Energy Efficient Homes Command Modest Price Premium, Despite Costly Upgrades
Buyers pay only a small amount more for homes with top energy efficiency ratings, even though upgrades like solar panels can cost thousands.
Homes with the highest energy efficiency ratings command only a modest price premium over less efficient properties, according to new data, despite the significant costs associated with green upgrades. Properties rated A or B on an Energy Performance Certificate (EPC) are approximately 1.6 percent more expensive than similar homes rated D, a difference equivalent to about £4,500 based on the average house price in England. This finding comes from Nationwide, which analyzed EPC ratings, a system that bands properties from A (most efficient) to G (least efficient).
While homes with lower EPC ratings, such as A, B, or C, typically mean reduced energy bills due to features like insulation, modern double-glazed windows, and solar panels, the market's willingness to pay for these benefits appears limited. The data indicates that buyers are not significantly increasing their offers for these features, even though the upgrades themselves can be substantial. Installing solar panels, for instance, can cost around £11,000 on average, while improving insulation may cost approximately £4,000.
Properties with the poorest classifications, rated F or G, are valued about 1.4 percent less than comparable D-rated properties, a cash difference of around £4,000, Nationwide reported.
Higher Premium for Buy-to-Let Properties
The valuation difference is significantly more pronounced for buy-to-let purchases. For these properties, an A or B rated home attracts a 12.2 percent premium. This greater impact is likely influenced by upcoming regulations requiring rental properties to achieve a minimum EPC rating of C by 2030. Data from the Department for Energy Security and Net Zero suggests that median annual fuel costs are around £400 lower for properties rated A, B, or C compared to a D-rated property, and £1,200 lower than for an E-rated property.
Nationwide estimated that the average cost to improve a home to an EPC C rating in 2024 was approximately £7,500. The total investment needed across England to achieve this standard for all homes is estimated at around £81 billion. Homes with F or G ratings face considerably higher costs to reach EPC C, averaging around £17,000 and £6,000 respectively, compared to D-rated homes.
Awareness and Future Intentions
A recent survey by Nationwide revealed that over half of over 2,000 participants were unaware of their current home's energy efficiency rating. However, 77 percent stated that the EPC rating would be an important factor in their future property buying decisions. Current data from the English Housing Survey indicates that approximately 53 percent of owner-occupied housing stock is rated C or above, a notable increase from 21 percent a decade ago.
Older properties, particularly those built before 1919, tend to have lower energy efficiency ratings. About 24 percent of dwellings in England constructed before 1919 have an EPC rating of E to G, in contrast to just 2 percent of homes built after 1990.
Andrew Harvey, Nationwide's senior economist, commented on the pace of home improvements, noting that the government's Warm Homes Plan aims to upgrade five million homes by 2030. He suggested that the current rate of progress is slow given the scale of the challenge, indicating a potential need for further incentives to support home decarbonization efforts.
Recent Upgrades and Buyer Interest
Among homeowners who have already made energy efficiency upgrades, just over half reported installing solar panels in recent years. Around a quarter had a heat pump installed, with 68 percent of these installations occurring within the last two years, possibly reflecting increased awareness and government incentives. Newer properties, particularly those built since 2011, are more likely to have heat pumps.
Ian Harris, president of NAEA Propertymark, observed a growing interest from buyers in a property's energy efficiency, especially when features like solar panels and other green upgrades are already in place. However, he emphasized that while a strong EPC rating and green improvements can make a property more appealing, they are typically considered alongside other key factors such as location, affordability, and overall property condition. He also highlighted the ongoing need for practical support to help homeowners improve their properties' energy performance, particularly given the barrier of upfront costs.