Would You Pay More For An Energy Efficient Home? | FUNdamental Friday

Welcome back to Friday Fundamentals on The Property Couch.

In this episode, Shane Pope is joined by Jacob Caine, President of the Real Estate Institute of Australia and Victoria, to unpack a property shift that many homeowners and investors may not be thinking about yet:

Home energy ratings.

Jacob explains why energy efficiency could become a much bigger factor in how properties are valued, rented and sold — particularly as governments look more closely at the energy performance of existing homes.

The conversation covers mandatory disclosure, retrofitting, the former NatHERS system now moving under the Home Energy Rating brand, and why upgrades like solar, insulation, batteries, heat pumps, efficient appliances and decommissioning gas could become part of a property’s future value story.

They also explore why this may create a major opportunity for owners of existing homes, especially if buyers and renters increasingly factor energy performance into their decisions.

If you own property, rent property, or are thinking about upgrading, this is one to keep on your radar.

Got a question or a “hill” you want us to unpack? Send it through here 👉 https://thepropertycouch.com.au/topics/

#ThePropertyCouch #EnergyEfficiency #PropertyValue #AustralianProperty #PropertyInvesting

⏱️ Timestamps

00:24 – Welcome back to Friday Fundamentals
00:36 – Meet Jake Caine
00:52 – Why energy efficiency matters for property
01:17 – The built environment and net zero targets
01:23 – How energy ratings may impact property values
01:32 – New builds vs existing homes
01:53 – Why retrofitting is the big opportunity
02:15 – Mandatory home energy rating disclosure
03:02 – Energy ratings at point of sale or lease
03:31 – How this could roll out across states
04:01 – Victorian rental energy standards
04:22 – Energy efficiency and the value premium
04:41 – The potential difference in property value
04:59 – Solar, batteries, insulation and heat pumps
05:18 – Why owners should start thinking about upgrades
06:06 – How Home Energy Ratings could guide improvements
06:47 – Will upgrades translate into added value?
07:38 – Comparing energy upgrades to pre-sale improvements
08:39 – Could small upgrades create a larger value premium?
08:56 – Final thoughts and webinar reminder

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Transcript

SPEAKER_00 0:00

Hundreds of thousands of dollars difference between a property that has a higher energy efficiency rating. The value of properties moving forward will be impacted very significantly by the energy efficiency rating of that particular property. Every home has to have a home energy rating, and that that home energy rating will then play into the value proposition for people renting or buying those homes.

SPEAKER_01 0:23

Hey

Welcome back to Friday Fundamentals

SPEAKER_01 0:24

catchers, welcome back to another Friday Fundamentals. We have a Friday 1st. Today with me is Jake Kane, the Real Estate Institute of Australia and Victoria president. And he has

Meet Jake Caine

SPEAKER_01 0:36

for us a scoop. Something about the future value of homes being predicted and protected based on energy something. Efficiency. Thank you. Energy efficiency. That's the one. So my first question is very simple in one word. What?

Why energy efficiency matters for property

SPEAKER_00 0:52

What? Yeah, great question. Look, we have a challenge ahead of the country, right? To hit that net zero target, right? Whether you're in on that or or not in on that, there's a massive economic imperative coming in this transition. A critical component of reaching those targets is the built environment, or more particularly the buildings that exist already on the on the face of this

The built environment and net zero targets

SPEAKER_00 1:17

country. And many of those, the majority of those, are residential homes. Yep. So the value of properties moving forward will be impacted very significantly by the energy efficiency rating of that particular property.

New builds vs existing homes

SPEAKER_01 1:32

So is this so is this then new builds, or are we talking about we can impact and influence these values by retrofitting things as well?

SPEAKER_00 1:40

Look, the real opportunity exists in the retrofitting because right now across the country, in various different states and and territories, there are minimum energy efficiency standards, right? That that the properties have

Why retrofitting is the big opportunity

SPEAKER_00 1:53

to be built to. So that's kind of that that's taken care of. But the existing homes, the circa 11 million homes across Australia, that sit there with an average rating according to totality of somewhere between two and three stars, which is low on a 10-star scale. We like totality, they're very reliable. Yep, their data is uh is is very complete and accurate in most cases. So that's where the average home uh rating is sitting right now. And what we've got coming down the pipeline at us really rapidly is mandatory disclosure of home energy ratings.

SPEAKER_01 2:26

And so how do you analyze? How do you know this is coming down the pipeline because of your exposure and your role to government?

SPEAKER_00 2:33

Government. Yeah, so there are departments at a Commonwealth and a state territory uh level that are called something along the lines of DECU or Department of Climate Change, Energy, the Environment and Water. Yeah. South full, hence the reason we say DEQ instead. And they have been working with local authorities in New South Wales in particular. New South Wales will lead the charge on this about a regime, a regulatory environment where at the point of sale, the point

Energy ratings at point of sale or lease

SPEAKER_00 3:02

of lease, every home has to have a home energy rating, and that that home energy rating will then play into the value proposition for people renting or buying those homes. Now, I can't say explicitly when this is happening, but you should anticipate that this could come into effect from a regulatory perspective within the next six months in New South Wales.

SPEAKER_01 3:22

Now that won't be So they'll start that at a state level first, and they're gonna they're gonna pilot that in New South Wales.

SPEAKER_00 3:28

Yep.

SPEAKER_01 3:28

And the learnings will be passed on to other states thereafter.

How this could roll out across states

SPEAKER_01 3:31

Yeah.

