Over two-thirds of landlords (68%) say they would now be less likely to purchase a property if it has an Energy Performance Certificate (EPC) rating of below C, according to the Q4 2022 BVA BDRC Landlord Panel research report.
Level C is the government’s proposed EPC minimum for new rental tenancies from April 2025, with existing tenancies needing to meet the target by 2028.
The research showed that among landlords specifically looking to buy in the next 12 months, almost two-thirds (59%) said they would be looking to buy a property rated C or above, while 29% said they would be buying those rated D through to E. Landlords were also more likely to sell a property rated D to E over the next 12 months than one rated A to C.
The survey, comprising 752 online interviews with landlords, was undertaken on behalf of Foundation Home Loans in November and December last year.
It specifically asked landlords how many properties within their portfolios were rated below C, with the results showing almost four in 10 rental properties did not currently reach this level. This means that the average landlord currently has 2.9 properties rated D and below, with the figure rising to 9.8 for landlords with larger portfolios – over 11 properties.
While there was strong awareness of the anticipated future requirements, with 66% saying they were aware and understood, some 25% said they did not understand the details, while 9% were not aware at all.
Two-thirds of landlords said they would carry out any works required to increase the EPC level of a property and carry on letting it out. However, 20% said they would not carry out any works and seek to sell or not re-let.
Landlords were also asked what they believed the anticipated costs per property would be for the work to be carried out, suggesting an average of £8.3k. Those with larger portfolios believe the cost would be closer to £9k per property.
George Gee, managing director (commercial) at Foundation Home Loans, said: “Interestingly, the EPC level is now a real factor when landlords are looking at purchase opportunities, with over two-thirds saying they wouldn’t purchase a property unless it had achieved the necessary level. That is a real shift, and one that is likely to filter into values if these higher-rated properties become, as is likely, more desirable.”
