The impact of Minimum Energy Efficiency Standards on the UK investment market: one year on
| Pages | 416-423 |
| DOI | https://doi.org/10.1108/JPIF-04-2019-0046 |
| Published date | 10 June 2019 |
| Date | 10 June 2019 |
| Author | Nick French |
| Subject Matter | Real estate & property,Property management & built environment |
The impact of Minimum Energy
Efficiency Standards on the UK
investment market: one year on
Nick French
Real Estate Valuation Theurgy, Frilsham, UK
Abstract
Purpose –The purpose of this paper is to provide an update on how the 2018 energy efficiency legislation in
the UK, Minimum Energy Efficiency Standards (MEES), is impacting upon the UK market with a particular
emphasis on the 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 –The role of the property prof essional is to ensure that cl ients are fully
conversant with thei r statutory obligations and to advis e on appropriate investment strate gies to optimise
their property portf olios.
Originality/value –This paper provides insights on the requirements of MEES legislation to aid the
property professional.
Keywords Market value, Energy Performance Certificates (EPCs), MEES regulations, EPC assessors,
UK property market
Paper type General review
The single most significant piece of legislation to affect our existing building stock in a generation.
(John Alker, 2016)
Introduction
On the 1 April 2018, the pricing and value of lettable real estate in the UK changed forever.
As of this date, new legislation, known as the Minimum Energy Efficiency Standards
(MEES) was introduced and applied to all investment buildings, domestic or non-domestic.
It is now illegal to let buildings on new leases with the lowest two energy efficiency ratings
(Energy Performance Certificate (EPC)) of “F”and “G”and the price of such properties in the
marketplace has begun to fall accordingly. But, it is not 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. It is a “game changer”and not a transitionary piece
of legislation.
It was a major intervention in the UK property marketplace. Not since 1971, when the,
then, conservative government introduced a rent freeze to try to counter high inflation, has
there been such state interference in the free market. And, perhaps more worryingly, even
market chose to ignore all its implications until the enactment date of 1 April 2018.
In truth, that is an unfair statement as the market is quite disparate and many of the big
players such as pension funds, property companies and the like embarked upon strategic
Journal of Property Investment &
Finance
Vol. 37 No. 4, 2019
pp. 416-423
© Emerald PublishingLimited
1463-578X
DOI 10.1108/JPIF-04-2019-0046
Received 6 April 2019
Accepted 6 April 2019
The current issue and full text archive of this journal is available on Emerald Insight at:
www.emeraldinsight.com/1463-578X.htm
416
JPIF
37,4
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