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Climate Change and the Housing Market

With sizzling temperatures set to hit their highest ever in the UK and the MET office issuing their first extreme heat warning, what better time to discuss climate change and the possible impact it will have on the property market and mortgage lending.

In recent years, London has witnessed and felt the brunt of some of the most disruptive protests led by Extinction Rebellion. These protests amongst others have seen to it that climate change is rarely out of the headlines. Now with heatwaves hitting the UK and likely to cause more chaos, the world is under mounting pressure to take action. So how does this impact property and what changes can we expect to see the property market?

 

How does climate change affect property?

Aside from rising temperatures, climate change will give rise to incidents of dangerous levels of winds, rain and flooding which in turn will bring about increased risks of subsidence and in some cases may even lead to properties being submerged under water by 2100.

Even areas like Manchester and Birmingham whilst they are not at risk of being submerged under water they are still threatened by the effects of rising temperatures and humidity. Other UK cities most in danger of climate change include London, Carlisle and Exeter with Brighton topping the list for being at risk of storm damage; expected temperature rises and rising sea levels.

 

What does this mean for the property market?

With 20% of the UK housing stock having been built pre 1919, we now need to consider how homes that were built for a completely different climate will fare as climate change develops. If we have learned anything in the last week, it is that the UK does not have the infrastructure to cope with sweltering temperatures.

The mortgage market is already seeing Lenders looking to reward borrowers with more environmentally friendly properties and offering more favourable rates to borrowers buying a home with an energy rating of ‘A’ and ‘B’. We may even see the government offering lower council tax for ‘greener’ properties.

In the long term, we may even see changes on the appetite to lend with both property and geographical exclusions playing a significant role. Mortgage lenders will look at revising their loan to value amounts with high risk areas seeing the biggest increase in rates. This may also bring about the necessity for higher deposits and lower loan to value ratios. Not only will this impact buyer’s looking for competitive mortgage deals, but existing homeowners may find it difficult to sell their properties in the future with properties becoming less desirable and more expensive to finance.

The same exclusions will also prompt insurance providers to increase their premiums which will in some cases render some homes unaffordable.

Not only will homeowners be affected, but landlords may be required to meet the government proposal of all rental properties having an energy performance certificate rating of ‘C’ or above by 2025. It is hoped that this will reduce carbon emissions in line with the 2050 initiative and make homes more energy efficient.

 

What you can do

The government has an ambitious target to reach net zero carbon targets by 2050 and is looking at the phasing out of gas boilers by the mid 2030s and a ban on gas boilers completely in new build homes from 2025 with requirements to replace them with more eco-friendly equivalents.

No doubt, there will be more eco friendly legislation to follow but in the meantime buyers and homeowners (including landlords) should act now to prepare for the inevitable changes.

If you are buying a property, then engage a surveyor and ask them to advise on viability for the life of the mortgage especially if looking to buy in a high risk area or a property located in an area that might be affected by flood plains, and or rising sea levels.

Make sure you can obtain suitable insurance on favourable terms. If you cannot get insurance, then the chances are you will not be able to secure favourable mortgage lending if at all.

If you are a homeowner/landlord, then you might want to consider getting a handle on efficient heating and cooling from air source heat pumps to solar thermal panels and electric boilers.

Ultimately, going forward eco friendly and sustainable living will be the new norm and we all have to play our part!

Posted By Laura Gill

3 August 2022

Laura Gill
Associate