Annual house price growth has picked up at the fastest rate since December 2022, according to the latest figures from Nationwide.
Average prices rose 2.4% year on year in August, up from 2.1% recorded in July – though prices are still about 3% below the all-time highs recorded in the summer of 2022.
The Nationwide House Price Index also suggests buyers are will willing to pay a premium for a home due to its energy performance rating.
By including energy-efficiency ratings from EPCs alongside the usual property characteristics, the figures suggest a more energy-efficient, A or B-rated home attracts a premium of 2.8% compared with a similar D-rated property.
There is little difference for homes with C or E-ratings compared with D. However, there is a noticeable discount for properties rated F or G – the lowest energy efficiency ratings. Indeed, an F or G-rated home is valued 4.2% lower than a similar D-rated home.
The latest data (2022) shows 48% of the housing stock is now rated C or higher, up from 18% in 2012. The average cost to improve dwellings to band C was roughly £7,400. As expected, dwellings with a rating E to G have a higher average cost to improve than D-rated homes (£13,500 vs £6,200).
According to government analysis, if all applicable energy improvement measures were applied to all homes rated below C, 96% of those would shift into bands A to C, while 4% of dwellings could not be improved beyond a D rating.
However, the estimated total cost for upgrading the entire housing stock is between £91bn and £94bn.
Robert Gardner, Nationwide’s Chief Economist, said: “Providing the economy continues to recover steadily, as we expect, housing market activity is likely to strengthen gradually as affordability constraints ease through a combination of modestly lower interest rates and earnings outpacing house price growth.
“The value that people attach to energy efficiency is likely to continue to evolve, especially if the government takes measures to incentivise greater energy efficiency to help ensure the UK meets its climate change obligations.”
Commenting on the Nationwide index, Nigel Bishop of buying agency Recoco Property Search, said: “Some buyers are still hesitant to finalise their search as they first want to observe the Labour government’s impact on the wider economy.
“Meanwhile, more homeowners have been motivated to put their property up for sale amid fears over an increase in Capital Gains Tax and Inheritance Tax in the upcoming autumn Budget. As we are seeing more sellers entering the market, we predict buyer interest and activity to pick up after the summer holidays.”
He added: “Over the past years, good eco-credentials and sustainability have become a deciding factor and many buyers are enquiring about EPC ratings or a property’s potential for eco-related upgrades. Depending on the EPC rating, some properties can demand a premium of around 15%.”
