Dubai solar: The low-down on how solar panels will affect your home's value

Buying and installing solar panels may provide an attractive long-term return on investment but it is unlikely to significantly increase the value of your home.

David Godchaux, the chief executive of Core Savills, said the “lack of awareness” surrounding sustainability issues in the UAE meant that those who spend money on the technology generally don’t benefit from a boost in their property’s value.

“It’s a vicious spiral,” he said. “Because you don’t have awareness, people don’t understand that they can resell at a premium. And because they don’t understand that they can resell at a premium, they actually don’t, which makes new buyers think it’s not worth it.”

He said that homeowners in the UAE who make improvements to other elements of their home, such as upgrading kitchens or bathrooms, do generally benefit from an uplift in a property’s value.

“You typically make a profit in this country because a lot of people don’t want the hassle of improving a home that is generally not delivered to a very high standard of finishes by the developer to the homeowner.

“So if you improve it, you are typically able to triple the money you invested to improve it. That’s a general rule of thumb. If you spend Dh10,000, you are able to get about Dh20,000 to 40,000 back.”

Those who invest in solar panels may benefit handsomely from reduced electricity costs in the long term, as Gipin Mani of Alec Energy says that a solar panel system typically returns about three times its investment value over a 25- to 30-year lifespan. However, they are unlikely to make anything more on it than the cost of insulation.

Dima Isshak, the head of research and consultancy at Chestertons Mena, said that part of the problem is that many renters or homeowners do not properly grasp what proportion of their overall housing costs goes on electricity bills.

Chestertons estimates that solar panel installations could reduce electricity bills by between 50 per cent and 60 per cent per month and that buyers should eventually recognise the value of them in the long run.

Ms Isshak acknowledged that one of the potential barriers for solar panel take-up in the UAE market is the higher-than-average number of investors as homeowners.

Installing solar panels is “just asking them to invest more ­money into their property” without the incentive of saving on fuel bills, which are typically paid by the tenant.

Similarly, tenants lack the security of tenure to make the type of investment in a property that they do not own when the payback periods are so long.

“But if you’re an end-user and you own the villa, you will get that payback over the course.”

Holley Chant, a senior executive at KEO International Consultants, said that perceptions regarding sustainability are changing and that developers run the risk of being stuck with obsolete assets in the future if they don’t design sustainably today. She pointed to the adoption of Green Real Estate Sustainability Benchmarks by the property developers in the US as evidence of the seriousness with which the industry now takes this issue.

“I think it is really interesting and a prophecy of things to come, that people are doing sustainability as a risk management so they don’t lose value in their real estate,” she said.

She said that sustainable homes could be a differentiator in the future – particularly in Dubai, where energy costs are higher than Abu Dhabi and where some experts are predicting the risk of an oversupply of new homes in the future.

“When there is an abundant supply, people will start to look at what is going to cost less in terms of operation. So if you’re a tenant, and someone says ‘your rent is the same as down the street but your energy bill is going to be half’, which one are you going to rent?”

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