A new research study has revealed that energy efficient homes attract a premium in sale price and rent in the market.

This finding is a clear signal to builders and owners to adopt energy efficiency measures in their properties and reduce carbon emissions.

It has also brought into focus the need to implement a mandatory energy efficiency rating (EER) disclosure system across Australia.

Conducted by University of Melbourne property lecturer Dr Georgia Warren-Myers and University of Cambridge visiting fellow Dr Franz Fuerst, the study involved the analysis of tens of thousands of property transactions from 2011 – 2016 in Australia’s Capital Territory.

Only the ACT requires mandatory rating disclosure for all dwellings while nationally only new dwellings need a minimum six-star rating out of a possible 10.

According to Dr Warren-Myers, people are making decisions based on the number of bedrooms, bathrooms and carparks in the property as well as the energy efficiency reflected in these ratings.

Studying the correlation between sale price premiums and different star ratings, the researchers found that properties rated five and six stars attracted premiums of 2 and 2.4 percent respectively (compared with three-star properties), while properties that achieved a seven-star rating attracted heftier premiums of up to 9.4 percent.

Similarly, the rental market saw five and six-star properties rented at a 3.5 and 3.6 percent premium respectively compared to three-star properties.

Aware that new homes meet a minimum six-star level, homeowners seek to be better than the standard by aiming for the seven-star mark and differentiating themselves from that baseline, says Dr Warren-Myers.

Dr Warren-Myers has called for a mandatory disclosure program Australia-wide to drive broader energy efficiency in existing properties, particularly in the rental market where landlords lack incentives.