What Value Will A Solar Installation Add To Your Residential Property?

What we have all come to learn in the past 14 years is that load shedding is here to stay. Since then, we've all needed to understand how we can minimise the impact on our lives.

 

Whilst the consumer is proving to be resilient, the question that is looming, and the answer for which is not quite clear, is what effect does an investment in alternative power, such as a solar photovoltaic (PV) solution, have on house or property prices?

 

Some of the most influential valuers in the property market are us, the Estate Agents. As the present surge in new solar systems installations in South Africa is creating a fairly new question re the influence it will have on present and future property values, it is in all our interest to understand how we can leverage an off-grid or partly off-grid house in the selling and valuation process.

 

Keeping real estate in top shape and maintaining its value is one of the smartest things one can do with non-liquid assets. The process does not require constant attention, but it does have its challenges. Over the past two decades, renewable and efficient energy have become important in both industry and quality of life, so naturally they started to affect real estate as well.

 

A 2015 study by the University of California, Berkley that was supported by the U.S. Department Energy determined homeowners who installed enough solar capacities to cover their monthly energy needs get higher prices when trying to sell their property. The difference in sale price can potentially be as big as the initial investment, but if you install solar and stick with it for three to five years, you'll already have returned your initial investment via energy savings.

 

Real estate has many other factors that influence price, like location, size and age. At the end of the day, an extra bedroom might be more appealing than all these energy improvements put together. However, for those who do not plan on selling anytime soon, improving efficiency and adding renewables might be the smartest move.

 

Energy consultants always recommends improving efficiency first, and then adding solar, as lowering energy demand could just mean less panels on the roof and less money upfront.

 

 

- A saving on electricity bills which should be noted accurately to sellers.

 

- And for more upmarket properties, the convenience of being immune to load shedding should ring loudly in customers' ears. Solar installations in the luxury property market fits in perfectly with a worldwide surge in "sustainable living" - favoured by designers, architects, and developers when building sustainable homes. More people are starting to think green when it comes to their homes. Consumers are looking for homes that conserve energy, out of environmental awareness or a desire for low maintenance costs - or both.

 

- And ensure that access to technology is "guaranteed" due to the availability of "off-the grid" electricity (especially for the younger homebuyers). Technology is no longer a convenience - it's a necessity for us due to our reliance on smartphones, tablets, and other internet-capable devices. In South Africa we foresee that not only tech will become such a big factor in their home search - but also solar installations.. Property searches for features like smart thermostats, wall outlets with built-in USB ports, and smart appliances will pique their interest, BUT definitely also how close to "off-the-Escom-grid" the property is. The 2023 property search is all about connectivity and convenience and especially for the younger generations and first time buyers looking to buy property.

 

- A "think green" environment (and property) as 76% of Gen Zers are worried about climate change. Indeed, this generation has a keen sense of environmental welfare, a mindset that also affects what they buy. Again, the numbers bear this fact: 73% of them are willing to pay more for sustainable products. What does this mean for sellers? It pays to highlight the "green" features of a house, be it sustainable construction materials, energy-saving architecture, or solar panels. Gen Z put their money where their values are, so make sure to market your home accordingly.

 

Over the last twenty years, solar installations have stood out as one of the most iconic symbols of the environmental movement - and one of the most effective and impactful ways to harness clean energy.

 

Hopefully in time, we will all be able to demonstrate that:

 

- A house with backup power will sell quicker - and at a higher value. That would be good for all of us.

 

- A property's value will increase where energy efficiency improvements have been made in the property. Energy certification of property is not as yet such "a big thing" as it is the USA. In SA being energy efficient was no one's prime concern as energy was before the ESCOM crises cheap and the threat of climate change was not as evident as it is now. Both residential and commercial structures were wasting a lot of energy, but that wasn't considered a problem. NOW - our electricity is amongst the most expensive in the world - so energy efficiency has become something of national importance.

 

 

To determine which value solar installations add to residential property in South Africa, it seems that sellers will have to be able to proof to home buyers at least the invoiced cost of the installations, to justify the higher price of the property in comparison to similar "competing" properties in the local market area.

 

We are of the opinion that predicting a specific percentage house price increase (value increase) is not justifiable or feasible.

 

Property price increases will directly correlate with the system you install and your current (pre-installation) house value due to its size, condition, and location. The type of installation and the length of its warranty, as well as how much the installation enables you to save on your monthly power bill due to high electricity rates, are all factors which will add value or not.

 

A solar photovoltaic (PV) system, like any other fixture in a home, will need to be maintained over the years to preserve its functionality and add value to a property. In future, especially the age of the batteries and solar panels will need to be considered when evaluating a property. If the aging PV equipment would be older than 10 years or the manufacturer's warranties, then the buyer of the property will probably not be willing to pay for or add a "new PV system / equipment" price on top of the home's sales price.

 

If you are considering buying a home with a solar panel system, review all of the system's documentation, including maintenance records and warranty coverage. These details should also include any replacements or upgrades completed during ownership.

 

The issuance of a proper electrical COC by a certified electrician after the completion of the solar system installation is of the utmost importance. Property sellers will in future face big electrical expenses if the solar installations were installed by unqualified / non-certified "salesman". Buyers will undoubtably request for a proper electrical COC when buying a property with a solar installation (as their home insurance company and bank will require it before property transfer will be effected.

 

If you plan to sell your home after installing solar panels, it is important to choose the right financing option. You must legally own your solar panel system to include it in your home sale.

 

 

According to Architecturaldigest.com, the long-term savings on energy costs (and carbon emissions) help boost home's property value. According to the Appraisal Journal, a home value increases by $20 for every $1 saved on energy bills. For example, if your solar energy system saves you $700 per year, the value of your home increases by $14,000.

 

In a recent survey conducted by Japan's Sharp Electronics Corporation, eight of ten Americans want builders to offer solar power as an option for new homes. Half of those surveyed said they would pay up to 10% more for a solar-equipped house.

 

A 2021 Zillow housing trends report found that 67% of homebuyers considered energy efficiency to be a "very to extremely important" inclusion for a potential home. Homebuyers are willing to pay $15,000 or more for a solar powered-home, according to a large-scale solar home study conducted by the U.S. Department of Energy's Lawrence Berkeley National Laboratory (Berkeley Lab).

 

This push for energy-efficient homes translates to higher home sale prices for sellers. Prospective buyers will spend 4.1% more for a solar-powered home, or around $9,274. These boosted resale values are even higher in certain housing markets. In New York, for example, buyers will pay an additional $23,989 for a solar home versus comparable homes.

13 Mar 2023
Author Benhard Wiese