Will emission ratings affect your property value?

The Australian government’s plan to reduce carbon emissions by 43 per cent by 2030 is set to shake up a range of businesses and industries around the country. But could this target also affect the value of your home, and what can you do to plan ahead for it?

Speaking at an Australian Information Industry Association conference, Australian Banking Association (ABA) CEO, Anna Bligh, said that for Australia to reach the 43 per cent reduction target by 2030, the nation would need to start measuring emissions in the household sector, after the energy and transport sectors.

“And once you start energy rating a house, markets start to behave differently. It will affect the value of your property – people will attach a higher value to a lower-end house than to a higher-emitting house. People will see a market opportunity in buying higher-emitting houses and converting them.”

Ms Bligh added that with some governments legislating that you can’t sell or rent a house unless it meets a certain energy rating, or that you can’t advertise a house for sale without disclosing the energy rating of the house, “it’s going to change the way we think about the homes in which we live.”

How are housing emissions rated?

The energy efficiency of Australian homes is measured by the Nationwide House Energy Rating Scheme (NatHERS) using a star rating scale out of ten:

• A 0-star rating means the building shell does practically nothing to reduce the discomfort of hot or cold weather.
• A 6-star rating is the minimum standard in most states and territories. It indicates good, but not outstanding, thermal performance.
• A 10-star rated home may not need any artificial cooling or heating to keep you comfortable.

Factors affecting a new home’s star rating include the home’s heating and cooling equipment, hot water systems, lighting, swimming pool and spa pumps, and onsite renewable energy systems (e.g. solar panels).

To increase the energy efficiency and electric-vehicle readiness of new dwellings, as well as their accessibility, new updates to the National Construction Code (NCC) are set to increase the minimum level of thermal performance for new dwellings from 6 to 7 stars.

According to the Australian Building Construction Board, the changes to the NCC could lead to:

• House energy bill savings across jurisdictions of an average $183 annually
• Greenhouse gas abatement of 4.3Mt Carbon Dioxide Equivalent from 2022-2030
• A household level benefit-to-cost ratio of 1.37 (after accounting for increased construction costs).

Energy efficiency changes to the NCC are voluntary from 1 October 2022, with a transition period until 1 October 2023, though this may vary by state and territory.

How can you prepare your property for the new energy efficiency standards?

Whether you’re an owner-occupier or an investor, taking steps to improve the energy efficiency of your property today could potentially affect its value in the future.  

Some of NatHERS’s tips for getting your dwelling to a 7-star rating or above include:

• Contacting a NatHERS assessor for more specific advice regarding your property. The cost of an assessment typically ranges from $250 to $500.
• Adjusting the orientation of the property to suit the local climate, allowing for appropriate shade and solar access.
• Double and triple glazing windows
• Adding more internal doors
• Improving insulation
• Adding ceiling fans
• Lightening external roof and wall colours
• Choosing lighting options that allow for continuous insulation

How can you finance an energy-efficient home build or renovation?

If you’re looking at building a new property with energy efficiency in mind, a construction loan may be able to help you pay for the building project. Unlike a typical mortgage, a construction loan lets you draw down funds in stages as the project progresses.

Owners of existing homes looking at renovating to improve energy efficiency may have several potential finance options available, such as:

• Refinancing their home loan to borrow more money
• Accessing the equity in their property with a home equity loan or a line of credit
• Applying for a home improvement personal loan or a green personal loan
• Switching to a green mortgage

Compare green home loans:

Compare home loans in Australia