Home buyers and renters prepared to pay more for high EER

If you have a home with a high energy efficiency rating (EER), new research shows home buyers are willing to pay more for it.

A study from the University of Melbourne has found properties with higher EERs generate better sale price premiums.

The study analysed tens of thousands of property transactions in the ACT over five years, from 2011 to 2016.

Compared with three-star properties, the research found properties with EERs of five and six attracted premiums of 2 and 2.4 per cent respectively. Properties with an EER of seven attracted premiums of up to 9.4 per cent.

There were similar results in the rental market – five and six-star properties rented at 3.5 and 3.6 per cent premiums respectively compared to three-star properties.

A property’s EER is based on the running costs of the home in terms of energy output. Homes with an EER of zero can cost almost four times as much to run per year than homes with six stars.

“People value energy efficiency and make decisions based on these ratings,” said University of Melbourne property lecturer and report research Dr Georgia Warren-Myers.

“It has become one of the factors that people consider when they’re looking. They see the number of bedrooms, bathrooms, carparks and energy star rating.”

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LJ Hooker Kaleen agent Ben Lewis said EER isn’t a significant factor in his day-to-day negotiations.

“For some buyers, the EER is high on their list when purchasing but I have many other buyers who don’t hold it to high regard,” he said.

“People are more conscious of the EER if they are live-in buyers – investors, not so much, because they aren’t paying the bills.”

Mr Lewis said he finds desired physical features of a property, including aspect and layout, are higher on people’s lists than the EER itself – although these factors also attribute to the increase in energy efficiency and selling price.

“In my experience people don’t place importance on EERs, but I believe it’s hugely important for people to have an understanding of them,” he said.

When Rhys Langley bought his first home in May 2017 he didn’t take the EER into consideration. He purchased a three-bedroom home in Kaleen with a rating of 1.5.

“It’s very cold in winter and very warm in summer,” he said.

“I’ve got ducted heating but I try and limit usage otherwise the bill would be astronomical.”

Mr Langley said he was attracted to the home due to its “fixer-upper” potential and aims to improve the EER when he renovates.

“I plan on reselling the home at some point and now that I’ve experienced firsthand the importance of having a high EER, I wouldn’t resell the home without improving it,” he said.

Mandatory EER disclosure has been placed in the ACT since the 1990s – it is the only state or territory to enact this.

The University of Melbourne study has prompted calls for mandatory disclosure to be rolled out nationally.

“By providing a mandatory disclosure program Australia-wide, decision making by owners, occupiers and landlords will drive more energy efficient dwellings, potentially reducing carbon emissions associated with housing,” added Dr Warren-Myers.

“For tenants who have limited capacity to make changes to a property, not knowing the energy rating means they can effectively be penalised from the perspective of household bills.”