The Australian property market is experiencing a fundamental shift that goes beyond traditional metrics of location and size. As of May 2024, every new home in Australia must meet stringent 7-star energy efficiency standards, marking the beginning of what industry experts are calling a "once-in-a-generation transformation" in real estate valuation.
Come mid-2025, this revolution extends to Australia's 11 million existing homes through the expanded NatHERS rating system, potentially adding or subtracting tens of thousands from property values based on energy performance alone. For homeowners and buyers alike, understanding these changes isn't just about environmental consciousness, it's about protecting and enhancing one of their most significant financial assets.
The New Energy Efficiency Landscape
What 7-Star Really Means
The jump from 6 to 7 stars represents far more than a single point improvement. According to NatHERS data, 7-star homes use 24% less energy for heating and cooling compared to their 6-star counterparts, translating to annual savings of $500 to $1,500 depending on location and home size.
But the changes go deeper than thermal performance. The new whole-of-home assessment, mandatory from May 2024, evaluates properties on a 100-point scale that encompasses:
- Building envelope thermal performance
- Fixed appliance efficiency including heating, cooling, and hot water systems
- On-site renewable energy generation
- Battery storage capabilities
- Overall energy consumption patterns
This comprehensive approach means two identical houses could receive vastly different ratings based on their solar panels, heat pump hot water systems, or battery storage solutions.
The Existing Homes Game-Changer
Starting mid-2025, NatHERS expands beyond new constructions to rate existing homes, fundamentally changing how Australians buy, sell, and value property. The NSW and Australian governments will conduct a pilot program in late 2025, working closely with the real estate sector to test disclosure of energy ratings during property sales and leases.
CoreLogic research reveals that newer homes are already twice as energy-efficient as older properties, with outer suburbs showing higher median energy ratings due to more recent construction meeting modern standards. This efficiency gap is about to become transparently visible to every buyer and renter in the market.
The True Cost of Going Green
Investment vs Return
The numbers tell a compelling story. According to a comprehensive study of over 50,000 NatHERS simulations, achieving a 7-star rating for new builds costs an average of $4,311 extra, varying significantly by location:
- Brisbane: $2,972 (lowest additional cost)
- Sydney: $4,850
- Melbourne: $5,905 (highest additional cost)
- Perth: $3,800
- Adelaide: $4,200
These costs primarily cover enhanced insulation, double-glazed windows, and improved sealing. However, the return on investment extends well beyond energy savings.
Breaking Down the Upgrades
Essential elements for achieving 7-star status include:
Double-glazed windows: With U-values of 1.41 compared to 5.8 for single glazing, these windows alone can reduce heat transfer by up to 75%. Government data shows windows are responsible for up to 40% of heat loss and 87% of heat gain in Australian homes.
Enhanced insulation: Wall insulation of R2.5 or higher, ceiling insulation between R3.5 and R6.0 depending on climate zone, and mandatory under-slab insulation under NCC 2022 requirements.
Smart design features: Proper orientation, effective draught-proofing, and strategic use of thermal mass can contribute significantly to star ratings without adding substantial costs.
Financial Incentives Driving Change
Green Loans and Reduced Rates
The financial sector is rapidly adapting to support energy-efficient homes. Westpac became the first major Australian bank to join the government's NatHERS trial for existing homes, signalling mainstream acceptance of energy ratings in lending decisions.
Current green loan opportunities include:
- The Household Energy Upgrades Fund (HEUF) offering $50 million through Bank Australia
- Clean Energy Finance Corporation (CEFC) partnerships providing reduced interest rates for energy-efficient properties
- Major banks offering rate discounts of 0.10% to 0.40% for homes meeting specific energy standards
These incentives can save borrowers $20,000 to $80,000 over the life of a typical mortgage, effectively offsetting upgrade costs multiple times over.
Property Value Premiums
Climate-resilient properties are increasingly commanding premium prices, with energy-efficient features becoming key selling points. Properties with solar panels, battery storage, and high energy ratings are selling faster and for higher prices than comparable properties without these features.
State-by-State Implementation
Leading States
Victoria, NSW, ACT, and South Australia have fully implemented the 7-star requirements as of 2024. Victoria has gone further, setting targets for 65% renewable energy by 2030 and 95% by 2035, driving demand for energy-efficient homes.
Lagging Behind
Queensland has delayed implementation due to industry concerns, while Western Australia won't require compliance until May 2025. Tasmania has deferred until the NCC 2025 iteration, creating a patchwork of requirements across the nation.
This variation creates interesting dynamics for interstate investors and highlights the importance of understanding local requirements when purchasing property.
