Does building green really pay off?

GUEST OBSERVATION

While location and price remain the biggest considerations for anyone purchasing a new home, smart buyers are starting to look at sustainability attributes and green ratings to decide which home may be a more sustainable long-term investment.

There are a number of rating systems in the market able to assess the energy efficiency of your home.  A Green Star rating, however, is more than just an indicator of energy efficiency, signalling that other environmental impacts such as water use, health impacts and origins of the materials in the building, and the connections to transport have been addressed.

Many buyers are beginning to see Green Star as a mark of quality when they hunt for a new property, and evidence is emerging that a green rating translates into a higher sale price when it comes time to sell.

In the commercial sector, a large range of research – both in Australia and overseas – has found that green buildings deliver consistently higher returns.  One Australian report, Building Better Returns (2011), found that Green Star-rated buildings deliver a 12% ‘green premium’ in value and a 5% premium in rent, when compared to non-rated buildings. 

But is this restricted to the commercial market?

A 2008 study from the ACT, Energy Efficiency rating and house price in the ACT, examined the relationship between (thermal) energy efficiency and house prices, finding that each half-star increase in the FirstRate energy efficiency rating translated into a 2% increase in capital value.

Another broader American study, The Value of Green Labels (2012), involved a pricing analysis of 1.6 million single-family home sales in California from 2007-2012.  The researchers found that, while the average sales price of a non-certified California home was $400,000, a green certification lifted the price by more than $34,800.  This translated into a 9% green premium. 

While many Australians are reluctant to pay more for a green-certified home at the moment, it is almost certain that they will pay less for non-rated, inefficient and unhealthy homes in years to come – so although a ‘green premium’ may not be much, the ‘brown discount’ for inefficient, unhealthy houses and apartments that are expensive to run will be considerable. Such homes would be worth less, and harder to sell on.

Whether a home with a green rating is more valuable right now may be up for debate, but there’s no doubt that a sustainable home uses less energy and water – and that can save you thousands of dollars each year. Add the improved health and wellbeing, and you’ve got more dollars in your pocket and better quality of life.

Romilly Madew is chief executive of the Green Building Council of Australia.