As of 2025, new EPC rules mean that landlords will not be able to accept tenants in a property with an EPC rating of a D or below. And these new rules surrounding the permissible EPC ratings of rental properties have already begun to shape investor behaviours.
What’s Happening in Response to New EPC Rules?
Already in 2020, 50% of properties bought by investors have had an EPC rating of A, B or C. This is a much higher figure than we would typically see – for example, in 2021 this share was only 39% and 33% in 2020. This figure was even higher in London, where 66% of investor purchases had an EPC rating of a C or higher. In the Northern regions, a far lower percentage of properties with EPC ratings above a C were purchased. For example, in the North East, only 34% of buy-to-let properties purchased had EPC ratings above a C. This is likely due to the increased affordability of property in Northern regions and the ability to renovate larger, higher-yielding housing stock to adhere to new EPC standards.
‘In the UK, where the cost of living is soaring, a high EPC rating could well be the deciding factor for a tenant when choosing a rental property as higher EPC ratings will save tenants significant amounts of money’ says Stuart Marshall of Liquid Expat Mortgages. ‘The average tenant would save £285 a year on their gas, electricity and water bill if their property was upgraded from a D to a C, while upgrading a property from an E to a C will save a tenant £725 a year. If all rental properties in the UK were upgraded to a C, the average rental household would pay £326 less in utility bills than the average home-owner – a serious incentive to stay in the rental market compared to homeownership.’
‘We have discussed this change a lot as it’s one of the main changes in the buy-to-let investment market that UK expat and foreign national buyers need to adjust to. Flats and newer build homes are much more likely to have a higher EPC rating compared to older, period or ‘character’ properties, which leaves investors with a difficult decision about which properties to purchase and what to do with their existing properties. So, with the changes in legislation already adjusting buyer behaviours, what should those investing using UK expat and foreign national buy-to-let mortgages do?’
Opportunities to Buy Cheaply.
Since older properties will be more difficult and expensive to renovate, it’s likely that these properties will fall out of favour with both investors and owner-occupiers. For investors, the much more attractive proposition of smaller, more energy efficient properties like flats will likely take precedence while residential homebuyers will be on the lookout for more energy efficient properties to reduce the rising cost of living. ‘This will create availability and consequently lower prices for older, less-energy efficient period properties which could prove to be massively profitable for investors that are willing to renovate these properties’ says Stuart Marshall. ‘With the help of a UK expat or foreign national buy-to-let mortgage, investors could find themselves with a highly desirable investment property. Especially when you consider the growth in popularity that larger, ‘character’ properties saw over the course of the pandemic. These types of property command high monthly rents and their capital growth potential is exponentially higher than flats. Of course, the renovation project could prove to be expensive but in conducting these renovations, UK expat and foreign national mortgage holders are also massively adding to the value of their property by ensuring it remains mortgageable long into the future. An expert UK expat or foreign national mortgage broker will be able to discuss the pros and cons of this route and help to identify which properties might be suitable for green renovations within a particular budget.’
For investors that don’t want a renovation project, there are still a number of good options available using a UK expat or foreign national buy-to-let mortgage. ‘One good way to avoid a renovation project is by buying off-plan. Off-plan properties haven’t been built yet so, since they will be newbuilds when they’re completed, they will have a higher EPC rating. Going forward, any project built off-plan is likely to have an EPC rating of a C or higher in order to attract buyers. Not only will off-plan properties pass the new EPC guidelines, but they will also give some flexibility to the investor as many off-plan developments allow the investor to pick some of their fixtures and fittings and so tailor their investment to their ideal investor. There is also a wide range of choice available for off-plan in the UK’s major investment hubs. For example, in Manchester there are currently 16,000 off-plan apartments under construction and 1,700 awaiting planning permission. So off-plan properties are likely to bypass a lot of the EPC problems associated with older properties while still delivering on capital growth potential, high rental yields and affordability, especially when using a UK expat or foreign national mortgage.’
A more conventional way to avoid the renovation project associated with a property that does not meet the new EPC standards is to buy flats. Because these properties are smaller and often more modern, they are more likely – or can be more easily adjusted – to meet the requirements for a C EPC rating. This is also a great choice for investment at the minute as the rental market for city centre flats is booming. Zoopla has reported that the demand for city centre flats is 43% higher than the five-year average, while demand is 43% lower, causing rents to rise to a 13-year high. City-centre rental homes outside of London are further projected to rise by 4.5% over the course of 2022 as well. So, with a city centre flat, UK expat and foreign national investors taking advantage of a UK expat or foreign national mortgage are getting a green compliant property in one of the most desirable sectors in the rental market.’
Renovating Existing Properties.
‘Lastly, existing UK expat and foreign national mortgage holders with a property below the new EPC standards are faced with a choice of whether to sell or renovate their property. On the one hand, selling the property will allow investors to adjust to the changing marketplace and invest in new growth areas with the range of UK expat and foreign national mortgage deals that are currently available. On the other hand, it could be profitable to re-mortgage the existing investment property and take out some extra money to conduct green renovations on the property.’
‘By using the existing equity in the property, some of this equity can be released in re-mortgaging and used to fund improvements for the environmental efficiency of the property. In green-proofing the property, investors will also ensure that the property remains mortgageable and thus future-proof the property so that it will be possible to sell it when the time comes. As mentioned above, the higher the EPC rating on the property, the more desirable it will be for tenants who are looking to save money in the midst of massive increases to energy prices. This could prove crucial in a competitive marketplace, with one in ten renters saying that they would extend their current tenancy if their landlord made environmentally friendly changes to the property. This increased enthusiasm from tenants to rent an environmentally friendlier property also translates to a willingness to pay more for the property. 18% of tenants said they would pay more if their property had new windows; 15% agreed that a new boiler would warrant paying a higher price; 10% said that they would pay more if their property had solar panels.So, re-mortgaging an existing property will allow for green renovations as well as ensuring the long-term profitability of the property, all while taking advantage of the numerous UK expat and foreign national mortgage deals that are available.’
Liquid Expat Mortgages
Ground Floor, 3 Richmond Terrace,
Phone: 0161 871 1216
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