Solar Panels will add value to your home

Will solar panels increase the value of your home? My answer to this question would be a simple “yes” because solar panels that provide free heat reduce the energy cost of the home and that ought, by my simple logic, make the home more worth more than an identical home next door. However I am not a valuer or an appraiser of property, so perhaps my simple logic does not work in the real world. It needs to be tested by research.

There are few renewable energy devices fitted to homes in the United Kingdom and the United States of America. By far the most popular renewable energy technology are solar panels that use light to heat water and sometimes to heat pools and provide space heating. I have not been able to find out any United Kingdom studies regarding the impact on the value of a home by fitting solar panels, but my feeling has been that they would normally increase the value of the home by about as much as the cost of the system, and what I hear from people who know of people of have sold homes with solar panels confirms this, but this is not hard evidence upon which you can support a statement that putting solar panels on the roof of your home also adds value to the home.

One of Genersys’s engineers, in Irvine, California, Ryan Evans, drew my attention to some actual studies on this point by the US Environmental Protection Agency in 19998 reported in the prestigious Appraisal Journal provide evidence that in the United States a home’s value rises on average by $20 for every $1 decrease in its annual energy bill and that this formula has held pretty much true since the 1970s. That means that if your solar system in the United Kingdom saves you around £150 per year, then it adds £3000 to the value of your home.

In the United States a Genersys system would save around $270 in natural gas each year, increasing the home value by $5,400, without taking into account tax rebates and incentives. Of course, as energy costs rise the more the value of your home with solar panels rise, so it is clear that the fuel savings themselves are not the only aspect of the financial decision that you should make when considering investing in solar panels,; you will be increasing the value of your home.

Specifically, in the United States, residential real estate markets assign an incremental value to homes that have solar panels that reflects the discounted value of annual fuel savings. This results in an additional value of such homes of somewhere between $10 (at the lower level) to $25 at the upper level for every $1 reduction in annual fuel bills. The Appraisal Journal reported that these figures are borne out by an analysis of house sale prices.

Traditionally journalists and commentators who do not understand these things and who take unqualified advice argue that solar panels provide very long pay backs; they are wrong about this, when you take all factors into account, but making a buying decision on payback alone is not sensible. You have to take into account other factors, including the carbon savings, the security that solar panels provide and, on the basis of the American studies, and the fact that solar panels will increase the value of your home on accepted valuation principles.

The study also shows that you should not defer your installation of solar panels because you might sell your home in a few years time, and would not recover the cost; you will recover the cost in the increased sale price that you will achieve for your home, if it has a good, well installed, guaranteed solar system on its roof.

The data producing these conclusions was contained in Review of Literature on Market Valuation of Energy-Efficient Homes. (I regret that I cannot direct you to an on line version of the Review.) Seven studies provide some insight into the relationship between residential housing values and energy costs. Six of these studies were published between 1981 and 1986, and the most recent study was published in 1990. The data for these studies were collected when there was considerable variation in fuel prices and mortgage interest rates, although with small samples. All seven studies report higher home values associated with energy efficiency and microgeneration, such as solar panels.

With the United Kingdom now legally requiring Home Information Packs to include an energy report on every home that is put up for sale, it is certain that in the future people will spot the additional value of a home with solar panels, compared to an identical one without them.

So the position is clear; if you want to add long term value to your home, get some solar on the roof.

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