such as changing to more energy efficient lightbulbs, replacing the loft insulation or even going for a boiler upgrade – for others it could be a lot more costly.
Many Victorian properties, such as your standard terraced two-up-two-downs, or a semi-detached red-brick family home, often have an EPC rating that’s well below a C. It might not have the capabilities of having cavity wall insulation, or the floorboards are just naturally a little draughty.
Getting these up to standard, perhaps without some form of government intervention or further help from lenders (in an ideal world there’ll be some low-interest further advance options available across the board, which some lenders have already adopted), will be quite a task.
More interest in new-builds
At Fowler Smith Mortgages & Protection, we’ve seen quite an influx of interest in new-build properties among investors and landlords. Granted, this is often due to there being a strong rental demand in vibrant city centres – buildings with great amenities that offer a co-living feel will often appeal to the younger demographic – but landlords are very likely looking, and planning, ahead.
New-build properties – apartments or otherwise – typically have very high EPC ratings. As, Bs and Cs. With an EPC lasting ten years, this takes the property way into the mid-2030s, surpassing the 2030 deadline set by the government. It no doubt offers immediate peace of mind, in this regard.
We also see some lenders offering ‘green’ incentives for properties with, typically, an A-C energy performance rating. This can vary from lesser arrangement fees, or even an element of cashback upon completion.
It’s an interesting directive – but one that benefits lenders as well, as they’re frequently asked to update/streamline their lending book by the regulator above. Lenders will no doubt want to demonstrate that they have a ‘green’ lending portfolio too – which will surely put them in a further positive light in the marketplace.
With strong landlord demand for the new-build properties, this no doubt will help the overall economy and the property market as a whole. It keeps developers developing – which the government naturally want to see with their target for many new homes in the coming years.
With that, there’ll also be the ability for developers to help provide further social housing in the UK. Furthermore, if there’s more interest in new-build properties, it may open up the second-hand property market a little more to allow first-time buyers and home movers get on the ladder a little easier.
I’d really like to see a continuous discourse with lenders to see where they can support landlords to meet the EPC requirements, and no doubt there’s already discussions between lenders and the government on this – but with this in mind, it may be increasingly popular for landlords to opt for the new-build route in order to have further peace of mind, and lenders seem to be on-board.
