A client came to me last month asking whether it was worth spending $45,000 to retrofit their Northcote investment property with better insulation, solar panels, and double glazing to push its NatHERS rating from 4 stars to 7 stars. Their logic was simple: green sells. Higher ratings should mean a higher sale price.

It’s a reasonable assumption. But is it true? The answer, based on what we’re seeing in Melbourne and nationally, is more complicated than the marketing brochures suggest.

What the Research Says

The most comprehensive Australian study on this came from the UNSW City Futures Research Centre in collaboration with CoreLogic. Their analysis of over 200,000 residential sales across NSW, Victoria, and Queensland found that homes with higher energy efficiency ratings sold for an average premium of 5-10% compared to similar homes without disclosed ratings.

That sounds great, but there’s a crucial caveat. The premium was strongest in new builds where the energy rating was part of the initial sales pitch. For existing properties that had been retroactively assessed, the premium was much smaller - closer to 2-4%. And in some suburbs, it was statistically insignificant.

The reason is buyer awareness. Most residential buyers don’t ask about NatHERS ratings. They ask about bedrooms, bathrooms, parking, and location. Energy ratings are somewhere down the list, well below kitchen renovations and proximity to schools.

Where Green Ratings Matter More

Commercial property is a different story. NABERS (National Australian Built Environment Rating System) ratings have a measurable and significant impact on commercial leasing and sale values. A NABERS Energy rating of 5 or above can command rental premiums of 8-12% in CBD office markets.

This makes sense. Commercial tenants care about operating costs, and energy-efficient buildings are genuinely cheaper to run. A large corporate tenant paying electricity bills across 10,000 square metres notices the difference between a 3-star and a 5-star building. A homeowner paying a few hundred dollars a year less on heating might not.

Green Star certifications from the Green Building Council of Australia are increasingly expected in premium commercial developments. Some institutional investors won’t even consider assets without them. This has created a real market floor under green-certified commercial properties.

The Residential Reality in Melbourne

In my experience selling residential property across Melbourne’s inner east and northern suburbs, green features sell best when they’re visible and tangible. Solar panels on the roof? Buyers like that. They can see the feed-in tariff on the electricity bills. Double glazing? Sure, buyers appreciate it when you demonstrate how quiet the house is from street noise.

But an abstract star rating printed on a certificate? Most buyers glance at it and move on. I’ve seen beautifully energy-efficient homes in Coburg sell for less than draughty Edwardian terraces in the next street because the terrace had period character and a bigger backyard.

The exception is new apartment developments, where sustainability features are part of the developer’s branding and marketing. Buyers of off-the-plan apartments in green-rated buildings are often younger, environmentally conscious, and specifically seeking those credentials. For this demographic, the certification isn’t just about running costs - it’s about identity.

What About Running Costs?

There’s a secondary argument that green certifications lift property values indirectly by reducing running costs, which should theoretically increase the property’s yield or attractiveness to tenants.

In practice, the savings are real but modest for most residential properties. Moving from a 4-star to a 7-star NatHERS rating might save $800-1,200 per year in heating and cooling costs, depending on climate zone and occupant behaviour. Over a 30-year mortgage, that adds up. But it doesn’t move the needle at the point of sale the way a new kitchen or extra bathroom does.

Where running costs do shift values is in extreme cases. A fully off-grid property with solar, battery storage, and rainwater tanks in a regional area has genuinely lower running costs, and some buyers will pay a premium for the self-sufficiency angle. But that’s a lifestyle choice as much as a financial one.

The Coming Shift

I do think green ratings will matter more in the next five to ten years. Energy costs are rising. Building disclosure requirements are tightening - from April 2026, Victoria requires energy efficiency disclosure at the point of sale for most residential properties. Once buyers can easily compare properties on energy performance, it’ll become another factor in the decision matrix.

Some analysts at Team400 have looked at how data-driven property valuation models are starting to incorporate sustainability metrics alongside traditional factors. Their view is that as disclosure becomes mandatory and consistent, the pricing signal from green certifications will strengthen considerably.

The trend in Europe supports this. In the UK and Germany, where energy performance certificates have been mandatory for years, properties with poor ratings are starting to see measurable price penalties, not just smaller premiums for good ratings. Australia is likely heading the same direction, just more slowly.

My Advice

If you’re building new, aim for the highest NatHERS rating you can afford within your budget. The marginal cost of going from 6 to 7 stars at the construction stage is relatively small, and you’ll benefit from lower running costs and stronger positioning when you eventually sell.

If you’re retrofitting an existing property specifically to improve its rating for resale, be cautious. The numbers often don’t stack up yet. Spend money on improvements that buyers can see and feel - insulation, solar, efficient heating systems - rather than chasing a star rating on paper.

The green building certification premium is real, but it’s smaller and less consistent than the industry claims. Give it five years. By then, I suspect the conversation will be very different.