Morningstar DBRS published a commentary discussing the potential impact of Energy Performance Certificate (EPC) scores on residential property values located in England/Wales and how EPC scores could affect Morningstar DBRS’ structured finance credit analysis in European mortgage-backed securities. The analysis was performed using a machine learning algorithm out of almost 6 million sale transaction records.
Key highlights include:
- EPC is a house price driver to some extent.
- On average, low versus high EPC shows about a 3.9% difference in house prices.
- House prices in London appear to be less affected by EPC levels.
- The findings of our analysis could be seen as credit positive for home efficiency loans backed by low efficient properties in certain regions.
“The model shows that overall higher EPCs are linked to higher prices per m2. As expected, EPC does play a role in determining property prices, but does not rank higher than other property features such as dwelling age or floor area,” said Dylan Cissou, Senior Vice President of European Quant.
