Menu

Is it worth being green when developing a property?

Friday, 1st Aug 2014

being green

Whether you’re doing a simple multi-unit development or a larger-scale project, you’ll have to decide how much to spend on the build to get the best possible return.

So, financially speaking, is it worthwhile investing in features that will make your property more environmentally friendly?

One thing is for certain, environmental sustainability and eco-friendliness have become far more mainstream issues today than in the past. They are no longer simply the domain of hippies. And while green homes were once seen as visually unappealing (think of those unsightly solar panels), they have now become largely indistinguishable from their non-green counterparts. So it’s fair to say that the market for green properties is a growing one.

Some things just have to be done

It’s important to be aware that there are certain green standards that are mandated under the Residential Design Codes and the Building Code of Australia.

The Building Code, for instance, requires that all new buildings meet a minimum standard for energy-efficiency, measured by a star rating. The current requirement for Western Australia is 6 stars with an additional requirement for water-efficiency called 5-star plus.

Some local councils may also have their own additional energy-efficiency requirements that must be met in order for a developer to secure a particular zoning.

What else can be done?

There is a seemingly endless list of things you can do to make your property greener from the simple, such as installing energy efficient light globes and appliances, to the more expensive options, such as installing solar panels.

In Australia, conserving water is another important issue. Some of the things you can do in this area are installing rain tanks, and insisting on water conserving showers, toilets, washing machines and dishwashers. Establishing a drought tolerant garden is another positive step you can take.

Some people take the issue further and decide to use only sustainable and renewable materials in the construction of their property. Some will also commit to using non-toxic paints to improve air quality.

The point is that are numerous things you can do to make you property more eco-friendly. The added costs can range from a few dollars to tens of thousands of dollars per property.

Will it pay off?

We know that going green will be good for the environment and it could go a long way to reducing the running costs of the property. It may even help improve air quality. But will it pay off financially?

Firstly, there may be government subsidies or tax credits for installing certain features. But this will be of minimal incentive for developers.

In terms of lowering heating and cooling costs, yes, there is often a direct return on investment. If you are an owner occupier, the longer you spend in the property the more chance you have to recoup the additional costs. But more often than not, a developer is not responsible for paying power, water and gas consumption bills.

For those developing properties to hold the inevitable question arises, will a tenant pay more to rent a property that has lower running costs? Generally speaking, it is unlikely. While many tenants would prefer an environmentally friendly property, when it comes down to the crunch most tenants won’t pay a premium. At best I think an investment in green features could perhaps help to minimise vacancy periods by making your property more desirable.

Will a buyer pay more for your property if it has green features? Practically speaking a house that saves the occupants money should be worth more. However, I think it is unlikely you’ll get a huge premium. But it will definitely help your property stand out, especially in an oversupplied market.

The issue of whether a green property will attract a premium from renters or buyers depends on the location. People in some areas may recognise the value more than others. The high end of the market is perhaps a good place to look for buyers who would be willing to pay a premium.

Conclusion

Logic says that if you are going to invest in making your property greener with the explicit goal of generating a financial return, choose the features that are most visible to tenants and buyers. A stylish rain tank may put a tick in the box for many people, but how many will appreciate the fact that the timber floors came from a sustainable forest? Go with the items that will give you the biggest bang for your buck.

Of course, your reason may not be a commercial one and you may simply want to minimise the footprint you leave on the planet. This is of course commendable, even if there is no financial reward at the end of it.