Property investors are facing increasing pressure as new energy efficiency regulations, combined with the rising costs of inflation and energy, pose significant financial challenges.
The Labour Government’s recent confirmation that all rental properties must achieve an Energy Performance Certificate (EPC) rating of Band C by 2030 has sparked concern across the sector.
A recent survey conducted by Finbri revealed that 76% of property investors were worried about escalating costs due to inflation, while 71% were concerned about the impact of rising energy prices.
The regulations are part of the Government’s broader strategy to reduce carbon emissions, improve housing efficiency, and lower tenant energy costs.
Stephen Clark, from Finbri bridging finance, said: “Most people appreciate the need to reduce carbon emissions and make properties more energy-efficient, but the new additional EPC regulations will put a further financial strain on smaller landlords in the private rented sector.
“Making necessary improvements to meet the new regulations will likely cost thousands of pounds per property.
“Meeting the new Government’s energy efficiency standards will force property investors to find ways to offset that cost.
“The obvious outcome could be higher rents, which is never good for tenants.”
Market analysis of 50,000 rental properties in England, Wales, and Scotland discovered that the average cost to upgrade to EPC Band C is approximately £10,000.
Nearly two-thirds of all BTL properties currently have an EPC rating of Band D or below, meaning that most landlords must make considerable investments to bring their properties up to the required standard.
The survey highlighted that 71% of investors were concerned about the impact of rising energy prices on their investments.
The recent announcement that gas and electricity prices will rise by 10% in England, Scotland and Wales from October will only add to these concerns.
Landlords with properties that do not meet the new EPC requirement could see a decline in demand as energy efficiency becomes a critical factor for both tenants and buyers.
Indeed, Finbri’s 2023 survey of 1,000 UK renters found that a combined 80% were either concerned (33%) or strongly concerned (47%) about their rental property energy costs.
