Energy efficiency is an important factor when it comes to determining the sale price or rent for a residential property. With both buyers and renters prioritising energy efficiency in their choice of dwellings, energy efficient homes are attracting a premium in the market, reveals a new research study conducted by University of Melbourne property lecturer Dr Georgia Warren-Myers and University of Cambridge visiting fellow Dr Franz Fuerst.

This finding underlines the need for builders and owners to adopt energy efficiency measures in their properties and reduce carbon emissions. It has also brought into focus the need to implement a mandatory energy efficiency rating (EER) disclosure system across Australia.

For the study, the researchers analysed thousands of property transactions from 2011 – 2016 in Australia’s Capital Territory. Only the ACT requires mandatory rating disclosure for all dwellings while nationally only new dwellings need a minimum six-star rating out of a possible 10.

Key criteria for buyers and renters when making a final decision on a home include the number of bedrooms, bathrooms and carparks as well as the energy efficiency reflected in these ratings.

Correlating the sale price premiums and different star ratings, the researchers found that properties rated five and six stars attracted premiums of 2 and 2.4 per cent respectively (compared with three-star properties), while properties that achieved a seven-star rating attracted higher premiums of up to 9.4 per cent.

The rental segment also saw five and six-star properties rented at a 3.5 and 3.6 per cent premium respectively compared to three-star properties.

Homeowners, who were aware about the minimum six-star requirement for new homes, sought a higher rating to differentiate themselves from that baseline, says Dr Warren-Myers.

Dr Warren-Myers has called for a mandatory disclosure program Australia-wide to drive broader energy efficiency in existing properties, particularly in the rental market where landlords lack incentives.