Now that the feed in tariff is here and with fuel prices on a steady incline there is no doubt that solar panels are an excellent medium to long term investment if you intend staying in your home, but what if you move? Will your house be worth more or less? Will you recoup your initial investment?
The truth is we haven’t yet seen the full impact of solar panels or other renewable energy technologies on house prices and we probably will not for another few years but there are some interesting early indicators.
Zero Carbon Apartments
Brand new “zero carbon” apartments, of which there are increasing numbers, are tending to sell for around 2% than their carbon producing counterparts. This holds true for properties under the minimum stamp duty threshold, suggesting that it is the promise lower fuel bills and a smaller carbon footprint rather than stamp duty relief that makes them more valuable.
These higher prices are achieved even without the carrot of the feed in tariff payments, which when it comes to these types of apartments will usually be payable to the landlord.
Survey of Property Buyers on Demand For Solar Power
A recent small scale survey on prospective property buyers in Oxford revealed that 47% would be more likely to buy a property if it had a solar hot water system and 10% would be less likely to but such a property. For solar electricity the figures were 33% more likely and 17% less.
Of the people surveyed, 53% said that lower fuel bills were the most influential factor. In terms of impact on prices however, on average the prospective purchasers said they would pay just £250 – £290 more for a property with solar panels.
There were a couple of interesting things to come out of this survey. First, there was little indication that people were aware of the potential feed-in tariff or renewable heat incentive payments, which are far more financially rewarding than the cheaper fuel bills. Second, 80% of estate agents surveyed said that the existence of solar panels would not affect their valuation and 75% said that where they had sold properties with solar panels installed they had not included any information about them in their sale particulars, so it seems that the benefits are not recognised by estate agents who consequently are not marketing the properties as effectively as they might.
Will Solar Panels Help Sell My My Home Faster?
The Oxford study shows that there is a demand for homes with solar panels and, like any rare and sought after feature, they should generate more interest and lead to a quicker sale. In fact the Energy Saving Trust estimates that homes with solar panels already fitted will sell on average 30% faster that homes that do not generate their own power.
How Can I Make The Most Of My Solar Panels When Selling My Home?
As with any feature, making the most of your solar panels in terms of added value is all about marketing. Keep any fuel bills you have (or ask your energy provider for copies) from before you installed the panels and make sure you have a bill from after the installation, preferably for the same period (i.e. two winter bills or two summer bills) so that potential buyers can compare them and see the benefits the panels will bring.
Ask your estate agent to include details of the amount you are saving in fuel bills in the sales particulars as well as the amount of feed-in tariff or renewable heat incentive payments you are receiving.
Will Solar Panels Have More of an Effect On House Prices in Future?
The answer to this is almost certainly yes. Fuel prices are rising and will continue to do so, the feed in tariff payment per kWh will probably be revised downward in April 2013 for new installations meaning that existing installations will be more valuable and there are suggestions in some quarters that in future the size of a home’s carbon footprint could affect its council tax liability. This of course already happens with cars, where the larger the engine the higher the road tax.
All of these factors, together with increasing public awareness of the benefits of solar panels, are likely to lead to them having a greater impact on the value of a property as time goes by.
Likely Impact of Free Solar Panels on House Prices
There are a number of companies now offering free solar panels in return for the company claiming the feed in tariff payments while the home owner benefits from cheaper electricity. These schemes have their benefits but may actually have a negative effect on a home’s value or at least on how quickly it sells.
Firstly, a purchaser who is drawn to properties with solar panels will probably be counting on claiming the feed in tariff and may be put off by the fact that he cannot. Secondly he would need to enter into a binding agreement with the owners of the panels in terms of the tariff payments which for someone who is not particularly interested in having solar panels anyway might seem quite onerous.
Solar Panels Do Not Offer an “Immediate and Tangible” Benefit to Buyers
One factor which is likely to lessen the positive impact of solar panels on house prices is that in exchange for the higher purchase price there is no immediate and tangible benefit. People will be happy to pay more for a property with an extension because they immediately have extra room, or for a property which has recently been decorated to their taste because it will save them money they would otherwise have had to spend straight away.
