Buyers will pay up to 20% more for an energy efficient home

With gas and electricity bills taking a larger share of people's household income, growing numbers of buyers and renters are prioritising energy efficiency and sustainability when looking to move home, new research shows.

In a survey by YouGov for Legal & General, both tenants and buyers rated energy efficient, sustainable features as more important than the size of the property.

What's more, prospective buyers and renters are willing to pay a premium for a home that ticks these boxes.

The survey found that buyers looking for a new home are willing to pay 10.5% more for a low-carbon property, with Generation Z buyers willing to pay another 20%.

Renters are willing to pay a 13% premium for a low-carbon property.

Separate research from Go.Compare Energy found that Millennials are the generation most likely to be drawn to a property with eco-friendly features, with 60% saying they would be put off by a low-scoring Energy Performance Certificate (EPC).

This compares with an overall 51% of all those surveyed who would prefer to avoid a home with a low EPC rating.

"Legal & General's research shows that location, good insulation and lower energy bills are the top three general criteria when selecting a property," said Simon Century, director of housing at Legal & General Capital. "For the first time, energy efficiency is now as important as the size of the property, a welcome change to the way consumers think about buying a home."

Searches for eco-friendly homes have increased by 34%, according to data from Legal & General's SmartrCriteria tool, while 62% of UK households see investment in energy efficient homes as an attractive way of addressing the current cost of living crisis.

Despite escalating energy bills, it was actually the environmental element that made consumers more likely to invest in or rent sustainable homes as opposed to older, less energy efficient ones. When asked why they would like to buy or rent a low-carbon home, two-thirds (65%) of those surveyed chose environmental factors such as reducing their carbon footprint or helping to prevent climate change, while 37% prioritised the cost savings that they would see from cheaper energy bills.

However, only one in three 'clearly' understand EPCs for determining energy efficiency, suggesting that more clarity is needed about what makes a home energy efficient to encourage adoption.

"Climate change and energy efficiency have risen right up the agenda for many people when choosing a home," commented John Alker, head of sustainability at Legal & General Capital.

"With buyers and renters prepared to pay a 10.5% and 13% premium respectively, energy efficiency and sustainability in homes make a material difference to the consumer. This research helps cement the business case for investors and developers to invest in low-carbon homes."

Alker added that EPCs should be reformed to better reflect real-world energy consumption and to help incentivise the adoption of low-carbon technology.