In just over a month, the energy price cap will rise, and it once again thrusts energy efficiency in the UK housing sector into the spotlight.
The latest research from Rightmove has revealed that the least energy efficient homes could see an annual utility bill increase of £558, following the recent announcement that the energy price cap is set to rise by 10% from 1st October.
At the other end of the scale, homes with energy performance certificate ratings of A – which is the highest energy efficiency rating and is the rating most likely to be seen in new-build properties – could see average annual bills rise by just £56 after the energy price cap is raise; nearly £500 less.
The energy price cap is a limit set by the energy regulator Ofgem on the maximum amount energy suppliers are allowed to charge for each unit of gas or electricity used by consumers. This was introduced in 2019 due to concerns that energy companies were essentially overcharging ‘loyal’ customers who didn’t switch to better deals.
Under the new energy price cap, the typical annual dual-fuel bill paid by direct debit will be £1,717 per year. However, this amount will vary greatly depending on the energy efficiency of a property, as well as each household’s usage.
Boosting energy efficiency
When it comes to households adjusting their daily routines in order to lower their energy costs, it seems that bills are more at the forefront of the minds of tenants than homeowners, making energy efficiency a key consideration for buy-to-let landlords at the moment.
Rightmove’s survey of more than 14,000 people found that 70% of homeowners would be willing to adjust their daily routine if it meant lowering their energy bills. However, of the tenants surveyed, more than three quarters (76%) said they would change how and when they use energy if it meant cheaper bills.
This could be because tenants are less likely to be able to make any physical changes to their rental to home to improve its energy efficiency, so the only option may be to adjust how they live in it.
However, from a property investment point of view, the survey is a further demonstration of how energy efficiency in rental properties is becoming a more prevalent issue, with tenants increasingly likely to mark this as a priority when searching for property.
Should investors prioritise top-rated homes?
On average, new-build housing stock achieves much higher EPC ratings than existing homes, although increasingly properties are being upgraded and retrofitted to boost their energy efficiency scores.
For investors looking at potential energy bill savings that can be made on different property types, Rightmove’s research sets out the potential outcome of each property rating based on current figures:
Average annual energy bills increase by EPC rating:
|
EPC rating |
Average energy bill (from October 1st) | Increase in cash terms from previous energy cap | Average annual energy bill October 2019 | 5-year increase in average energy bill |
| A | £620 | £56 | £378 | £242 |
| B | £1,124 | £102 | £724 | £400 |
| C | £1,748 | £159 | £1,127 | £621 |
| D | £2,471 | £225 | £1,622 | £849 |
| E | £3,512 | £319 | £2,344 | £1,168 |
| F | £4,896 | £445 | £3,301 | £1,595 |
| G | £6,140 | £558 | £4,145 | £1,995 |
As the table shows, the average energy bill from 1st October once the new price cap is in force could be around £6,140 a year on the most energy inefficient properties achieving the lowest rating (G) on their EPC certificates. In cash terms from the previous energy cap, this is a rise of £558 per year.
The average UK property currently scores a D on its EPC certificate. For those properties, the average annual energy bill is set to rise by £225 from the previous energy cap, bringing it up to £2,471 per year.
However, for top-rated properties, homeowners or tenants could be paying as little as £620 per year to live in an A-rated home, which is around 10% of the highest-paying households. B-rated property dwellers are set to see average energy bills of £1,124 from October.
This could be a major selling point for investors and landlords offering top-rated properties, particularly as energy efficiency and bills is such a hot topic among most households at the moment.
A motivation to be greener
Tim Bannister, Rightmove’s property expert, says: “The rising price of energy in recent years means that renters and homeowners are likely having to closely consider their total monthly outgoings when choosing their next home.
“We know that lower bills is one of the biggest motivators for people to go greener, so we expect over time people will increasingly seek out more energy efficient properties in order to keep bills down over the long-term.
“Our research suggests that if something like a dynamic price cap, where energy is cheaper at less popular times of day, was to be introduced, the majority would welcome it if it meant lower bills.”
