Did you know that more than 80 per cent of Australia’s houses have less than half the energy efficiency rating of homes built to today’s standards?
That’s a staggering statistic, but it also highlights a growing issue for homeowners and property investors alike.
With rising energy costs and increasing environmental awareness, buyers are now seeking properties that are not only comfortable to live in but also cheap to run—and older homes are falling short.
Jacob Caine, a director of the Real Estate Institute of Australia, put it bluntly: “The cost of running these older homes is often far greater than people expect, and this is starting to influence buyer decisions.”
If you own an older property or are thinking about buying one, you might want to pay attention because the gap between modern, energy-efficient homes and older housing stock is widening—and not just in terms of heating bills.
It’s easy to be tempted by the charm and often lower upfront price tag of older homes.
But what many buyers fail to realise is that these properties can come with hefty hidden costs.
Poor insulation, drafty windows, and outdated heating systems mean older homes are less efficient to heat in winter and cool in summer.
According to the Australian Financial Review, retrofitting older homes to meet modern energy efficiency standards can cost tens of thousands of dollars.
That’s money most buyers don’t factor into their budgets when they see a “bargain” property.
And with stricter building codes and energy ratings becoming more important to buyers, these costs aren’t just a personal inconvenience—they’re a liability when it comes to resale value.
Why energy efficiency is the new gold standard
Modern buyers are increasingly savvy about the benefits of energy-efficient homes.
Not only are these properties more comfortable to live in, but they also offer significant savings on energy bills.
Homes built to today’s National Construction Code must achieve a minimum 7-star energy efficiency rating, making them far superior to the 2- to 3-star ratings typical of most older homes.
This growing focus on sustainability and affordability means buyers are prioritising homes with features like solar panels, double-glazed windows, and high-quality insulation.
And as the housing market becomes more competitive, homes that don’t meet these expectations are at risk of being left behind.
Look what lenders want:
Lenders will also want to reduce the emissions and insurance risks of assets in their mortgage books, said Mr Caine in the AFR.
“We will see in the not-too-distant future almost mandatory requirements in lending from financial institutions for those properties that don’t meet minimum standards,” he said.
“For a buyer interested in purchasing a property that was in the hands of someone for 30-plus years, sitting with a two or three-star rating, lenders might lend only on the criteria that upgrades are [undertaken] to make sure it meets minimum standards.”
Late last year the federal government’s Clean Energy Finance Corporation launched a $1 billion household energy upgrades fund to provide cheaper loans – currently being offered by Westpac and Bank Australia – to homeowners wanting to make their homes more energy efficient.
The difference in energy efficiency between newer and older homes is a pattern repeated across the country and in cities and regional areas.
In Sydney, the median rating of pre-2010 houses is 2.4, while in Melbourne it is 3.5 and in Brisbane 3.1.
Areas with more newer homes have higher median ratings, with the suburb of Molonglo in the ACT having the highest median rating of 6.1, the CoreLogic analysis finds.
What this means for investors and homeowners
So, what does this mean if you own an older property?
The good news is that you can take steps to improve your home’s energy efficiency and maintain its value in a changing market.
Start with simple upgrades like sealing drafts, adding insulation, and upgrading appliances to more energy-efficient models.
For investors, these changes aren’t just a cost—they’re an investment in future-proofing your asset.
But if you’re thinking about buying a home, be cautious.
A cheaper upfront price may come with higher ongoing costs, and those can quickly outweigh any savings.
As Jacob Caine points out, “Buyers are starting to factor these costs into their decisions, and properties with poor energy ratings are becoming harder to sell.”
The bottom line
The Australian housing market is changing, and energy efficiency is no longer a “nice-to-have”—it’s becoming a must-have.
Whether you’re a homeowner, an investor, or a buyer, understanding the importance of energy efficiency can save you money and headaches down the road.
So, before you fall for the charm of an older property or dismiss the need for upgrades, ask yourself: Is this home truly as affordable as it seems, or are you just buying into hidden costs?
