Energy costs to drive demand for new builds?

Could spiralling energy costs replace the race for space as the next big driver of the property market?

Lockdowns and work-from-home changed people's housing priorities. New research from JLL suggests that the next disruptor might be rising energy costs driving demand for new build homes. Could housebuilders benefit from a new wave of buyers and renters looking for greater energy efficiency?

There is a lesson to be learnt from the motor industry. Environmental awareness and fuel costs have seen the sales of electric vehicles increase from just 7% a year ago to 17% today.

JLL research looked at average energy bills from the most efficient (EPC band A) to the least (band G).

The lifting of the price cap will see households facing energy price rises of 50% or more from April. Energy efficient homes - those with an EPC rating of C or better - will likely face increases of £600 per annum. Band G dwellers might have increases almost treble that.

JLL's analysis found that the difference in the annual energy costs between a typical home in band A and one in band G was approximately £3,500.

In their most recent survey, the Home Builders Federation found that 75% of people are concerned about their home's energy performance, with 25% stating that energy efficiency will be a crucial factor in their next home move.

84% of new build homes achieve an EPC rating of A or B. Just 4% of existing stock meets that standard, suggesting that the appeal of a newly built property can only increase.

Marcus Dixon, JLL's Head of UK Residential Research, says "Those paying energy bills for homes in bands A to C will be on average £3,246 a year better off than their neighbours in a band G home.... there is an opportunity here for the new homes industry, offering best in class efficiency and tapping into demand from households who not only want to do their best for the climate but also save themselves money too.”

The same opportunity is there for prospective property investors.