Eco homes represent the future of the residential property market, and property lenders are being urged to prioritise energy efficient homes when funding new development loans.
Last month, Assetz Capital revealed that the company is targeting 95 per cent of all the new homes that it funds to be EPC B or higher by the end of 2022. This is a hugely ambitious goal, which reflects chief executive Stuart Law’s core belief that energy efficiency will be a key driver for property values in the future.
“You can’t really insulate old housing effectively,” says Law (pictured).
“Old houses are well known to leak air left, right and centre. They’re like a leaky bucket. You can’t use a much less effective air source pump mechanism in an old house because it isn’t up to the job. And you’ll find that you’re running a very big electricity bill trying to keep it going because the heat you produce doesn’t stay in the house long enough. So personally, I don’t believe old housing is in a good place.”
Law estimates that the cost of bringing an old house up to spec, energy wise, could easily be between £30,000 and £50,000.
“For most houses that is immense, and that’s going to come off house prices,” he says.
“It’s going to come off because mortgage lenders are not going to be lending on those homes or are going tto, at the very least, start to apply mortgage retentions at some point that would be used by the buyer to negotiate the price down.
“I think what’s going to happen over the next five years is there’s quite possibly going to be a significant market shock because old housing isn’t fit for purpose in this new energy-efficient world. We’re going to be cautious about funding low-energy efficient housing and we’re going to be targeting the funding of more and more eco homes.”
Assetz Capital has been funding small- and medium-sized enterprise (SME) housebuilders since the lending platform was founded in 2012, and Law believes that smaller housebuilders are able to act more quickly and efficiently to tackle the challenges of climate change and rising energy bills. The platform has already begun lending to future-thinking, low-energy homes so Law knows just how transformative eco house building can be and he has direct experience of delivery of those homes.
“An example of what is possible is that our group was involved in the delivery of a one-off coastal new build – a three-bed house, with keys delivered over a year ago,” Law says.
“So we’ve got a full year of data now. This house uses an air source heat pump, which pulls heat out of the air even though it’s on the coast in a windswept part of Wales. The heat pump produces all the heat needed for hot water and for heating the house and uses £25 a month of electricity. You can’t argue with £25 a month for all hot water and heat.
“So would you rather buy an older, energy inefficient home and then have a £30,000 to £50,000 upgrade cost, or would you rather buy a really high quality home and have that kind of saving on your energy?”
In the wake of COP26 it has become clear that the way we heat and power our homes is set to change, and older homes are simply not built for this task. However, by working with SME property developers to build brand new, energy efficient homes built for the modern world, Assetz Capital can play a significant role in funding the next generation of eco homes.