Green energy ratings boost property prices - David Alexander

First coined almost 100 years ago in the United States, the phrase that success in property is about three things - “location, location, location”- has certainly stood the test of time.

David Alexander is managing director of DJ Alexander

But the 2020’s are different from the 1920s in so many ways and in the residential sector of the future, a property’s value might depend not so much on where it is located but on how eco-friendly it is.

Because responsibility for so many aspects of our lives has been devolved to Holyrood, people in Scotland take less interest than they used to in the Labour and Conservative party conferences held annually at this time of year. But with environmental issues something of a grey area – overall energy policy is principally a matter reserved to Westminster but powers on energy efficiency and conservation have been devolved to Edinburgh - what the Tories had to say about the subject in Manchester last week was highly-relevant north as well as south of the Border.

Under Boris Johnson, the Conservative government is becoming increasingly “green”, so much so that some of his critics would say he is turning traditional Tory blue into turquoise.

But it is a policy with contradictions, for example increasing reliance on wind turbines which do not operate when there is no wind and have to be shut down, for safety reasons, when wind speed exceeds something like 85 miles an hour. In tandem with this has been our failure to maintain a network of reliable nuclear power stations which have the ability to produce electricity on demand, without reliance on imported fossil fuels and which leave no carbon footprint. Despite this dichotomy, the national electricity grid is expected to cope with even heavier “load” over the next 25 years as cars and vans move from petrol and diesel to battery power.

All in all, therefore, the recent energy price rises – wherever one lives on the British mainland – is unlikely to be a temporary phenomenon. If we want a cleaner, greener country, we will all have to pay for it.

Clearly this will have major implications for the housing market, not only for developers but any owner-occupier trying to secure a sale. At present few people choose a house purely or largely on its eco-merits; design, space, neighbourhood and similar aspects are what still motivates the average buyer. But as the cost of space- and water-heating becomes increasingly expensive, energy efficiency is likely to move significantly up the “selling points” ladder.

One outcome of the drive for a greener environment has been the emergence of Energy Performance Certificates (EPCs). These explain how energy efficient a building is and provide ratings from A (very efficient) to G (inefficient). They also tell you how costly heating and lighting a property and what its carbon dioxide emissions are likely to be. Additional information is provided on what the energy efficiency rating could be if recommended improvements are introduced as are cost effective ways to achieve a better rating. Each EPC is valid for ten years, after which it has to be renewed.

The Scottish Government has stated that residential properties across the country will be required to achieve a rating of at least EPC C by 2040. Thankfully, however, it seems to be taking care to avoid a one-size-fits-all approach, recognising that not all buildings will be able to this standard. It has even stated that “in some cases the cost of the work may outweigh the energy saving benefits”, which was no doubt welcomed by some owners of late Victorian/Edwardian tenemental homes in inner-city areas.

However laudable this aim, just like Home Reports and various statutory home-safety regulations, the drive for ever-higher energy efficiency standards will result in additional costs which will, eventually, filter out to the consumer. But there will be advantages that go beyond energy efficiency. For example, with EPC C a minimum standard, an even higher rating is likely to be an attractive selling point when a house comes to be put on the market.

So in some instances, “green” may actually be profitable as well as beneficial for the market - while making some people feel good about themselves, of course.

David Alexander is managing director of DJ Alexander