When buying a property it is usually the case that every penny counts and paying extra for solar panels will mean less of a budget for decorating and furnishings or borrowing more, leading of course to higher mortgage payments. Purchasers will need to weigh this disadvantage against the future financial benefit.
Are Solar Panels a Good Investment If I’m Looking to Sell Soon?
There are a number of conclusions we can reach from the above. First, the properties need to be properly marketed in that selling agents need to place more focus on the fuel savings and tariff payments available as a result of solar panels since public awareness is not high. Second, you are unlikely to recover your investment if you sell immediately after installation as things stand at the moment. If solar panels increase the value of a property by 2% then even on a property previously worth £250,000 this is only about £5,000 whereas the system will cost between £10,000 – £13,000 to install.
The benefit is likely to increase over time but at the moment you would probably need to stay in your home for another 5 years, and claim the feed in tariff in that time, in order to see an overall financial benefit. The full effects are yet to be seen however and it is worth keeping an eye on the market.
I read agreat article in one of the broadsheets (I forget which) in a supplement about this last week.
My gut feeling is that no-one will add the capital value of solar panels to their value of a property they are about to buy, I do think that the visual impact may put some people off however.
In spain many solar systems are temperamental – being older on lots of rural properties and this can often affect the value but its more to do with the fact that the properties themselves have no alternative, not being conected to the mains.
I welcome the day when solar power becomes a desireable feature of a house – unfortunatley i think this will only come with either a financial incentive or financial penalty.
J.
I am leaning towards a company offering the free installation of solar PV panels. I know I am missing out on the tarrif, but the installation cost is too much of a stretch, and I think more of a risk than the free installation to me. Has anyone got any experience of this service and whether they think it worthwhile? My thoughts are that as it doesn’t cost me anything, I have nothing to lose by going greener, and I can make modest savings on my electricty bill. (I have just moved into what I hope will be my ‘forever home’, and I am reasonably relaxed about any issues that may arise should I wish to sell, albeit I don’t plan to – I just can’t see it as a problem that someone else owns and maintains at their expense, for there own benefit also, the PV panels and the homeowner benefits from lower bills. Why would this put someone off buying a property? Is it just solicitors (extra fees), and PV installers who don’t do the free installation with alterior motives driving this ‘be wary’ philosphy around the free installations?). I don’t buy the argument people looking at houses with solar panels only want the feed in tariff, I would have thought the house comes first, then you assess the features of the house. Some free installers give a buy out option I beleive.
Hello Paul,
Only just seen your question, but shall reply anyway. I work for a renewable energy installer that recommends paying for it yourself, best to be honest from the start! But my reason for writing is to help you, not drum up business. If you’re planning on staying there for a good few years it just seems a terrible shame to miss out on the FITs. Panel prices are coming down all the time. We charge only £10,339 for a 3kW system, £12,990 for a 4kW. Assuming south facing, no shading etc, it would be paid off in 8 years and earn you £40,000-£50,000 over the 25 years, and that’s a conservative figure as assumes 2.5% inflation (and FITs are tied to the RPI, currently 5.2%). Anyway, we also offer the PV for free scheme (only done for a school thus far) but it really is not in the customer’s best interests. There’s no ‘agenda’ in what I say, I’m just trying to look out for you. Best of luck.
I think everyone I have seen engaged in this debate is missing a major point.
I have a 4kw aray fitted and at the 43.3p FIT so I am lucky to have got in on the scheme, but it is NOT the tarriff, nor the misely export supplement….it is not even the rise in fuel prices that excites me.
From a purely financial perspective it is the fact that I shall be selling my house now or in 15 years time with a ‘guaranteed’, index linked, income and capital gains tax income stream.
If I was to sell my house as a going Bed and Breakast and the income that generated it would be worth vastly more than the same house without the income stream.
Thus on revenue, it will take 10 or 20 years to recoup….whatever, but on capital outlay I would be confident I could recoup the cost tomorrow.
This argument deminishes with the unfiarly harsh and short notice reduction but still remains valid. It does not have any validity if you have rented your roof and not paid for the panels and installation outright.There are also legal questions over selling your property when someone else has rights of access and equipment installed on it. I would certainly never consider buying such a houce.
As I understand it,there is another option; it should be possible to sell your house to a new owner but retain the income from the solar panels, the only problem being that of gaining access for meter reading / maintenance.