When tenants compare rental properties, the weekly rent is only one part of what a home will actually cost them.
Electricity, heating and cooling, hot water and other household expenses all contribute to the true cost of living in a property. With energy costs continuing to put pressure on household budgets, the energy efficiency of a rental is becoming an increasingly important consideration.
For property investors, this means features that help a home stay comfortable while using less energy can offer more than environmental benefits. They can make a property more attractive to prospective tenants too.
What is a NatHERS rating?
The Nationwide House Energy Rating Scheme, or NatHERS, measures the energy performance of Australian homes.
A home receives a star rating based on how effectively its design and construction help maintain a comfortable indoor temperature. Generally, the higher the rating, the less energy occupants may need to use for heating and cooling.
NatHERS has traditionally been associated with new homes, but the scheme has expanded to include assessments for existing homes. Whole-of-home assessments can also consider fixed appliances, hot water systems, solar panels and batteries, providing a broader picture of a property's energy performance.
For tenants, that information can make it easier to understand how a home may perform before moving in.
Why energy efficiency matters to tenants
A home that is difficult to keep warm in winter or cool in summer can quickly become expensive to live in.
Poor insulation, draughts, inefficient heating and cooling systems and older hot water systems can all contribute to greater energy use. In a more efficient property, tenants may be able to maintain a comfortable temperature while using less energy.
And renters are taking notice.
Research from the PropTrack Origin Renter Reality Report found that 35% of Australian renters would pay more for a home with smart energy features.
The same research found that 33% of renters said their current home had no energy-efficient features, while 22% were unsure. More than half also identified a lack of control over their rental property as a barrier to making energy improvements themselves.
For landlords, this presents an opportunity to make improvements that can benefit both the tenant experience and the property's overall appeal.
What does this mean for South Australian rental properties?
South Australia introduced a minimum 7-star NatHERS energy efficiency standard for newly constructed homes from October 2024.
This does not mean existing SA rental properties need to achieve a 7-star rating. There is currently no minimum NatHERS star rating that an existing South Australian home must achieve simply to be rented.
However, energy performance is becoming a bigger part of the conversation around Australian housing.
NatHERS ratings are now available for existing homes, while other states and territories are introducing or considering stronger energy efficiency requirements for rental properties.
For South Australian investors, it is worth watching this space and considering energy performance as part of longer-term property planning.
Energy costs add another consideration
Energy efficiency becomes even more relevant when household energy prices are taken into account.
From 1 July 2026, the Default Market Offer for South Australian residential customers on flat-rate standing offers increased by 1.4%, or approximately $33 based on benchmark annual usage.
Individual bills will naturally depend on the household, energy provider and plan. However, when tenants are already thinking carefully about their living expenses, the potential running costs of a home can influence how they compare rental options.
An efficient property can therefore offer something tenants increasingly value: greater comfort with the potential for lower energy use.
How can landlords improve energy efficiency?
Improving the energy performance of a rental property does not always require a major renovation.
Depending on the age and condition of the property, owners could consider:
- improving ceiling, wall or floor insulation
- sealing gaps and draughts around windows and external doors
- installing more efficient heating and cooling
- replacing older hot water systems with energy-efficient alternatives
- switching to LED lighting
- installing solar panels where appropriate
- improving window coverings or glazing
- choosing energy-efficient fixed appliances when existing ones need replacing.
The best improvements will depend on the individual property. Rather than upgrading everything at once, owners can consider energy efficiency when maintenance, repairs and replacements are already required.
South Australian property owners may also be eligible for free or discounted energy efficiency upgrades through the Retailer Energy Productivity Scheme (REPS), depending on the property and available activities.
Can better energy efficiency mean better rental returns?
Energy efficiency is unlikely to replace the fundamentals of a strong rental property. Location, condition, size, presentation and local demand will continue to influence rental value.
But energy performance is becoming another factor tenants consider.
When prospective tenants are comparing similar properties, features such as solar, effective insulation, efficient heating and cooling and lower potential running costs can help a home stand out.
With research showing more than a third of renters are willing to pay more for smart energy features, there is a growing case for owners to think about efficiency as part of their property's overall value proposition.
For landlords, improving energy efficiency is not simply about achieving a higher NatHERS rating. It is about creating a home that is comfortable to live in, potentially costs less to run and remains attractive as tenant expectations continue to change.
There may not be a mandatory NatHERS requirement for existing South Australian rentals today, but making considered improvements over time can help future-proof your investment and keep your property competitive in the rental market.
If you're looking to improve your investment property and have questions about where to start, our team is here to help you make informed decisions and open the door to better rental outcomes.
Disclaimer: Information in this blog is accurate at the time of publication. OC has relied upon information from external sources in compiling this publication and does not warrant its accuracy or completeness. Please verify details and consult your agent before making any decisions.
