Does solar increase the value of your property?
So you have a solar power system installed at your property, is it really going to increase the value of your property? Well, it really depends on a few factors. Let’s take a look…
From in-ground pools to manicured landscapes, from a new concrete driveway to a new solar power system, home improvements can take on all shapes and forms. Most homeowners and prospective homeowners are looking to add value to their property beyond the likely/inevitable inflation.
Improvements to functionality and cosmetic appeal are imagined and undertaken not just for the enjoyment of the occupants, but with a view to increasing the value of the property. Be it for resale value, the benefits of future collateral or for wealth creation, increasing your property value is something we all desire.
So what about solar? We are all very aware of Australia’s significant uptake of photovoltaics on the domestic front. We also know that the installation of home solar systems is growing rapidly. The question now on the lips of many a solar speculator is: will a solar system add value to my property?
On face value, one would be inclined to jump straight in and say, of course, of course, a solar system will add value to my home, how couldn’t it? A home with cheap power…happy days!
For a number of reasons, we’re inclined to agree, but with qualification. The issue is a little more complex than a broad stroke emphatic yes. ‘It depends’, would be a more accurate
We know the last thing you want to hear is something so indecisive as ‘it depends’. It’s like when your mum and dad said, “maybe” to your request; you always knew ‘maybe’ meant no.
In this case, however, it’s quite the contrary. Opinions, ours and other relevant industry pundits, are suggesting home values will and have increased with the addition of solar. This opinion is in tune with the limited but growing body of evidence. Firstly, let’s define ‘it depends’.
We’ll use the example of a home renovation or ‘upgrade’ that includes the addition of an extra room (3rd bedroom on the side of the house), a complete paint inside and out, a new kitchen and a mosaic on the front porch.
On the surface, this sounds like a project that will increase property value. Here’s the ‘it depends’ bit…
What happens if the existing classic period timber kitchen with traditional features is being replaced with a very cheap, DIY, flatpack? If the house is to be painted DIY bright pink inside and out, the 3rd bedroom is clad with second-hand Zincaloom, replete with rust, and the mosaic on the front porch is a picture of a cemetery?
Ultimately, despite the fact the owners may love it, it’s likely nobody else will. Hence, the value of the property is decreased. Just because you think it’s an improvement, doesn’t mean anybody else will, including the bank!
In short, just because you are renovating or making additions, increasing your property value isn’t a guarantee. You can easily devalue your property via poor work, or a niche job of extreme or esoteric design and construction.
So ‘it depends’ also applies to the addition of a solar system. Yes, you can add value to your home. It may also have a neutral impact or, in rare circumstances, reduce value. It depends on how you approach it.
So when we say yes, a solar system will add value to your property, but we need to qualify our position, what are the qualifications we are talking about? Here’s a list, and we’ll address each one.
- Solar system age
- Solar system size
- Solar system quality
- Is the solar equipment owned outright or leased?
- The future of solar and renewables
- The future price of central grid electricity
- Public perception
Solar System Age
A solar system, 2 to 5 years old, still in warranty (all components), and producing power with ‘out of the box’ efficiency is a great ‘bonus’ to your house. Vendors will be able to demonstrate efficiencies via power bills and readouts. Selling agents will be able to use the array as a benefit, a feature.
On the other hand, if your solar system is 15 years old, it may be difficult to use it as a selling feature. Firstly, the panels and inverter are more than likely out of warranty. Secondly, the array is likely to be functioning less efficiently, reducing the financial savings on power. At the very least, maintenance and repairs are possibly likely.
Solar System Size
A small, inexpensive, low-power-producing system such as a 1kW system, or solar assist hot water, is a feature, yes. The benefits compared to sizable outlay of a home, however, make this feature negligible. It is unlikely to add value to the property.
On the other hand, a quality, large, 10 kW system, or larger, provides very significant reductions in power bills. A large system that shows a return as opposed to a bill, will definitely be a feature that adds value.
A more modest solar array that has the potential for expansion will appeal to many buyers, hence adding to the property value.
