How UK expats and overseas domestic investors can adapt to the new EPC rules
The new EPC rules are already shaping investor behavior. Liquid Expat Mortgages looks at what new and existing expat and foreign investors in the UK should do.
MANCHESTER, GREATER MANCHESTER, UK, March 14, 2022 /EINPresswire.com/ —
From 2025, landlords will no longer be able to accept new tenants for a property with an EPC rating of D or lower. And these new rules regarding permitted EPC ratings for rental properties have already begun to shape investor behavior.
What is happening?
Already in 2020, 50% of properties bought by investors had an EPC rating of A, B or C. This is a much higher figure than we would typically see – for example, in 2021 this share was only 39% and 33% in 2020. This figure was even higher in London, where 66% of investor purchases had an EPC rating of C or higher. In the northern regions, a much lower percentage of properties with EPC ratings above C were purchased. For example, in the North East, only 34% of rental properties purchased had EPC ratings above C. This is likely due to the increased affordability of properties in northern regions and the ability to renovate larger units. and more productive. stock to adhere to new EPC standards.
“In the UK, where the cost of living is skyrocketing, a high EPC rating may well be the deciding factor for a tenant when choosing a rental property, as higher EPC ratings will save tenants large sums,” says Stuart Marshall of Liquid Expat Mortgages. . “The average tenant would save £285 a year on their gas, electric and water bill if their property was upgraded from a D to a C, while upgrading a property from an E to a C would save a tenant £725 a year. If all rental properties in the UK were upgraded to a C, the average rental household would pay £326 less in utility bills than the average homeowner – a serious incentive to stay in the rental market compared to the home ownership.
“We have discussed this change a lot as it is one of the major changes in the buy to let market that UK expats and overseas buyers are having to adapt to. Newly built apartments and homes are much more likely to have a higher EPC rating than older, period or “character” properties, leaving investors with a difficult decision as to which properties to buy and what to buy. what to do with their existing properties. So, with changes to the law already adjusting buyer behaviors, what should those investing using rental mortgages for UK expats and foreign nationals do? »
Possibilities to buy at low prices.
Since older properties will be more difficult and expensive to renovate, these properties are likely to fall out of favor with investors and homeowners. For investors, the much more attractive proposition of smaller, more energy-efficient properties like apartments will likely take precedence, while residential home buyers will be looking for more energy-efficient properties to reduce the rising cost of the life. “This will create availability and therefore lower prices for older, less energy-efficient period properties, which could prove extremely profitable for investors looking to renovate these properties,” says Stuart Marshall . “With the help of a British expat or a rental mortgage from a foreign national, investors could end up with a highly desirable investment property. Especially considering the growth in popularity of larger, “character” properties during the pandemic. These types of properties have high monthly rents and their potential for capital growth is exponentially greater than that of apartments. Of course, the renovation project could prove costly, but by carrying out these renovations, UK expats and foreign mortgage holders are also massively increasing the value of their property by ensuring that it remains mortgaged for a long time in the future. future. An expert UK expat or overseas mortgage broker can discuss the pros and cons of going this route and help identify properties that might be suitable for green renovations within a particular budget.
For investors who don’t want a renovation project, there are still a number of good options available using a UK expat or foreign national rental mortgage. “A good way to avoid a renovation project is to buy off plan. Off-plan properties have yet to be built, so since they will be new construction when completed, they will have a higher EPC rating. Going forward, any off-plan project is likely to have an EPC rating of C or higher in order to attract buyers. Not only will off-plan properties pass the new EPC guidelines, they will also give flexibility to the investor, as many off-plan developments allow the investor to choose some of their fixtures and fittings and thus tailor their investment to its ideal investor. There is also a wide range of choices available for off-plan projects in the UK’s major investment hubs. For example, in Manchester there are currently 16,000 off-plan apartments under construction and 1,700 awaiting planning permission. Thus, off-plan properties are likely to circumvent many of the EPC problems associated with older properties while offering potential for capital growth, high rental returns and affordability, especially when using a British expatriate or a mortgage from a foreign national.
A more conventional way to avoid the renovation project associated with a property that does not meet the new CPE standards is to buy apartments. Since these properties are smaller and often more modern, they are more likely – or can be more easily adjusted – to meet the requirements of a C EPC classification. It is also a great choice for immediate investment as the downtown apartment rental market is booming. Zoopla reported that demand for downtown apartments is 43% above the five-year average, while demand is 43% lower, pushing rents to a 13-year high. City center rental accommodation outside London is also expected to grow by 4.5% during 2022. So with a city center apartment, UK expats and overseas investors benefiting from a UK expat mortgage or foreigners secure an environmentally compliant property in one of the most desirable areas of the rental market.
Renovation of existing properties.
“Finally, existing UK expats and overseas mortgage holders with property below the new EPC standards are faced with the choice of whether to sell or renovate their property. On the one hand, the sale of the property will allow investors to adapt to market developments and invest in new areas of growth thanks to the range of mortgage offers for British expats and foreign nationals currently available. On the other hand, it might be profitable to remortgage the existing investment property and pull out additional cash to do green renovations on the property.
“Using the existing equity in the property, part of that value can be freed up on a new mortgage and used to fund improvements for the environmental efficiency of the property. By eco-protecting the property, investors will also ensure that the property remains mortgageable and therefore future proofed so that it can be sold when the time comes. As mentioned above, the higher the property’s EPC rating, the more desirable it will be for tenants looking to save money amid massive increases in energy prices. This could prove crucial in a competitive market, with one in ten tenants saying they would extend their current tenancy if their landlord made environmentally friendly changes to the property. This increased tenant enthusiasm for renting a more environmentally friendly property is also translating into a willingness to pay more for the property. 18% of renters said they would pay more if their property had new windows; 15% agreed that a new boiler would justify paying a higher price; 10% said they would pay more if their property had solar panels. So, re-mortgaging an existing property will allow for green renovations and ensure the long-term profitability of the property, while taking advantage of the many UK and overseas expat mortgage deals available.
Liquid mortgages for expatriates
Ground Floor, 3 Richmond Terrace,
Telephone: 0161 871 1216
For all media inquiries, please contact Ulysses Communications.
+44 161 633 5009
+44 7811 326463
write to us here
Visit us on social media: