New build not appealing to landlords hit by inflation

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A high inflationary environment is triggering significant change in the way that landlords interact with their tenants, but less in the types of property they choose to invest in, according to a recent study for GetGround.

The buy-to-let company creation and management platform surveyed hundreds of landlords across the UK during February 2022 and established that a large proportion are looking to mitigate the impact of high inflation on their investments by committing to energy upgrades in their existing rental properties. Fewer landlords are looking to make investments in new builds and other energy efficient properties to reduce that effect.

New government rules state that by 2028 all rental property must have achieved an Energy Performance Certificate (EPC) rating of grade C or higher. Asked their view on these new regulations in the context of rising inflation, 82% of respondents agreed that the rules will help reduce the impact of high energy costs on families who rent.

With the annual cost of energy set to increase by an average £700 per household, the study also found that 69% of landlords feel a responsibility to help their tenants mitigate the impact of the cost of living crisis on their lives, and 34% believe making energy efficiency upgrades to their properties, thereby helping reduce tenants’ energy spend, goes some way to providing that support.

50% of all landlords intend to make upgrades to their rental property to achieve EPC ratings of grade C or above within the next 12 months. 19% will make the changes within the next six months. The remaining 31% will do it in six to 12 months. 9% said they don’t intend to make any improvements until inflation is back under 5%, which isn’t expected to occur until 2023.

In spite of this, inflation isn’t changing the approach many landlords will take to expanding their property portfolios. Just 28% of landlords said they are now more likely to invest in new builds as a result of living with higher inflation, and a similarly modest proportion (31%) indicate an intention to invest only in properties with EPC ratings of grade C or higher in future.

Moubin Faizullah Khan, CEO of GetGround, said: “Newer builds and other properties where higher performing energy efficiency standards have already been achieved are, understandably, always going to be attractive to landlords.

“Yet, observing landlords knowingly commit to investing in underperforming property when mandatory rules about EPC ratings are just around the corner indicates that many landlords continue to pick property that they know they can add value to.

“This isn’t just good economics for them, but goes a long way to helping to continually improve the quality of much-needed rental stock across the whole of the UK.”

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