As a UK property investor, you may be wondering if investing in a sustainable portfolio is worth it. After all, the appeal of property investment is typically driven by the potential for profitability and long-term returns, rather than environmental or social responsibility.
However, today's real estate market is experiencing a shift in attitudes, with many investors placing greater importance on sustainability. So, can sustainable investments deliver both profits and peace of mind?
This article explores the intersection of environmentally friendly choices and profitability in the real estate industry. We'll examine whether green improvements are simply a costly moral exercise or if they actually hold the key to increased profits. Keep reading to learn more.
What is sustainable real estate?
As the UK works towards achieving net carbon zero by 2050, sustainability is no longer just a nice-to-have - it's a legal obligation. Despite, landlords being required to meet Minimum Level of Energy Efficiency standards since 2018, England's homes still produce more carbon emissions every year than the country's entire fleet of cars. There's definitely plenty of work to be done.
From buildings that are designed, built, and operated with the environment in mind to retrofitting older properties with green technologies to reduce their environmental impact, there are various ways to build your eco-friendly property portfolio.
A great place to start making your portfolio more energy efficient is by installing green technologies like double and triple glazing, efficient boilers, cavity insulation, thermostats, heat pumps, biomass boilers, and micro-CHP systems. This can make a huge impact on reducing energy waste.
After addressing heating and insulation, look at ways to reduce electricity usage by upgrading to LED bulbs and installing smart meters. Finally, consider adding renewable energy sources like solar power, which can be a fantastic investment for both your property and the planet. By thinking about the environment at every step of the way, you can build an eco-friendly property portfolio that aligns with national targets and benefits everyone.
What are the benefits of environmentally friendly property investment?
Did you know that homes with the best energy ratings are worth an average of £40,000 more than less sustainable properties? That's right! With such a large financial incentive, it’s clear to see why investing in eco-friendly properties is becoming increasingly popular in the UK property market. Even the difference between an E-rated home and a C-rated home can add up to £11,000. This highlights the 'green premium' and shows just how much people are willing to invest in environmentally friendly homes. Plus, investing in energy efficiency can provide profitable financial returns.
Not only are there environmental benefits to investing in eco-friendly properties, but also financial ones. By focusing on sustainability, investors can attract environmentally conscious tenants and customers who are looking for greener living spaces. For example, a recent study found that 73% of millennials would be willing to pay more for a sustainable rental property.
In addition, those investors using strategies with bills included in the price, for example, HMOs and Serviced Accommodation will also increase NET yields by reducing energy bills. Not only will it reduce costs, but enhancing your serviced accommodation’s eco friendly credentials will make 73% of travellers more likely to with you!
Furthermore, with the UK government’s commitment to achieving net zero emissions by 2050, there has never been a better time to invest in green properties. Investing now will not only help protect the environment, but you will also get ahead of EPC ratings legislation changes for rental properties. Avoid the rush and ensure your portfolio is ready for the 2025 change. Don't wait until it's too late – act now for a smooth transition.
In conclusion, investing in eco-friendly properties offers numerous advantages both financially and environmentally. Not only will it help prepare you for upcoming changes such as EPC rating updates but also provide you with an opportunity to attract tenants and customers who are looking for greener living spaces.
What is the cost of sustainable real estate investment?
While there may be some additional costs associated with sustainable real estate investment, these costs can be offset by the potential long-term savings that come from investing in green properties. Additionally, many governments offer tax incentives and other financial benefits to those who invest in sustainable real estate projects. Eco upgrades/refurbishments give the highest rate of capital allowances and these allowances are available regardless of who/what entity owns the asset. Examples of enhanced capital allowances are air source heat pumps, solar panels, Electric Vehicle charging points and countless others. Ultimately, the cost of sustainable real estate investment should be weighed against the potential benefits it could bring in terms of both financial returns and environmental sustainability.
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