What the new home energy standards mean for home buyers and housing affordability in Australia

In parts of Australia, all new homes will need to meet a high efficiency rating, as well as accessibility requirements, as of October 2023. However, this new push for sustainability has many experts questioning how the changes could impact housing affordability, amidst the ongoing construction sector supply chain delays and rising materials costs.

The new home energy standards, agreed up in a meeting on Friday, require new homes and renovations to meet a 7-star rating (out of 10) on the Building Sustainability Index. Currently, the minimum sits at 5.5-stars.

However, not everyone is convinced the move is a homerun yet. Master Builders has advised the changes could add at least $30,000 to every new build on average. It has suggested that the cost-benefit analysis performed by the Australian Building Code “has failed”. These are hikes that could hurt first home buyers already struggling to save up a property deposit in the current market.

What are the new home energy and accessibility standards?

To reach the new standard under the National Construction Code 2022, homeowners may need to factor the following into their construction plans:

• Add solar panels
• Utilise passive cooling strategies (more shading, insulation, double-glazed windows, natural vegetation etc.)
• Ditch gas as an energy source

The state government will also begin requiring that carbon contained within construction materials is calculated and reported upon, allowing the government to better track emissions in residential building materials.

And it’s not just residential construction that is affected, with large state projects, as well as commercial developments, needing to submit a “net-zero statement” that they will convert to renewable energy by 2025, or are currently all-electric, to proceed.

Further, the new regulations are set to improve accessibility as well, with step-free access, one toilet on ground level and internal walkways able to fit wheelchairs, now part of minimum mandatory standards for new homes.

The transition to a 7-star efficiency rating, as well as improvements in accessibility, will commence over the 12 months following October 2023. The measures are set to help states, such as New South Wales, reach zero emissions by 2050.

Could new home energy standards impact housing affordability?

In a statement to ABC News, Master Builders Queensland CEO, Paul Bidwell, stated the industry body anticipated the changes would add an extra $30,000 to an average build

"$30,000 is a significant amount. It's the first homebuyers who are most impacted, who are struggling to get a deposit together, to make the repayments, and then the cost of construction goes up," Mr Bidwell said.

In theory, if the price of building a home has jumped exponentially for the owner, would-be buyers may find these higher costs have been passed on to them in the form of higher property values. Or, if the cost of investing in new property rises, these increases could also be passed on to renters.

However, state modelling has suggested that the cost may be closer to $6,000 than $30,000. Minister for Energy and Public Works, Mick De Brenni, stated that they expect it is likely to increase building costs by around 1% on average

Further, as the impacts of climate change continue to affect Australians, it’s worth wondering how much preparing homes ahead of time could ultimately save homeowners. If the switch to renewables is inevitable, and energy prices are continuing to rise, investing in solar power could help cover the increase to build costs over time.

Can sustainable home builds save you money?

NSW Treasurer Matt Kean said the new standards would drive “more energy-efficient homes from Bondi to Broken Hill and beyond, with better design, better insulation and more sunlight”

Further, modelling shows that those living in high-rise apartments in suburban Sydney could save up to $150 each year. Power bills for homeowners in western Sydney may be reduced by a massive $720 a year as well.

According to NewGenSolar, the impact of a 6-star rated home alone upgrading to a 7-star rating could have the impact of reducing energy costs by up to 20%, which can equate to hundreds, if not thousands, of dollars a year.

Even simply adding solar panels to a home has been recently proven to help improve your property value. According to Domain data, the premium paid for a median priced energy-efficient house in 2022, was $125,000, or 17.1% more compared to non-efficient houses. And for energy-efficient units, the premium paid was $72,750, or 12.7% more

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