Property valuation in UK: climate change targets and the value of UK investment properties – a change in sea level[1]
| DOI | https://doi.org/10.1108/JPIF-04-2020-0043 |
| Pages | 471-482 |
| Published date | 09 June 2020 |
| Date | 09 June 2020 |
| Author | Nick French |
| Subject Matter | Property valuation & finance,Property management & built environment,Real estate & property |
Property valuation in UK: climate
change targets and the value of UK
investment properties –a change in
sea level[1]
Nick French
Real Estate Valuation Theurgy, Frilsham, UK
Abstract
Purpose –The UK government, in late 2019, announced new proposed targets for the energy efficiency
legislation in the UK, MEES –Minimum Energy Efficiency Standards. The current suggestion is that all let
properties, commercial or residential, need to be Brated by 2030. If this is implemented, it will have a significant
impact upon the UK market property investment market.
Design/methodology/approach –This practice briefing is an overview of the 2018 legislation and
comments on how market awareness has changed since its introduction and the potential impact upon prices of
affected properties moving forward
Findings –This paper discusses how capital and rental values are beginning to be discounted in the market to
allow for current and future liabilities under the MEES legislation. This has a significant impact on strategies
for property investment.
Practical implications –This paper analyses the likelihood of (negative) capital and rental value changes
under the proposed stricter energy efficiency guidelines.
Originality/value –This provides guidance on how valuations can be undertaken to reflect any impact of the
likely changes to UK energy efficiency legislation.
Keywords Energy performance certificates, EPCs, Market value, Market rent, MEES regulations
Paper type General review
A change in the weather is sufficient to recreate the world and ourselves
Marcel Proust (1920)
Introduction –climate change and the built environment
Although the aforementioned quote isn’t directly related to the topic of climate change, it fits
the ongoing debate about our changing weather patterns. It is now accepted that the vast
majority of scientists in this area of study believe that there is global warming (the observed
data cannot refute this view) and that it has been, at worse, caused specifically by human
activity or, at best, it is a natural change exacerbated by excessive carbon emissions. There
are always voices in the wilderness that say otherwise, but the vast majority of countries
around the world have accepted the evidence and signed up to a treaty (Paris Agreement,
2009) to try to reduce our global emissions and halt, or at least limit, the warming of the Earth.
In an attempt to lower carbon emission in the United Kingdom, the government has
introduced legislation, known as the Minimum Energy Efficiency Standards (MEES), to limit
the UK’s carbon footprint. This is far reaching legislation and isn’t a transitionary piece of
legislation, it is a “game changer”. It isn’t just pricing and valuations that are affected, it
impacts on all aspects of the property market. The nature of leases, dilapidation settlements,
bank lending, property management strategies and investment portfolio selections will all be
affected by MEES. A full summary of the legislation, and its initial impact in 2018, can be
found in the RICS Insight Paper (RICS, 2018).
In previous practice briefings, I have written papers (French, 2019;French and Antill,
2018) that looked at the impact on property valuation due to new UK MEES legislation. This
Climate change
and UK
investment
property
471
The current issue and full text archive of this journal is available on Emerald Insight at:
https://www.emerald.com/insight/1463-578X.htm
Received 25 April 2020
Revised 25 April 2020
Accepted 25 April 2020
Journal of Property Investment &
Finance
Vol. 38 No. 5, 2020
pp. 471-482
© Emerald Publishing Limited
1463-578X
DOI 10.1108/JPIF-04-2020-0043
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