SPEAKER_00 3:31

And you would you expect that that would roll on pretty rapidly across um particularly the larger jurisdictions as well. Um but but those laws won't come into effect for more than 12 months, right? But they will be legislated potentially in the next six months. And what that will mean is a transformation of our built environment or the the buildings that that are here in Australia, but also a massive opportunity for people to capture value from their homes on their principal place if they're doing principal place or investment property as

Victorian rental energy standards

SPEAKER_00 4:01

well. Um we also have obviously in the Victorian context minimum energy efficiency standards, rental standards coming into effect from March next year. And that's going to require our property investors across Victoria to take some action, uh, often, you know, in terms of upgrading their rental home. But what that should also translate into is obviously a higher value on their property. So the capital improvements there are significant. Um, right now, REIA and Cotality are in the final stages of a white paper that tries to demonstrate what the value premium is on properties that have higher energy efficiency ratings. I can say without going into the detail of the report, which should come out in the next month

The potential difference in property value

SPEAKER_00 4:41

or so, that it is often hundreds of thousands of dollars difference between a property that has a higher energy efficiency rating, i.e., they've got uh solar panels, they might have a battery, they've got better insulation, they've decommissioned gas, they have a heat pump, they have um high uh energy efficiency appliances in the property, right? But there can be several hundred thousand dollars in like for light properties in terms of the difference.

SPEAKER_01 5:05

When this report comes down the line, that's would that serve as a potential framework or a guide for people to go, these are the things I'm gonna invest my capital in on my home over the next period of time?

SPEAKER_00 5:17

At a top

Why owners should start thinking about upgrades

SPEAKER_00 5:18

level, absolutely. Yep. We've done it for the sector to demonstrate to the sector it's time to start thinking more about this and start getting your clients, whether they are investment clients or sales clients, to make these upgrades because the the case is there to go if you take this property to market, whether for rent or for sale, with that higher rating, with these features inside the property, it's gonna get you a better price. It's gonna get you a better outcome. Better rental, better sale. Better rental, better sale. And that's demonstrated across the spectrum where people understand and know about the you the features that are in the property and the rating of the property. Now, the uh the Natters, formerly Natas, which was the national um uh uh uh uh housing rating system for for energy efficiency, it's transitioned to that aim the home energy rating

How Home Energy Ratings could guide improvements

SPEAKER_00 6:06

right now. Yep. Those ratings, when they're undertaken, if this legislation becomes mandatory, which we expect it to do so, they will give recommendations to the homeowner, the property owner, about what to upgrade to get it. Hypothetically, it comes in with a two-star rating and you want to get it to a seven-star rating, it will give you a laundry list of items that you can go bang, I'll do that, bang, I'll do that, bang, I'll do that. And all of a sudden I go from two to eight stars.

SPEAKER_01 6:31

With the initial, my final question on this, with the initial work that you've done on it in producing that white pay bar, will that laundry list say, here are six things, it'll cost you fifty thousand dollars to do them, but you'll add a hundred thousand dollars in value.

Will upgrades translate into added value?

SPEAKER_01 6:47

Is that it will it be as clear as that in the language that, or can we in can that be inferred from reading the report in terms of the values?

SPEAKER_00 6:54

Certainly from reading our report, like it will it speaks about the features that that were included in that home. It doesn't ascribe a particular value to each of them, but it compares it with um you know, recent results of comparable properties, um, suburb medians for that type of property, um, buyer inquiry, seller uh uh contract requests, etc. All of the key metrics that real estate um professionals use to sort of measure the success of a campaign. Yep. And it'll demonstrate, you know, you know, where this property um fit in the landscape all comparative to the others as well. Um but I think we will get there in due course, right? Where we'll have this understanding that if I do A, B, and C, and A, B, and C might be panels that might be better insulation and

Comparing energy upgrades to pre-sale improvements

SPEAKER_00 7:38

double glazing, right? Yep. That that investment of $5,000 will translate into a $50,000 value premium. Much like we do right now out there, agents, the reason agents, you know, repaint, recarpet, get the gardens done.

SPEAKER_01 7:51

And make it more attractive, add value, and increase inquiry, that's and and and elevate the sale price. That's right. And mitigate complaints as well.

SPEAKER_00 7:59

That's one of the big things. Yes, remove objections before you even start. That's right. People come in here and they go, Oh, I'm gonna have to repaint, recarpet, redo the garden, it's gonna cost me 50 grand. And and everyone knows it actually costs about five.

SPEAKER_01 8:09

Do you know what? It's a funny stat. I can't remember where I read it, and it always held true when I was on the sales side of the industry. But a buyer will overestimate the value of any self-declared repairs or maintenance by three times. Yeah. Uh like a like a $45,000 repair that they're assuming that hasn't been done, if the vendor did it would actually be a $15,000 um job to undertake.

SPEAKER_00 8:30

Yeah. So so it a lot, much like those kind of you know, recommendations that selling agents make to their owners in anticipation of a campaign launch,

Could small upgrades create a larger value premium?

SPEAKER_00 8:39

it'll be the same thing. People come and say, let's do the panels, let's let's decommission the gas, let's go into induction uh appliances, let's put a heat pump in there, and you're gonna get an extra 100 grand. It's gonna cost you 15 up front, but you'll get 100 grand in the end.

SPEAKER_01 8:52

Very exciting, very interesting. I liked it. And in not an episode

Final thoughts and webinar reminder

SPEAKER_01 8:56

that we've done before, can we call it like a free money episode, I think, do you think? It really feels like we're just printing it and giving it away. Um, for those of you who are watching this today, we always had our webinar uh a couple of nights ago, so we'll put a link up. You can watch the replay on that. A lot of great questions um were asked, and I know that uh I think there'll be some responses for that online. If you put that in the link, we'll get it through. Jake, thank you so much for coming on the show. Really appreciate it. And we look forward to seeing you next Friday. Stay fun. Best episode I've been on on the couch was with you then. Perfect. You weren't recording that?

unknown 9:35

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