Practical Guide for Homeowners
Assessing Your Current Position
With existing home ratings launching mid-2025, homeowners should proactively assess their property's likely rating. Key indicators of poor energy performance include:
- Single-glazed windows
- Minimal or degraded insulation
- Old heating and cooling systems
- No renewable energy generation
- Poor draught sealing around doors and windows
Cost-Effective Improvements
Not all energy improvements require significant investment. Strategic upgrades can dramatically improve ratings:
Quick wins (under $1,000):
- Draught sealing doors and windows
- Installing ceiling fans to reduce air conditioning use
- Adding heavy curtains with pelmets
- Upgrading to LED lighting throughout
Medium investments ($1,000 to $10,000):
- Adding or upgrading ceiling insulation
- Installing a heat pump hot water system
- Upgrading to energy-efficient appliances
- Adding external shading to north and west-facing windows
Major upgrades ($10,000+):
- Installing solar panels with battery storage
- Retrofitting double-glazed windows
- Complete insulation upgrades including walls and underfloor
- Installing ducted heat pump systems
Understanding ROI Timelines
According to Climate Council data, most energy efficiency investments pay for themselves within 3 to 7 years through reduced energy bills. With energy prices continuing to rise and green loans offering reduced rates, the payback period is shortening.
Market Implications for Buyers and Investors
The New Due Diligence
Property buyers now need to consider energy ratings alongside traditional factors. A property with a poor energy rating might require $20,000 to $50,000 in upgrades to meet modern standards, significantly affecting its true purchase price.
For investors, energy-efficient properties offer multiple advantages:
- Higher rental yields due to lower running costs
- Reduced vacancy rates as tenants seek affordable properties
- Better capital growth prospects as efficiency becomes mandatory
- Access to green investment loans with favourable terms
Working with Professionals
Engaging a buyer's agent through PropertyGo's GoMatch system can help identify properties with strong energy efficiency potential or existing high ratings. Expert agents understand how energy ratings affect property values and can negotiate prices accordingly.
The Regional Advantage
Surprising Leaders in Efficiency
CoreLogic data reveals an interesting trend, outer suburbs and regional areas often have higher median energy ratings than inner-city locations. This is due to newer construction meeting modern standards, while inner-city heritage properties struggle with retrofit challenges.
Regional properties offer unique advantages in the energy efficiency revolution:
- Lower upgrade costs due to cheaper labour and materials
- More roof space for solar installations
- Greater potential for battery storage and off-grid systems
- Less heritage restrictions on modifications
Looking Forward: The 2030 Vision
Policy Evolution
Australia's commitment to net-zero emissions by 2050 means energy efficiency standards will continue tightening. Industry experts predict:
- 8-star minimum standards by 2030
- Mandatory energy ratings disclosure for all property transactions by 2027
- Integration of electric vehicle charging capability in ratings
- Carbon neutrality requirements for new commercial buildings
Technology Driving Change
Emerging technologies are making energy efficiency more achievable and affordable:
- Smart home systems optimising energy use in real-time
- Advanced battery storage becoming standard in new homes
- Building-integrated photovoltaics replacing traditional roofing
- Heat pump technology reaching new efficiency levels
Investment Opportunities
The transition creates significant opportunities for forward-thinking investors:
- Properties with upgrade potential trading at discounts
- Green development projects attracting premium buyers
- Retrofit specialists emerging as a new property services sector
- Energy-efficient rental properties commanding premium rents
Navigating the Transition
For Current Homeowners
The expansion of NatHERS to existing homes shouldn't cause panic but rather prompt strategic planning. Consider:
- Getting an informal energy assessment before official ratings begin
- Prioritising upgrades that offer the best return on investment
- Timing major renovations to incorporate energy improvements
- Investigating available government rebates and incentives
For Prospective Buyers
The changing landscape requires adjusted buying strategies:
- Factor potential upgrade costs into purchase decisions
- Use mortgage brokers familiar with green lending options through GoMatch
- Prioritise properties with existing energy-efficient features
- Consider future-proofing through higher initial investment
Conclusion
The 7-star energy revolution represents more than an environmental initiative, it's fundamentally reshaping how Australians value, buy, and sell property. With existing homes joining the rating system in mid-2025, every property owner and buyer needs to understand these changes.
The financial case is compelling: modest investments in energy efficiency can yield substantial returns through reduced operating costs, green loan access, and enhanced property values. Properties meeting high energy standards are already commanding premiums, and this trend will only accelerate as ratings become transparent and mandatory.
For those entering the market, whether first-home buyers navigating affordability challenges or investors seeking sustainable returns, energy efficiency is no longer optional, it's essential. The winners in this transition will be those who act early, invest wisely, and understand that the future of Australian property is green.
The transformation is underway. Properties that adapt will thrive, while those that don't risk being left behind in an increasingly energy-conscious market. The question isn't whether to embrace energy efficiency, but how quickly you can position yourself to benefit from this historic shift in Australian real estate.
Sources
- National Construction Code 2022 Implementation Data
- NatHERS (Nationwide House Energy Rating Scheme) Official Guidelines
- CoreLogic Australia Market Trends Report 2025
- Climate Council Energy Efficiency Studies
- Australian Government Department of Climate Change, Energy, Environment and Water
- Clean Energy Finance Corporation (CEFC) Green Lending Programs
- Australian Glass and Window Association (AGWA) Industry Reports
- Victorian Government Sustainability Victoria Resources
- Treasury Energy Efficiency Housing Initiatives
