Saturday is Earth Day, and when it comes to how homeowners can do their part for the environment, the answer is clear: commit to living in a green, high-performance home.
To be considered green, a home must meet several criteria, meaning that just installing solar panels or drought-resistant landscaping—both green features—aren’t enough.
A green home must be energy efficient, with a heating, venting and cooling system that is designed and installed for optimum performance. It must also have a thermal enclosure system that keeps cold air out during the winter and heat out during the summer, a water management system, and low-energy appliances and LED lighting.
Two million homes in the United States have met standards outlined by the United States Environmental Protection Agency and received Energy Star certification, said Asa Foss, the director of residential solutions at the nonprofit U.S. Green Building Council in Washington, D.C.
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At the next level up, 50,000 to 100,000 homes in the U.S. have received LEED certification, which stands for Leadership in Energy and Environmental Design, Mr. Foss said. To achieve this status, which includes more rigorous silver, gold and platinum levels, they’ve had to meet additional criteria related to indoor air quality standards, insulation, landscaping and the sustainability of building materials.
Meeting these standards as part of a new build or soup-to-nuts renovation typically adds a .5% to 2% premium to hard construction costs, Mr. Foss said. However, will buyers actually pay more for a green home on resale?
"That’s very hard to quantify," said Heather Witt, a green-certified real estate professional who works out of the Douglas Elliman office in Beverly Hills. She noted that she does see regular demand for this type of home.
Part of the reason the value of a green home has been tricky to capture is that there’s a lack of data, with few multiple listing services across the country including input fields for what they call green data, said Erik Cathcart, director of marketing and strategy at the Portland, Oregon-based non-profit, Earth Advantage.
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What’s more, even if an MLS has a field for green data—as about 225 of around 700 MLS services across the country do—these fields aren’t automatically populated by standardized data from energy or utility databases. This means that someone must manually enter in relevant information, which leads to frequent errors and omissions. Even if the information is there, it’s difficult to assess the real value of a green home from a financial perspective, and stack that figure up against comparable properties, as you’re able to do with other inputs, like price-per-square-foot, Mr. Cathcart said.
Other experts contend that the different types of green certification rating systems, and buyer confusion about what each means cause a problem. This is understandable when you consider that there are more than 100 types of green certification for residential properties in the world. These include regional green certifications in the U.S., like Earth Advantage certification in Oregon, the GreenPoint rating system in California, and EarthCraft certification in the Southeast, as well as BREEAM Certification in Europe and the Nationwide House Energy Rating Scheme in Australia.
On top of these are international green certifications, like Passive House Certification—popular in Germany and Austria, Mr. Cathcart said; Zero Energy Building Certification, meaning the home generates enough power to run itself; and much rarer, Living Building Certification, meaning there’s a net-positive energy return.
Finally, a lack of knowledge on the part of most agents and appraisers to properly market and evaluate green homes make it difficult to quantify their value, said Sandra Adomatis, a LEED green associate at Florida-based Adomatis Appraisal Service who published a textbook on how to value green homes in 2014, called "Residential Green Valuation Tools."
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With all that in mind, some regional research studies do exist from the last five years, looking at green homes in California, Washington, D.C., and regions in the Northwest, among other locations, which show that there’s typically a 3% to 9% premium placed on green homes, Mr. Foss said. Meanwhile, a U.K. study published in 2013 found a premium closer to 14% for energy efficient homes, while another based in Oregon put the premium at less than 1%, said Mr. Cathcart, indicating that there’s a lot of regional variability.
While none of the studies that currently exist looked specifically at luxury properties, this happens to be the area in which green homes can have the biggest impact from both a total increase in resale price (because a 3% premium on a $4 million property is much more than 3% on a $400,000 property), as well as lead to the biggest annual savings on utility costs, which are typically 20% to 30% less for LEED-certified homes when compared against similar non-certified homes built to code.
And of course it’s not always about the money. "While saving 30% on their energy and water bill may not impact these buyers much," Mr. Foss said, "they do want to play their part in the bigger picture, and are concerned with the quality of their home and their health."
For this reason, experts think high-net-worth individuals may be willing to outlay more for a home with solar panels, advanced air purification and water filtration systems, and walls painted with low-VOC products than a first-time home buyer who’s worried about paying the mortgage.
Even though today there’s no good way to tell what premium buyers are willing to pay for a green home, many industry insiders are trying to change that.
One way might be to create a standardized MLS field that would auto-populate with information related to green certifications and features. Mr. Foss said he’d like to see this taken a few steps farther, and include a standardized energy use figure—like when you’re buying a car and there’s the fuel economy, MPG sticker—that could give you a sense of what your annual energy costs might be.
The closest to that now in the U.S. is the HERS Index Score, which stands for the Home Energy Rating System. It gives homes a numeric score based on their energy performance, with a score of zero representing a home that produces as much energy as it uses, a score of 100 to 120 representing the energy standards of a house built in 2006, and a score of 140 being the highest, representing the least energy efficient homes. The problem with this system is that most homes aren’t rated.
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While Matthew Kahn, an economist at the University of Southern California, thinks that Mr. Foss’s energy use figure is a good idea in theory, but notes that every family has totally different energy needs. While one may keep the air conditioning running year-round and the TV on most of the day, another might rarely use either appliance.
What buyers and sellers can do in the current system, at least as it exists in the U.S., is work with a green-certified team, Ms. Adomatis said. This means hiring a real estate professional who understands the benefits of green features and can help pull together data needed to complete a Residential Green and Energy Efficient Addendum, and that also means advocating for a green appraiser to come in and try to quantify specific green elements, whose value should be relayed to potential buyers and lenders.
