Can energy efficient upgrades electrify property values?

Improving the energy efficiency of a house or unit boosts market value, according to studies into price variations, which is great news for investors looking to also ‘green’ their portfolio.

Australia’s ‘Net Zero by 2050’ emissions target has driven policies to eliminate the 24 per cent of the nation’s annual electricity consumption and 10 per cent of its carbon emissions that emanate from residential homes.

Lachlan Turner, Managing Director of Turner Real Estate in Adelaide, said there is no doubt about a growing trend towards sustainable properties and that more recent builds are incorporating smart design with clever energy efficient features. 

“Buyers do value this more and more, but there needs to be the balance of it being aesthetically pleasing and sustainable at the same time.

“The cost of adding some features is still quite high, so the trends are stronger in the LGAs closer to the city or beachfront and the more affluent areas will tend to have more capacity to retrofit or build with additional sustainable features on the property. 

“Developing areas that are growing, however, require minimum standards in the new builds, so we are also seeing more entry-level properties offering more in the green space,” Mr Turner said.

The South Australian agency is taking steps to reduce its own carbon footprint by supporting local initiative Trees for Life.

Sustainability equals property profit

Elham Monavari, Head of Green Star Strategic Delivery, Green Building Council of Australia (GBCA), said a sustainability report by Domain in 2022 showed houses with a higher an energy-efficiency rating (EER) had a greater price per square metre.

“When it comes to supply, the number of homes for sale in Australia that included energy efficient keywords on domain.com rose to 54.4 per cent in 2022 and the report also found homes with energy efficient features had greater buyer interest and sold quicker,” Ms Monavari told API Magazine.

An ACT case study in the report found the price per square metre for an EER of ‘excellent’, was 99.3 per cent more compared to one with a poor EER.

The GBCA released its own report about cost savings EE measures created, based on KPMG data, which showed green home owners saved significantly despite initial costs.

If savings from energy costs were reinvested into the home loan as additional principal repayments, using a loan product offering a .05 per cent reduction for green building practices, the long-term savings would be significant.

“We are seeing more lenders offering interest rate reductions for Green Star Homes, including the Commonwealth Bank, NAB and Bank Australia, meaning green homeowners are saving up to $150,000 in interest costs, compared to an average home,” Ms Monavari said.

New builds must already meet minimum energy efficiency requirements through the Nationwide House Energy Rating Scheme but according to the Energy Efficiency Council, around 7 million homes still need to be retrofitted to align with the standards.

These properties will soon be overseen by a National Framework for Disclosure of Residential Energy Efficiency Information guide, which will be standard for disclosure schemes in each state and territory.

An energy efficiency (EE) renovation wave has already begun in social and vulnerable housing under the $1.3 billion Energy Savings Package that funds household energy upgrade retrofitting 110,000 social housing properties with battery-ready solar, modern appliances and other improvements.

Mandating the energy rating of existing properties is a norm in the European Union, where energy performance certificates have been a requirement for the last decade, for building, selling or renting a property.

A knock-on effect there has not just improved efficiencies but also led to an increase in the resale value of properties with a high EE rating

A Netherlands index concluded that with high energy costs persisting, the potential for a sustained increase in demand for EE properties underpinned returns.

Green and clean real estate investments

Bank Australia (BA), which is known for investing in clean companies, uses the Green Star rating to guide its property finance products.

John Yardley, Deputy CEO, BA, told API Magazine they’re seeing more customers wanting to use their money as a force for good and expect to be supported by everyday banking products with features that contribute to a more sustainable future for people and the planet.

“Products like our Clean Energy Home Loan (CEHL), which provides a discount for people looking to do things like add solar panels, window glazing and insulation to their home - or even buy or build an energy efficient home - are growing in popularity.

“In the last financial year, we saw our CEHL portfolio increase by 33 per cent, to a total of $197 million.”

The bank also recently launched a pilot to help eligible home loan customers get off gas to be proactive in the electrification of dwellings at scale, which Mr Yardley said is key to the bank’s climate action strategy and reaching the 2035 net zero emissions target.

What about zero-energy use homes?

Founder of Earthship Eco Homes, Dr Martin Freney, has taken the alternative lifestyle concept of living off the grid into 100 per cent efficient build-for-purpose homes that are self-sufficient, free from utility bills, use circular economy building materials and are bushfire resistant.

All current Earthships in Australia are being built by owners, but Dr Freney told API Magazine that Earthships are a well-designed home and doesn’t see why they wouldn’t sell on the market for the same as a regular home.

“I believe there’s got to be a bonus though, for something that’s got no utility bills and is resistant to bushfires and storms.

“A lot of people who contact me are really concerned about climate change and things like bushfires, and they’d pay extra for something like an Earthship, because it’s a high-quality building that’s engineered to withstand things that regular houses cannot.

“They exceed the minimum standards by miles, for example, I’ve been collecting temperature data on an Earthship in Western Australia and that home doesn’t need any heating or cooling; it actually stays between 20 and 24.5 degrees year-round because it’s surrounded by earth and has a beautiful sunroom on the northern side.

“It just works, magically almost, but it’s not magic, it’s just physics and good design.

“It’s an 11-star home, because a 10-star home actually uses energy for heating and cooling - not much, but there’s still an allowance - so I wonder why there isn’t an 11-star category for a zero-energy use home, which is bizarre to me; why aren’t we aiming for that?”