How does an energy efficient home affect property value?
In recent years, energy-efficient homes have become more popular among Australian home buyers, sellers, and investors. According to Domain's 2024 Sustainability in Property report, the number of green homes has risen with half of all houses and one-third of units having green features.
Investors are looking to green homes because of their high demand and potentially better returns. But why are green homes garnering higher property values? It's a mix of supply, demand, and liveability. Here's a more detailed look at how green home features affect prices:
Higher demand for energy-efficient homes
If given a choice, around two-thirds of buyers would opt for energy-efficient homes. Take note that according to Domain research, the demand for green homes is more prominent for houses than it is for units.
Properties with listed green features such as solar panels and are north-facing garner more attention from buyers and sell quicker than those without. There's a growing trend of buyers not only preferring green homes but also actively looking for homes with sustainable and energy-efficient amenities.
The increasing popularity of green homes can be attributed to the heightened environmental consciousness of the average Australian. Amidst climate change, more people want to switch to a more energy-efficient lifestyle.
In addition to eco-friendly purposes, more homebuyers want energy-efficient homes because of the low maintenance and utility costs. Thanks to the green home features such as heat recovery ventilation, solar panels, and rainwater tanks, homeowners can save hundreds in costs yearly.
Statistics for energy-efficient houses
The data below from the 2024 Sustainability in Property report shows an increase in listing views for energy-efficient houses across all combined capitals and regions. This is consistent with growing interest from buyers of greener alternatives or sustainable features.
It's important to note that only some cities show fewer days spent on the market. Only energy-efficient homes in Adelaide, Canberra, and Darwin spent fewer days on the market while the rest saw no change or improvement. This could be due to other factors such as competition in hot markets and ease of financing for certain buyers.
| Location | Days on Market | Listing Views |
|---|---|---|
| Sydney | 0.0% | 27.0% |
| Melbourne | 0.0% | 34.7% |
| Brisbane | 0.0% | 18.6% |
| Adelaide | -5.0% | 52.9% |
| Perth | 2.2% | 17.8% |
| Canberra | 0.0% | 6.2% |
| Hobart | -5.9% | 14.8% |
| Darwin | -18.0% | 13.1% |
| Combined Capitals | 0.0% | 16.5% |
| Combined Regions | 0.0% | 13.6% |
| Australia | -4.0% | 16.7% |
Statistics for energy-efficient units
There is 6.6% more buyer interest in energy-efficient units than in non-energy-efficient units. Generally, energy-efficient units don't perform as well as energy-efficient houses, but they still garner better listing views overall compared to non-energy-efficient units. In areas like Sydney, Melbourne, and Brisbane, the listing views are over 15% better for energy-efficient units.
However, there are certain places such as Brisbane, Perth, and Darwin where these types of units spend fewer days on the market. In places like Adelaide and Canberra, energy-efficient units take longer to sell.
| Location | Days on Market | Listing Views |
|---|---|---|
| Sydney | 0.0% | 20.4% |
| Melbourne | 0.0% | 15.1% |
| Brisbane | -4.8% | 15.5% |
| Adelaide | 2.7% | 9.7% |
| Perth | -4.0% | 1.2% |
| Canberra | 17.4% | -7.2% |
| Hobart | N/A | 0.8% |
| Darwin | -7.9% | -10.9% |
| Combined Capitals | 4.3% | 0.8% |
| Combined Regions | 0.0% | 15.1% |
| Australia | 0.0% | 6.6% |
Buyers are willing to pay more for green homes
Those purposely looking for green homes are willing to pay the premium. Energy-efficient home buyers also often act swiftly to get the energy-efficient property they want. Investors are more motivated to adopt sustainable home features not only because of the environmental benefits but also due to significant financial gains. Recently, green homes have been performing better in the real estate market with the price premium of green homes being at $112,000 for houses and $70,000 for units.
Energy-efficient units seem to outperform energy-efficient houses; however, this may be due to the difference in buyer demographics. Due to houses being more expensive in general, some buyers may not be able to afford the premium, especially if it's their first home.
Top suburbs with high energy-efficient house price premiums
Some suburbs have higher energy-efficient price premiums than others. To maximise potential profit, it's best to research and review where energy-efficient homes can garner the most value increase.
It's also important to consider the kind of energy-efficient properties on the market. Some properties can be considered luxury properties which will have more inherent value compared to a standard single-family home.
| Suburb | State | Energy-efficient House Price | Energy-efficient Price Premium |
|---|---|---|---|
| Mosman | NSW | $6,350,000 | 48.2% |
| Port Macquarie | NSW | $840,500 | 9.8% |
| St Ives | NSW | $3,010,000 | 9.1% |
| Reservoir | VIC | $1,100,000 | 48.0% |
| Preston | VIC | $1,190,000 | 24.6% |
| Coburg | VIC | $1,319,000 | 23.3% |
| Buderim | QLD | $1,290,000 | 38.0% |
| Thornlands | QLD | $1,140,000 | 36.5% |
| Coomera | QLD | $840,000 | 28.4% |
| Mount Barker | SA | $715,000 | 16.7% |
| Munno Para West | SA | $577,000 | 14.3% |
| Morphett Vale | SA | $645,000 | 9.7% |
| Como | WA | $1,250,000 | 53.4% |
| Aveley | WA | $700,000 | 19.5% |
| Alkimos | WA | $699,000 | 19.0% |
Added value due to choice of green features
Installing sought-after features to established properties is a long-term strategy to increase a property's values. With energy-efficient features, however, home sellers and investors have the opportunity to tap into the green home market and attract a wider range of buyers and tenants.
The most popular and greatest value-adding feature are solar panels which include solar water heaters and solar electricity generation outfits. In the past year alone, 42.5% of sold houses have solar installation. Solar installation could increase the purchase price of a property by up to $150,000.
If you're an investor looking to capitalise on the green home market, adding something as simple as solar panels could potentially increase the value of your property. You can take advantage of solar home loans and get discounted rates so you can upgrade your property sooner.
Another impressive value-adding energy-efficient feature is double-glazed windows. Installing these windows can garner about a $187,500 increase in property value. Double-glazed windows are effective insulators while also reducing noise and lower heating and cooling costs.
Age and location of the property
Relatively speaking, green homes are new inventions. Energy-efficient homes are typically newer and therefore have more modern aesthetic features. If an established home is being renovated to include energy-efficient features, the exterior will likely also be improved to look less dated. Enhancing the aesthetic appeal of the property can also increase its property value.
Regardless of amenities, age, and overall demand in Australia, the value of energy-efficient homes still relies on the local real estate market. As an investor, it's best to study the local market trends to gauge profitability. It may be a good idea to look for areas with a low supply of green homes but high demand and fill in that niche. Understand where green home options are abundant so you can create an appropriate strategy.
Financing your green home construction or renovation
Building or renovating a green home can be costly but you can save more with a green home loan! At loans.com.au, we reward those going green by providing discounted rates and incredible loan features so you can get your energy-efficient home sooner.
About the article
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