Future proofing your investment

Future proofing your investment

While location and price remain the biggest considerations for anyone purchasing a residential property, smart investors are starting to look at green ratings to decide whether a house will be a sustainable long-term investment.

The reason is simple: cost and future proofing.

Future proofing is an interesting term. It means the process of anticipating the future and developing methods to minimise the effects of shocks and stresses of future events, like the increase in water and electricity costs. 

Smart investors are looking ahead to ensure assets will withstand these cost increases.  

But to be assured that your asset has been constructed to best practice industry standards, it must have an environmental certification rating. 

There are a number of rating systems in the market able to assess the energy efficiency of a property. A Green Star rating, however, is a holistic rating, providing more information to the potential buyer including environmental impacts such as water use, the materials in the building and the connections to transport.

In the commercial sector, a large range of research – both in Australia and overseas – has found that green buildings deliver consistently higher returns. One Australian report, Building Better Returns (2011), found that Green Star-rated buildings deliver a 12 per cent ‘green premium’ in value and a 5 per cent premium in rent, when compared to non-rated buildings.  

But is this restricted to the commercial market?

A 2008 study from the ACT examined the relationship between energy efficiency and house prices, finding that each half-star increase in the energy efficiency rating translated into a two per cent increase in capital value. 

A Green Building Council of Australia study into Green Star buildings in 2014 found that Green Star buildings use 66 per cent less electricity than average Australian buildings. They also consume 51 per cent less water. This means they are cheaper to run – saving thousands of dollars in utility bills each year.

Just one real-world example of these savings can be found at Forté in Melbourne. The tallest timber apartment building in the world, Forté is built of cross-laminated timber (CLT), which is manufactured using layers of timber to create solid panels.  

Using CLT offers better thermal performance and requires less energy to heat and cool. This has reduced energy and water costs by around 25 per cent, saving residents an average of $300 per year.

While Australia’s residential investors may still be weighing up the pay-back period on green features, investors in the commercial space have well and truly made the business case stack up. They understand that a Green Star rating is assurance that their investment is environmentally and financially sustainable.

 

 

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