Solar System Quality
Make no mistake. The discerning property buyer will be investigating the quality of the inverter, photovoltaics, mounts and all. If they don’t understand it themselves, they will be sure to research and get an opinion.
A comprehensive pre-purchase building inspection will provide insight to system quality. It stands to reason that a poor assessment will see the buying party negotiate the price down, particularly if the vendor has highlighted the system as a feature.
Is the Solar System Owned Outright or Leased?
This is not such a big deal in Australia. We Aussies overwhelmingly prefer to own our own system. And this is reflected in the stats.
However, the option to lease a solar system via a third party is still available, and it has shown continually in the USA that buyers are turned off by these arrangements.
There is little supportive data here to demonstrate, but it can be likened to picking up somebody else’s contract arrangements, with all its commitment and expense. This is something that will likely nullify any value of a solar array, regardless of size, and may even reduce property value, as has been shown in the US.
The Future of Solar and Renewables
This is a speculation here, but firmly based on current trend. Expect renewables, solar in particular, to be as household as the incinerator or outhouse was back in the old days. If a house didn’t have an outhouse, questions would be asked.
Check this chart for the growth stats on solar uptake projections in Australia. Yes, it’s significant. In the not-too-distant future, the deliberation will be more about the brand, size and quality of the installed solar system, not if the property actually has a system. Solar will be commonplace.
In the future, a home on a new estate without solar will be anomalous. The identical house next door, with 20kW and a battery, will hold more appeal and therefore more value.
Where the new estate is concerned, the proposed compulsory solar installation for new homes may well change everything. Again, property value gains will be based on size and quality of the system. No doubt the developer or builder will provide options at varying prices.
The Future Price of Centralized Grid Power
Certainty. Yes, death and taxes as the old adage goes. Death, taxes and ever-increasing electricity and power prices. You can bank on centralized grid power prices increasing. It’s traditionally expensive, expensive now, and will become more expensive.
On the converse, solar power is the cheapest power there is. It’s not hard to do the maths here and draw some simple conclusions.
If a property is independent of the grid or supplying the grid with excess and avoiding the huge cost of the centralized grid, this will appeal to many budget-conscious Australians. It stands to reason that house values will increase if the power that drives them is free or next to free. So, it’s fair to assume there is some correlation between solar systems and property value.
Research conducted by realestate.com.au showed 85% of Australians perceive houses with solar panels installed are more valuable than those relying purely on mains grid-supplied power. 78% of those surveyed suggested a value of up to $10,000 for a house fitted with solar.
75% of renters said they would pay more rent for a house with solar panels—up to $40 per month more in 40% of those surveyed.
Importantly, these stats are based on public perception. It’s what you and I ‘think’ about the value of solar. As we all know, perception is everything. Our markets run on it.
In terms of solar in the housing market, while supply and demand is king, that which the market perceives as valuable will attract a corresponding price tag.
In other words, it’s fair to say that it’s you and I who are instigating the value jump of a solar equipped home.
Solar makes sense, and dollars and cents. Whether it is for the savings on power, saving the planet, or potentially adding value to your home, the answer is always the same.
The climate for purchasing domestic solar and capitalising on the benefits is good, very good.
Whilst mistakes can be made, and while there are circumstances that will see a solar array add little to no value to your property, a well researched and well installed, quality solar system is likely to add real value to your property.
If not in terms of dollars directly, it may well increase the speed at which your property is sold. This too has a financial gain.
People increasingly are demanding a dwelling that is energy-wise. Solar is very energy-wise indeed.
With the growth of domestic solar being relatively new, it’s difficult to find reliable stats that prove emphatically solar will increase the value of your property.
Regardless of the absence of these stats, it seems to be a no-brainer that solar systems and increased property value are related. A house that has little to no running power costs is valuable. This benefit must be reflected in the sale price or valuation. In the not-too-distant future, expect to know exactly how much.
Plug in to DC for greener, more affordable living where investment will likely provide returns in several ways. Solar. It really is a sunny investment.
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