While green homes will certainly mean energy savings that many buyers are interested in, most are drawn to green certified homes because that label gives them the peace of mind that the building construction or renovations were well done, and to specific standards, Ms. Witt said. "It lets them know that they’re getting a quality home."
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Here is a look at other news from around the world compiled by Mansion Global:
Beijing Property Sales Have Hit A ‘Deep Freeze’
Strict new controls instituted last month appear to have sent Beijing’s property market into a "deep freeze," with a 66% month-to-month drop in sales of new private homes, according to local real estate consultancy Yahao. There was also a 31.4% drop in resales over the same period, while the price index dropped to 38.5 from 87.9, and the average sales price dropped from 47,727 yuan to 34,828 yuan. New rules include a ban on the sale of business apartments to individuals planning to use them for residences, as well as a ban on agents listing new and secondary apartments. There is also a new price cap of 150,000 yuan per square meter that’s been placed on the secondary market citywide, making developers reluctant to sell, and causing sales of most new development projects in the city to be put on hold. (South China Morning Post)
More:Hong Kong’s High-End Property Sales Increased in March
Spike In Paris Home Prices Is Dampening Value For Buyers Fleeing Brexit
As financiers rush to exchange their London properties for options in Paris, the weakening pound, sluggish London sales market, and the steady rise of Paris prices are all combining to make the purchases less of a slam dunk for this particular set of buyers. "Since the start of 2016, prices in Paris have begun to rise, whereas in central London, we saw values fall," said Databiens, the French branch of property researcher LonRes. Home values in Paris rose by 9% year-over-year in the first quarter of 2017, and are 22% more expensive for sterling buyers, according to Databiens. It’s a dramatic turnaround from just a few years ago when London values far outstripped Paris, and Databiens estimated that the premium for houses and flats in London versus Paris has dropped from 130% in 2015 to 71% in March. The data could mean a competitive real estate market for the numerous bankers planning to relocate from the U.K. capital—HSBC, for one, says it’s planning to move up to 1,000 traders to Paris. (Bloomberg)
Foreign Buyers Are Inflating The Housing Market In Victoria, Economist Says
Vancouver’s 15% foreign buyer tax seems to be driving purchasers to nearby Victoria, according to Bank of Montreal chief economist Doug Porter. "If there’s really any doubt that the non-resident buyer tax in Vancouver had an impact, look no further than Victoria’s accelerating price growth since August," Mr. Porter said in a release last week. Victoria has seen its home price index rise by 20% year-over-year, making it the only city with double-digit average price gains other than Ontario, and Mr. Porter added, "Almost the entire province of Ontario’s housing market is now on fire, while most of the rest of the country wonders what all the fuss is about." (Vancouver Sun)
More:Canadian Home Prices Soared 19% in March as Sales Edged Higher
Nervous About A Bubble, Toronto Owners Have Started Selling
In Toronto, concerned about a bubble and fatigued by high prices and cost of living, an increasing number of sellers are marketing their properties, and looking to downsize to something smaller or buy in a lower-priced province where their money will go further. "A little bit of air has been let out of the bubble," said real estate agent Josie Stern, who estimates that around one-third of her recent sales have involved sellers either downsizing or leaving the city. Meanwhile, she’s also seen "quite a big pullback" from buyers who were once diving headlong into bidding wars. As a result, smaller markets around Canada’s Golden Horseshoe, and even as far flung as Nova Scotia, are seeing an uptick of interest from buyers fleeing higher-priced cities. (BNN)
Coastal Town Hove Is Tops For England’s Young Professional Buyers
For the third year in a row, Hove, England—a seaside town adjacent to Brighton—recorded the highest rate of sales to 25-to-44-year-olds, according to data collected by Lloyds Bank. "Hove is a very popular area with families because of its closeness to the sea, good-sized homes and its gentler feel than Brighton," Lloyds said in its report. The area is also a good deal, and buyers can expect to pay £31,000 (US$40,000) less to live in Hove than in surrounding areas. Brighton was also in the top 20 destinations for younger buyers, as were Didsbury, Cotham, and 16 different areas in London, including Wandsworth, Wimbledon, Fulham, Battersea, Brixton, and Hampstead. While Hove represents a discount from neighboring areas, data from Lloyds indicated that on average, these buyers could expect to pay a £71,000 (US$91,000), or 13%, premium to live in these popular hubs compared to the surrounding regions. (The Guardian)
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The $1 Million Sale Of An Attic Apartment Could Be A Harbinger Of Sydney’s Bubble
Just as a report has been released warning of a bubble in Sydney’s hot housing market, a one-bedroom apartment that’s a fifth-floor walk-up has sold for A$1 million (US$752,645), nearly double its last sale price of $535,000 back in 2004. The apartment in question is just 50 square meters, has a shared balcony, and no parking but features views of Elizabeth Bay and access rights to the harbour pool next door. Meanwhile, the Deloitte quarterly business outlook reported that Australian families are second only to the Swiss as far as household indebtedness, and director Chris Richardson said that with property values of homes now earning more money than their owners, "That’s kind of God’s way of saying: this thing’s gonna blow." (news.com.au)
UAE Developers Are Shifting Focus From Luxury Toward Mid-Market Properties
A number of developers unveiling their plans this week at Cityscape Abu Dhabi seem to be making a distinct shift away from the struggling high-end market into the city’s mid-market, which is seen as having brisk demand but a lack of supply. Developer Aldar Properties showcased a AED1.3 billion (US$354 million), 1,272-unit residential development, and the company’s chief development officer said, "There’s a lot of latent demand (for mid-market units), but I think the problem is with supply; there wasn’t enough quality supply of mid-income product to tap that demand." Bloom Properties similarly unveiled plans for a forthcoming mid-market development Bloom Towers." Traditionally high-end focused developers may soon be getting into the mid-market game as well. (Gulf News)