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Nationwide: energy efficient properties command a price premium: "A home is a money pit, a guzzler of energy bills"

ended 30. August 2024

In its August house price index published this morning, the Nationwide said that energy efficient properties command a premium over non-energy efficient properties. It said: “Our analysis suggests that a more energy efficient property, rated A or B, attracts a modest premium of 2.8% compared to a similar property rated ‘D’ (the most commonly occurring rating). There is little difference for properties rated C or E compared with D. There is a noticeable discount for properties rated F or G - the lowest energy efficiency ratings. Indeed, an F or G rated home is valued 4.2% lower than a similar D rated property. Our research suggests while energy efficiency impacts remain relatively modest, they have increased relative to pre-pandemic levels, with A/B properties now attracting a larger premium compared with 2019 and F/G properties seeing a larger discount." Newspage asked experts for their views, below.

7 responses from the Newspage community

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Darryl Dhoffer
Founder at The Mortgage Geezer
Buyers are finally waking up to the fact that a home is not just bricks and mortar. A home is a money pit, a guzzler of energy bills. With the grid supply costs climbing higher than a mountain goat, it's time to get smart. Solar and wind are your new best friends. And don't forget about those fancy insulation tricks. A well-insulated home is like a cozy blanket on a cold winter night. So, why go green? Simple: it's a cash cow. Save the planet? Sure, that's nice. But let's be honest, it's the money that's driving this train.
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Ranald Mitchell
Director at Charwin Mortgages
The energy efficiency, running costs and fabric of homes have come into far sharper focus with buyers now. The costs of grid supply is always increasing and supplementing this with natural resources such as solar and wind can significantly reduce energy bills. Add to this smarter and better insulated homes and it’s little surprise that people are shifting to greener homes, albeit more for financial benefits than saving planet earth.
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Michelle Lawson
Director at Lawson Financial
The premium people are paying is interesting. Buyers are more incentivised to buy readily energy-efficient property rather than make the improvements themselves. I see hardly anybody wanting to make efficiency improvements. In a £300k house, a 2.8% premium is £8400- not to be sniffed at. Arguable solar panels and heat/air pumps cost considerably more than this to install unless potentially using a grant. There is more to be done here to make it more affordable while remembering it is easy to supply energy efficient new build stock, less so for the significant numbers of older housing and flats due to construction restraints.
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Justin Moy
Managing Director at EHF Mortgages
I haven't seen the EPC rating being a major factor in recent homebuying transactions. Many borrowers were not aware of the rating, similarly what it meant and whether it was important. The only conversations have been where the rating has been good enough for a slightly better mortgage product. Fundamentally a property has more important factors for consideration before the EPC, buyers of older properties will be looking more at the efficiency compared to a new-build purchase, but with relatively low stock on the market, buyers cannot be too picky at the moment.
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Gabriel McKeown
Head of Macroeconomics at The Sad Rabbit Newsletter
In today's market, it's not just location, location, location—it's efficiency, efficiency, efficiency.

The latest insights from Nationwide's August HPI indicate a growing awareness among buyers about the long-term savings and environmental benefits associated with energy-efficient homes. There has been a critical shift in buyer priorities in the post-pandemic landscape, where the allure of energy savings and sustainability is beginning to outweigh traditional factors. As energy prices continue to fluctuate and environmental concerns rise, the demand for homes that promise lower utility bills and a smaller carbon footprint is set to increase. Integrating renewable energy sources, such as solar panels, further enhances property values by offering significant savings and appealing to the eco-conscious buyer. Efficiency is no longer just a trend but a transformative force in the market, offering homeowners a chance to reduce their carbon footprint while increasing their property's worth.
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Stephen Perkins
Managing Director at Yellow Brick Mortgages
Dubious of these conclusions. Most new build properties are A or B rated and older properties have higher EPC ratings in general. So i think this is more about the new home premium than the energy efficiency premium. Most clients don’t care at all about the EPC rating when considering a property.
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Luke Loveridge
Founder and CEO at Propflo
We have seen increases of identical properties of just over 2% recently so these figures seem about right. However, previous reports from several large banks and RICS have suggested anything up to a 15% increase. Our stance has been that there is a ‘green’ value to energy efficiency improvements but it might defend the value of your home instead of increase it, which these figures also suggest. Demand will continue to increase with energy prices going up in October and rising minimum energy efficiency standards for the private rented sector imminent. And don't forget increasing government regulation on mortgage lenders driving them to incentivise more energy efficient homes like the recent Virgin Money £15,000 cashback mortgage.