Do Solar Panels Increase Property Value?

The Australian housing market is in constant flux, and solar panel installations have surged in Australia’s homes, reflecting a growing commitment to sustainability. Homeowners are always looking for ways to enhance their property value. Solar panels have become popular, but many wonder: Do solar panels increase property value? This article will explore this key question, examining the factors influencing property value and providing insights into solar installations’ financial and environmental benefits.

Solar panels offer significant financial benefits by reducing electricity bills. Homes with solar installations typically see a reduction in energy costs of up to 50%. This translates to substantial savings over the lifetime of the panels.

A study analysing the potential savings and payback periods for solar panel systems in major Australian cities found that a 2 kW system could generate 19–29% of a typical household’s winter energy needs, while a 5 kW system could generate 49–73%. The payback period for different systems varies, depending on city-specific factors such as solar radiation and energy consumption patterns [1].

An empirical study examining the cost-effectiveness of PV systems across eight major Australian cities found that households could achieve life cycle cost savings ranging from $273 to $53,021 over a 15-year period. The percentage of cost savings varied from 0.35% to 123.83%, depending on the capacity of the PV systems and the specific city [2].

Beyond financial benefits, solar panels, or Photovoltaic (PV) systems, appeal to buyers who prioritise environmental sustainability. The demand for energy-efficient and eco-friendly homes is growing rapidly in Australia. Homeowners are becoming increasingly aware of the impact of climate change and actively seeking ways to reduce their carbon footprint.

By generating clean energy, Solar photovoltaics help reduce reliance on fossil fuels and minimise greenhouse gas emissions, making them a desirable feature for environmentally conscious Australian Property owners. This environmentally conscious approach is attractive to buyers. They see solar panels as a sign of responsible homeownership. Homes with solar installations are often perceived as more desirable and command higher prices in the market.

The Australian government recognises the importance of promoting renewable energy. It offers various incentives and tax credits to encourage solar installations. These incentives can significantly reduce the upfront cost of going solar, making it more affordable for homeowners.
These incentives include:

• Small-scale Renewable Energy Scheme (SRES): This scheme provides financial rebates for solar panel installations, making it more financially viable for homeowners to invest in renewable energy.
• Renewable Energy Target (RET): This policy encourages the development of renewable energy sources in Australia. It includes measures that support solar panel installations.
• State and Territory Incentives: Several states and territories offer additional incentives and rebates for solar installations. These vary based on location.

By highlighting the environmental benefits of solar panels and the available incentives, homeowners can make informed decisions about investing in a sustainable and valuable home improvement.

The demand for solar-powered homes is steadily increasing across Australia. This growing popularity is driven by various factors, including rising energy costs, environmental awareness, and government incentives.

Real estate data consistently shows that homes with solar panels often attract higher prices than comparable homes without solar. This trend is particularly noticeable in areas where energy efficiency and sustainability are highly valued.

According to a Domain Sustainability in Property Report, Australian buyers are willing to pay a premium for energy-efficient homes, with buyers spending an average of 17% more to secure a sustainable property. Sustainable houses with features like solar panels, rainwater tanks, and insulation receive 8.7% more online views and sell 4% faster than comparable homes without these features.

Here are some key market trends that support this data:

• Buyer Preferences: Prospective buyers are increasingly seeking homes with energy-efficient features, and solar panels are a highly sought-after attribute.
• Faster Sales: Solar-equipped homes often sell faster than comparable homes without solar, demonstrating the high demand for this feature.
• Premium Pricing: In many areas, buyers are willing to pay a premium for homes with solar installations, recognising the long-term financial and environmental benefits.

Motivations for adopting solar panels include both economic benefits, such as reduced energy bills, and environmental concerns. Renters particularly desire solar panels for these reasons, but face barriers related to cost uncertainties [3].

Solar panels can add up to 4% to your home’s value. For example, a $300,000 home could increase by $9,000 to $12,000.

While monetary value is important, homes with solar panels also sell up to 20% faster than those without. This faster sale can be a significant benefit.

A study on residential properties in Western Australia found that homes with solar photovoltaic (PV) systems enjoy a property price premium of approximately 2.3–3.2%. This premium allows homeowners to fully recover the costs of PV investments upon selling their properties [4].

Another study showed that Australian renters with solar panels pay about A$19 more weekly housing rents than those without. This indicates that landlords can benefit from solar panel investments through higher rents, with a payback period of around five years [5].

While solar panels offer numerous benefits, it’s crucial to consider some key factors before making a decision.

The impact of solar on property value varies based on local real estate market trends and zoning regulations. It’s essential to research your area’s specific regulations regarding solar installations.

For example:

• Building Codes: Ensure your roof meets local building codes for solar panel installation.
• Neighbourhood Aesthetics: Some areas may have aesthetic guidelines that impact the type of solar panel system allowed.

If your area has strict regulations or limitations, discussing these with a qualified solar installer is crucial. They can advise on options that comply with local Council requirements.

Solar panel installations involve upfront costs. The cost varies based on system size, panel type, and installation complexity. To offset these costs, explore various financing options:

• Solar Loans: Banks and financial institutions offer loans specifically for solar installations.
• Government Rebates and Incentives: The Australian government offers various rebates and incentives to encourage solar adoption. These can significantly reduce your upfront expenses. For example, the Small-scale Renewable Energy Scheme (SRES) program is based on tradable certificates called small-scale technology certificates (STCs) that create a subsidy for households and businesses that install these renewable energy.
• Power Purchase Agreements (PPAs): A PPA allows you to lease your solar system rather than purchase it outright.

Solar panels generally require minimal maintenance. They are designed to last for 25 years or more. Typical maintenance includes:

• Cleaning: Dust and debris can affect efficiency. Periodic cleaning is recommended.
• Inspections: Annual inspections help identify any potential issues.

Over time, you may need to consider:

• Panel Upgrades: As technology advances, older panels might become less efficient. Consider upgrading to newer panels for improved performance.
• Replacement: After 25 years, panels might need to be replaced. This is an important consideration for long-term planning.

Installing solar panels in Australia can increase property values, as evidenced by higher sale prices and increased rents. These economic benefits, combined with environmental motivations, highlight the positive impact of solar panel adoption on property investments.

[1] Imteaz, M., & Ahsan, A. (2018). Solar panels: Real efficiencies, potential productions and payback periods for major Australian cities. Sustainable Energy Technologies and Assessments, 25, 119-125. https://doi.org/10.1016/J.SETA.2017.12.007.

[2] Tam, V., Le, K., Zeng, S., Wang, X., & Illankoon, I. (2017). Regenerative practice of using photovoltaic solar systems for residential dwellings: An empirical study in Australia. Renewable & Sustainable Energy Reviews, 75, 1-10. https://doi.org/10.1016/J.RSER.2016.10.040.

[3] Zander, K. (2020). Unrealised opportunities for residential solar panels in Australia. Energy Policy, 142, 111508. https://doi.org/10.1016/j.enpol.2020.111508.

[4] Ma, C., Polyakov, M., & Pandit, R. (2016). Capitalisation of Residential Solar Photovoltaic Systems in Western Australia. EnergyRN: Photovoltaics (Topic). https://doi.org/10.1111/1467-8489.12126.

[5] Best, R., Esplin, R., Hammerle, M., Nepal, R., & Reynolds, Z. (2021). Do solar panels increase housing rents in Australia?. Housing Studies, 38, 1918 – 1935. https://doi.org/10.1080/02673037.2021.2004094.