Over two thirds of landlords (68%) would now be less likely to purchase a property if it has an Energy Performance Certificate (EPC) rating of below C, new research from Foundation Home Loans has indicated.

An EPC rating of C is the level at which anticipated legislation is likely to be introduced for all new and existing private rental sector tenancies from 2025 onwards.

Of those specifically looking to buy in the next 12 months, Foundation’s findings showed that 59% said they would be looking to buy a property rated C or above, while 29% said they would be buying those rated D through to E.

Landlords were also more likely to sell a property rated D to E over the next 12 months, rather than one rated A to C.

The research, which was based on 752 online interviews with landlords, was undertaken in November and December last year.

“It’s obvious from this research that existing landlords are not just far more aware of the EPC rating of their properties now, but they are actively making decisions based on those levels and are planning for a future in which many of them will have to spend money in order to improve those ratings,” said managing director (commercial) at Foundation Home Loans, George Gee.

“Previously, the EPC rating of a property made very little difference to its saleability or indeed the way landlords viewed it for purchase, but a combination of factors including the government’s intended measures in this area plus of course a wider focus on energy efficiency, all things green, and the cost of utility bills, has drawn this into a much sharper spotlight.

“There are clearly very strong levels of awareness here and landlords appear to be actively considering their plans in light of what is likely to hit the statute books.”

Foundation also specifically asked landlords how many properties within their portfolios were rated below C, with the results showing almost four in 10 rental properties did not currently reach this level. This means that the average landlord currently has 2.9 properties rated D and below, with the figure rising to 9.8 for landlords with larger portfolios, of over 11 properties.

While there was strong awareness of the anticipated future requirements – 66% of landlords said they were aware and understood – 25% also said they did not understand the details, while just 9% said they were not aware at all.

“The EPC level is now a real factor when landlords are looking at purchase opportunities, with over two-thirds saying they wouldn’t purchase a property unless it had achieved the necessary level,” Gee added. “That is a real shift, and one that is likely to filter into values if these higher-rated properties become, as is likely, more desirable.

“Advisers are going to be encountering far more landlords where the EPC is a real determining factor in their purchase/remortgage decisions, and therefore it is imperative they have a good working knowledge of the measures and what products are available in order to support their clients in getting to their end goals.”

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