As the UK pushes towards net zero targets, the energy efficiency of residential properties is under increasing scrutiny.
Consumer awareness is growing, and it was recently announced that the Future Homes Standard will be published in the Autumn, with a vast majority of new homes to include solar panels. But how are these factors truly impacting property values today?
For property professionals, quantifying the value added by green technologies, particularly in the new build sector, remains a complex task.
One of the key challenges is disentangling the so-called “green premium” from other factors that influence property value—such as location, orientation, and the general appeal of new builds.
In many cases, buyers are drawn to new homes not solely because of their energy credentials, but because of their modern design, warranties, and availability in areas with limited second-hand stock.
Certain technologies, like air source heat pumps, illustrate the market’s ambivalence. Despite their environmental benefits, these systems often face resistance due to concerns about noise, space requirements, and unfamiliarity. Moreover, unless paired with complementary features such as solar panels and battery storage, these systems may not deliver meaningful savings on running costs.
Buyers, particularly those operating within tight budgets, tend to prioritise essentials such as space and location over sustainability features. Without regulatory pressure or clear financial incentives, green technologies remain a ‘nice to have’ rather than a decisive factor in value. As a result, the green premium—if it exists at all—is often marginal and difficult to isolate in practice.
Purchasing a home is an inherently complex decision, shaped by a range of competing priorities and financial constraints that vary from buyer to buyer. When faced with trade-offs—such as whether to invest in energy-efficient technologies that may carry a higher upfront cost—buyers must weigh the perceived benefits against the opportunity cost of foregoing other desirable features.
Pragmatic approach
While some individuals, particularly those with greater financial flexibility or strong environmental convictions, may be willing to pay a premium for sustainable features, most buyers adopt a more pragmatic approach. For the majority, any additional expenditure must be justified by a tangible return—typically in the form of cost savings over the expected period of ownership, which averages around 10 years.
From this perspective, the willingness to pay a premium for ‘green tech’ is likely to be capped by the projected financial benefit it delivers. Given the relatively modest savings currently associated with many green technologies, the impact of sustainability features on property value remains limited.
In today’s market, energy-efficient upgrades are often viewed as desirable but non-essential. Until the financial case becomes more compelling or regulatory frameworks shift, green technology is likely to remain a secondary consideration—valued, but not at the expense of more influential attributes.
In contrast to the uncertain premium for general green features, specific research focusing on homes that guarantee zero energy bills presents a more compelling picture. Analysis by Cambridge University & Think Three on homes eligible for Octopus Energy’s Zero Bills tariff suggests that these properties can command a premium.
Zero-bills homes can offer cost savings, potentially exceeding £25,000 over a typical 25-year mortgage term. These savings can increase a buyer’s borrowing capacity by a suggested £20,000–£40,000. This introduces an important distinction, and the impact of increased borrowing capacity should not be mistaken for a true ‘green premium.’
When buyers are able to access more favourable mortgage terms due to the lower running costs of energy-efficient homes, they may be able to afford properties that would otherwise be out of reach. This enhanced affordability can lead to the purchase of homes that better meet their primary needs—such as size, location, or amenities, or allow for discretionary spending on upgrades like kitchens, bathrooms, or even vehicles.
Supply and demand
However, this increased borrowing power also fuels demand. In a market with constrained supply, greater purchasing capacity among buyers inevitably drives up prices. This inflationary effect is not unique to green homes; it would apply equally to less efficient ‘brown’ properties if similar borrowing advantages were available. Thus, what may appear as a green premium is often a reflection of broader market mechanics.
Ultimately, any green premium is likely to be constrained by the actual savings a buyer expects to realise over their period of ownership. Even then, it requires not only a long-term perspective but also the financial means to absorb higher upfront costs. While enhanced borrowing power may distort market dynamics, it does not fundamentally alter the fact that, for most buyers, core factors such as location, size, and layout remain the primary drivers of value.
While much of the current discourse focuses on the potential for a green premium, the market may soon face a different reality: the emergence of a ‘brown discount.’ As energy-efficient features become standard in new builds and retrofitted homes, properties lacking these upgrades risk being perceived as outdated or inferior.
This shift would mirror past transitions in housing expectations, such as the move from single to double glazing or the widespread adoption of gas central heating. Once a critical mass of homes meets higher energy standards, buyers will likely begin to factor in the cost and inconvenience of upgrading less efficient properties, effectively discounting them in the marketplace.
Government intervention could further accelerate this transition and regulatory measures such as mandating minimum energy performance standards, will significantly influence market behaviour.
Ultimately, cost remains the primary barrier to making green home improvements. Saving money on energy bills is the biggest motivator for home-movers. Financial incentives, such as government grants, low-interest loans, stamp duty rebates for improvements, and tax offsets for landlords, are seen as crucial to encouraging wider adoption.
Currently, the notion of a ‘green premium’ in UK property valuation remains elusive—particularly when applied to general energy-efficient features outside of the new-build market. While zero-bills homes present a compelling case for value uplift, this is largely driven by tangible cost savings and enhanced borrowing potential, rather than the symbolic appeal of sustainability alone.
Until energy efficiency translates into clear, measurable financial benefits—or becomes a regulatory requirement—the market is unlikely to assign a consistent premium to green features.
Policymakers, lenders, developers, and valuers must work together to create a market where energy-efficient homes are not just aspirational, but accessible. Only then can the UK’s housing sector play its full part in the transition to a low-carbon future—without leaving millions of households behind.
Andrew Peters is associate director of technical services at Countrywide Surveying Services