Energy Ratings Deliver Higher Sale Prices For High-Performing Homes

27 January 2020 by Jason Quinn

Homebuyers do care about energy efficiency and energy rating schemes for homes show a price premium for high-performing homes, says this Australian author.  The problem is the ACT is the only Australian state with a mandatory scheme.

As homes and buildings are, in general, one of the few profitable paths to zero carbon (ie we can save money while drastically lowering carbon emissions) this is good news. I expect that as part of the Zero Carbon Act implementation, New Zealand will require mandatory energy ratings of all buildings, including homes. The only question is when.

“Disclosing energy ratings is standard practice in the commercial building sector in Australia. Previous research showed this increases the value of buildings with higher energy ratings (a price premium). Our recent review of international research looked to see if a similar effect exists in the residential sector.

The majority (23) of the 27 relevant studies we reviewed found more energy-efficient homes fetch higher prices than less energy-efficient, but otherwise comparable, homes. So what sort of price premium do houses with a higher energy rating attract? It’s typically around 5% to 10%.

Only one study looked at Australia (the ACT scheme, which has operated since 2003). It found a 2.4% price premium for a six-star house and a 9.4% premium for a seven-star house compared to a 3 star home. For Australia, with a median house price of $773,635 in late 2019, the ACT results equate to potential price premiums of $18,500 and $72,721.

In many countries, it is mandatory for the seller to obtain and disclose a home’s rating. For European Union countries, this has been the case for ten years. But that’s not the case in most of Australia. Only one of the states and territories – the ACT – has a regulated scheme to disclose the energy-efficiency rating of housing to prospective buyers.”

—27 Jan 2020

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