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Increase your property’s value by boosting its energy rating

Boosting your home’s energy efficiency pays dividends, increasing property value by as much as 9.4%. Here’s how.
5 min read
Published on 22 May, 2019

Taking steps to visibly boost your home’s energy efficiency pays dividends.

Most homes in Australia were built before legislation required minimum energy ratings. So owners of older homes often have to choose between using (and paying for) more energy than necessary or paying to retrofit their home with energy-efficient heating, cooling, draft proofing and more.

It’s a big task, but the investment could be worth it. Not just for comfort but because it could increase your home’s sale price by as much as 9.4%.

Measuring the energy efficiency of homes

Many homes now are built to a six-star energy rating, but houses built in 1990 average only one star on the Nationwide House Energy Rating Scheme (NatHERS) scale, and many states have ruled that new homes must be rated at least six stars. The ACT even requires real estate advertisements to show energy efficiency star ratings for homes up for sale.

Ratings depend on a few factors, like layout; roof, window and floor materials; insulation; orientation; and suitability to the local climate.

Some owners choose to retrofit older homes, adding measures to improve energy efficiencies like a new hot water tank, double glazing for windows or solar panels.

“Homes with seven stars were worth 9.4% more on average. Those with five or six stars attracted premiums of 2 and 2.4% respectively.”

Crunching the numbers: does energy efficiency = value?

Researchers from the University of Melbourne examined 42,000 house sales in the ACT from 2011 to 2016. The results suggest higher prices for higher star ratings. Five and six-star homes were worth 2% and 2.4% more than one-star homes, and homes with seven stars were worth an extra 9.4%.

Dr Georgia Warren-Myers, who co-authored the study, said it shows that home buyers value energy efficiency and that it’s a factor people consider when buying a home.

Data from abroad reveals similar trends. A 2013 UK study found that making energy-saving improvements to a property increased its value by 14% on average, and as much as 38% in some parts of the country. Meanwhile, in Los Angeles, nonprofit group Build It Green found that homes with green upgrades fetched up to 6% more at sale.

Mother and daughter on back decking with residential rooftop solar

The link between energy efficiency and property value

There are lots of ways to increase energy efficiencies in a home, such as insulating ceiling, wall and floor cavities, and draught-proofing windows and doors. But these measures are largely invisible in a quick property viewing; sellers should advertise these and the property’s energy-efficiency star rating to help increase the sale price.

Visible measures like installing solar panels will also help show prospective buyers that work has been done to boost a home’s star rating. Other visible measures include double glazing and shading.

How do these changes stack up financially?

Say your home is worth $500,000. Bringing it up from a one-star rating to five could deliver an additional 2% or $10,000 in property value.

In this case, spending $20,000 on a five-star upgrade wouldn’t make financial sense. But if you can take a $500,000 home from a one-star to a seven-star rating, you’re potentially adding $47,000 to your home’s value. This can make the extra investment more likely to pay off – not to mention the comfort factor and advantages of using less energy before selling.

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