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Residential Mandatory Building Disclosure: A Positive Step for Buyers and Sellers

Opposing views are always expected when changes to existing legislation is proposed. The Real Estate Industry has not always supported the proposed Residential Mandatory Disclosure Scheme, but as Charyn Youngson explains, it could be a positive move for both buyers and sellers.

In July 2011, The Ministerial Council on Energy released the Regulatory Impact Statement (RIS) for Residential Mandatory Disclosure (RMBD), detailing the options under consideration for implementing this legislation, and signalling the start of the public consultation process.

RMBD would require homeowners that sell or rent houses and apartments to provide information at the point of sale to prospective buyers and renters about the energy, greenhouse, and water performance of the home.

The government proposal is designed to help buyers and renters make informed decisions about choosing their new home based on energy efficiency. RMBD would require homeowners that sell or rent houses and apartments to provide information at the point of sale to prospective buyers and renters about the energy, greenhouse and water performance of the home. As with the existing scheme in the ACT that has been running successfully for many years, each house receives an Energy Efficiency Rating using a star system.

While the Residential Development Council has supported the mandatory disclosure of residential building energy, greenhouse and water performance nationally, the Real Estate Institute of Australia (REIA) have opposed it seeing it is an unnecessary burden on real estate agents and consumers.

The Association of Building Sustainability Assessors (ABSA) fully supports the introduction of RMBD. As the accrediting organisation of sustainability assessors, ABSA developed the submission in consultation with its national members who have direct experience in implementing many of the objectives in the proposed policy. ABSA supports the need for mandatory disclosure as it represents not only an opportunity to improve the living conditions for Australian people, but as a major catalyst to re-invigorate and update Australian cities. As the accrediting organisation of sustainability assessors, ABSA developed the submission in consultation with its national members who have direct experience in implementing many of the objectives in the proposed policy.

RBMD represents a significant opportunity for the building industry to shift their current bias from new build work toward the regeneration of existing stock.

Homes that were built before the mid-2000s did not need to have an energy rating to get building approval and as such, RBMD represents a significant opportunity for the building industry to shift their current bias from new build work toward the regeneration of existing stock. There are close to eight million homes in Australia that have been constructed during a different era with different priorities, and most of these homes have an energy efficiency rating of less than two and a half stars (out of 10) – significantly lower than new homes that are built to a minimum standard of five stars. The RBMD policy offers the opportunity to improve the quality of these homes that could allow them to compete better in the housing market and make them more comfortable to live in.

In their submission to the Department of Climate Change and Energy Efficiency, ABSA, stated that:

“RBMD provides an opportunity to create a market-led program of housing renewal with benefits at five levels:

  1. Improving the comfort and quality of existing homes
  2. Protecting Australians from the rising costs of energy
  3. Increasing consumer knowledge and protection through greater information
  4. Establishing longitudinal data sets to create benchmarks, identify trends and inform policy.
  5. Re-orientating the building industry to re-invigorate and update Australian cities (rather than a continued focus on green-field development).

RBMD can provide a welcome opportunity to objectively inform consumers when making a property purchase.

A home is, in most cases, the most expensive purchase Australian’s make – and it is often made with less information than we get when buying a new car. RBMD can provide a welcome opportunity to objectively inform consumers when making a property purchase. The rising cost of energy is having a huge impact for all Australians and the RMBD scheme represents the opportunity to assist all families to identify the areas of greatest energy savings in a home they are considering buying or renting.

Energy Efficiency Rating will simply be another tool that enables consumers to gauge how the prospective home they are going to buy (or rent) performs compared to others. It will help buyers and sellers make decisions about how important energy efficiency it is to them, and what they want to improve in their homes to reduce their cost of living. Increasing the EER of a home will boost the value of the property and recent statistics from the ACT support this.

Since 1999 in the ACT, sellers of residential properties have had to provide information about their property’s Energy Efficiency. In 2007, an ABS study commissioned by Department of the Environment, Water, Heritage, and the Arts (DEWHA) was to look at whether a relationship exists between the EER of a house and the house price. The study concluded there is a significant relationship between the house price and EER. EER was found to be positively associated with house price. The association on average for 2005 was 1.23% for each 0.5 EER star and 1.91% in 2006.

More recent statistics from the ACT have found that if the energy performance of a house improves by one star, its market value will increase by about three per cent on average.

More recent statistics from the ACT have found that if the energy performance of a house improves by one star (out of 10), its market value will increase by about three per cent on average. For example, if a property owner installs R4 ceiling insulation at an approximate cost of AUD$1,200 they will improve the energy performance of a poorly insulated home by at least one star. This means that a median priced detached house sold in 2011 for AUD $490,000 may fetch an additional AUD$14,700 with only a one star improvement in energy rating.

Just like any other significant home improvement that a property owner chooses to undertake to improve both the amenity and the capital value of a home, a national RMBD scheme will reward property owners that improve the energy efficiency and sustainability of their home by meeting the needs of both buyers and renters who wish to save money on energy and water bills.

The REIA should not fear the introduction of RMBD but embrace the fact that buyers and renters already place a value on a “greener” home and will be willing to pay a premium for homes that have a high EER.

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