Energy performance proving its worth in property markets
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The Australian real estate landscape is witnessing a significant shift as energy efficiency becomes a critical factor in property valuation. New national research, released today by Cotality in their Watt’s it Worth report, reveals that homes equipped with solar power systems are commanding higher prices, with buyers willing to pay a premium of approximately 2.7% more than for comparable properties without solar systems. This translates to a national average increase of $23,100, underscoring the growing importance of sustainable energy solutions in the housing market.
The report further highlights that each additional star in the Nationwide House Energy Rating Scheme (NatHERS) adds an extra 1.3% to a home’s value, which equates to an additional $10,560. These findings are being warmly received by the Real Estate Institute of Australia (REIA), which has long advocated for greater transparency and emphasis on energy efficiency in real estate transactions.
Jacob Caine, Chair of the REIA’s Sustainability Working Group, emphasised the impact of these findings on buyer behaviour, particularly in the context of current economic conditions. “Australians are recognising the dual benefit of energy-efficient homes – reduced running costs and stronger long-term value,” said Caine. He noted that consumer search behaviour increasingly favours listings that prominently feature energy-efficient attributes, indicating a shift in buyer demand. “These findings cement what we are hearing from buyers: energy efficiency ratings and solar panels are no longer ‘optional extras’ but central to how homes are appraised and sold,” Caine added.
The report’s insights bolster the REIA’s advocacy for a nationally consistent framework for the mandatory disclosure of energy efficiency ratings at the point of sale and lease. Caine pointed to the success of such initiatives in the Australian Capital Territory (ACT), where mandatory disclosure has been in place for over two decades. “The ACT government has shown for more than two decades that mandatory disclosure works. The report’s evidence provides a clear case for rolling out consistent, trusted ratings nationally, supported by incentives and a phased approach,” he said.
Among the REIA’s policy priorities are improving energy efficiency disclosure at the point of sale and lease, implementing a national mandatory disclosure framework, supporting retrofits for the 70% of existing homes rated below three stars, and raising consumer awareness. These measures aim to empower agents to better guide buyers, sellers, landlords, and renters toward more informed housing choices. Caine encapsulated the growing importance of energy performance in real estate by stating, “Performance is now as important as postcode. Homes with higher energy efficiency deliver greater comfort today and better capital growth tomorrow.”
The findings of the Watt’s it Worth report are likely to have wide-reaching implications for the Australian property market, influencing both buyer preferences and the strategies of real estate professionals. As energy efficiency becomes a more prominent factor in home appraisals, the market could see a shift in how properties are marketed and valued, with energy-efficient features becoming a standard expectation rather than a bonus.
This trend is set against a backdrop of increasing cost-of-living pressures, which are prompting buyers to consider long-term savings on utility bills as part of their purchasing decision. With energy prices remaining a significant concern for many Australians, the appeal of homes that promise lower running costs is clear.
The REIA’s call for a national framework reflects a growing recognition of the need for uniform standards in energy efficiency disclosure, which could facilitate more informed decision-making among consumers. By advocating for these changes, the REIA aims to drive a broader transformation in the housing market, aligning it with sustainability goals and consumer expectations.
As Australia continues to grapple with environmental challenges and economic pressures, the emphasis on energy efficiency in real estate is likely to intensify. This shift not only benefits individual homeowners through increased property values and reduced energy costs but also contributes to broader societal goals of sustainability and environmental responsibility.