Renewables for rent: Sustainable investment Pages

Renewables for rent: Sustainable investment in the future

Solar Victoria Chief Executive Officer Stan Krpan outlines the many benefits of undertaking energyefficiency or solar upgrades for rental properties.

Australians love property. Whether it’s making plans to buy, owning our own home, renovating or investing.

More than 2 million Australians own an investment property according to the Australian Taxation Office – around 20 per cent of all property owners.

For many, working hard and saving to secure that second property as an investment has been part of an important financial life plan to help them set themselves up for the future, reduce tax burden, secure additional income from hard earned cash or assets, and hopefully invest in capital growth.

As a nation of home improvers and renovators, Australians also make efforts to improve the value of their investment. Property improvements are often seen as a ‘no-brainer’ for primary places of residence, but investors have been wary of similar upgrades to their investment or rental properties. At times of financial uncertainty, rental providers may question the value of undertaking energyefficiency or solar upgrades for rental properties, because the immediate benefit of lower power bills goes to renters. This perceived ‘split incentive’ can act as a deterrent for investors.

But it shouldn’t.

The benefits to all – both owneroccupiers and renters – are clear and immediate; lower power bills providing hundreds of dollars in savings, reduced carbon emissions and a more thermally comfortable home.

While the benefits for rental providers may not be as immediately obvious, there are many, and investigating in them is worth your time.

With the support of the Victorian Government’s Solar Homes program, eligible rental providers can access a $1,400 rebate on a solar PV system and an interest-free loan for four years for an equivalent amount. That reduces the upfront costs of a rooftop solar PV system substantially, by $2,800, with the remainder generally forming a depreciable, tax deductible investment for rental providers.

The REA Insights Energy Efficiency Housing Report released in June this year shows that, in addition to minimum bedroom and bathrooms on offer, many people searching for rental properties

Renovation lifestyle shows are a national obsession, but it’s often about much more than aesthetics.

Homeowners are increasingly interested in improvements that both increase value and save money, particularly on energy bills, which is why adding insulation and solar panels is so popular. More than 20 per cent of freestanding homes in Victoria – over 500,000 homes – now enjoy the financial and environmental benefits of solar energy.

The Victorian Government’s Solar Homes Program has, since its inception in 2018, supported more than 160,000 Victorians to install solar. For many this would never have been possible, or affordable, without the generous incentives on offer and interest-free loans.

More than 500,000 homes in Victoria enjoy the financial and environmental benefits of solar energy.

across the group’s real estate platforms value sustainability features in a property.

Report author and realestate.com.au data analyst Karen Dellow said energyefficient ratings and energy saving features are important to all property seekers, whether they are looking to buy, rent or build. Reducing energy bills was the top reason consumers cared about energy-efficiency ratings, marked as being important by 84 per cent of survey respondents. Solar power was the top search term for a home sustainability feature, rated by 81 per cent of survey respondents. Solar power made up 92 per cent of energy-efficient keywords used in searches.

Marketing sustainability features to make a property more attractive to potential renters and buyers has become increasingly important for rental providers, agents and property managers over the past year.

According to the report, such features were particularly prevalent in areas with high rates of development and newer suburbs. Much of this can be attributed to regulatory requirements and increasing trends in building contracts to incorporate these features. The suburb of Clyde North in Melbourne’s outer south-east had the most listings with energy efficient features. Incidentally, Clyde North features consistently in the top 10 list of most popular suburbs for solar uptake under the Victorian Government’s Solar Homes Program. Tarneit in Melbourne’s west is consistently rated as number one.

Investors are already seeing gains from adding energy-efficiency and sustainability features to their properties. A 2015 research report in the Australian Journal of Agricultural and Resource Economics found a 2.3–3.2 per cent property price premium associated with rooftop solar PV systems installed on homes in Perth.

Other studies have found a premium for homes featuring solar PV installations. US real estate website Zillow reports that in the United States, homes with solar panels sell on average for 4.1 per cent more.

Origin Energy reports that 57 per cent of homeowners say they would pay up to $10,000 more for a home equipped with solar, and 55 per cent of renters say that they would pay up to $10 more per week rent for a property with solar. These are all positive indicators for rental providers and property investors particularly with higher vacancy rates and declining rents in Melbourne as rental providers compete for new tenants and renters being choosier about properties in a competitive market.

For its part, the Victorian Government is providing cash incentives that make sense for savvy rental providers.

In 2019, the Victorian Government announced that its Solar Homes Program would be extended to include 50,000 rental property rebates, to assist rental providers to go solar. It is the largest program of this type in the country and has been welcomed by renters and stakeholder groups.

There are plenty of good reasons to invest in upgrades to rental properties that benefit both investors and renters – solar is an obvious choice. It makes properties more marketable and more attractive to potential renters and buyers. And best of all, we can play our part by doing something for the environment too.

Stan Krpan

CEO, Solar Victoria