As load shedding continues unabated, one of the most topical subjects in homes across South Africa is solar energy. We spoke to Rabi Quntana, Head of Product in the Asset Ownership Management division at Nedbank Retail and Business Banking to get his perspective on its value to property owners, recovery costs during a sale, and how solar financing solutions are tackled by home loan providers.
Q: Does solar have a relationship to property values?
A: There has been a notable surge in the adoption of solar energy systems in both households and businesses, primarily driven by the need to address the challenges posed by frequent power outages. Solar energy has emerged as a sustainable solution that offers a wide range of benefits to both the environment and the economy.
The installation of home solar installations often correlates with an expected increase in residential property values. While exact percentages can vary depending on the region and market dynamics, in South Africa, it is typically observed to be in the range of 3-4%. This increase is confirmed by industry experts and mortgage originators. However, it is important to note that the actual increase may vary due to factors like the location of the property and the overall desirability of the area.
Q: Is it realistic for a home owner to expect to recover the costs of a solar installation on the sale of the property?
A: Sellers can expect to recover their installation costs if the installed solar solution remains a part of the property. However, several factors influence the expected recovery, including the initial cost of installation, the brand or product type of the solar equipment, and the lifespan of the solution. For those who installed solar when costs were higher, the recovery cost depends on factors such as the initial investment, depreciation, and the overall condition of the solar system.
Q: Are properties with solar systems really desirable?
A: In a highly competitive property market, differentiation is key. Solar energy systems offer a distinct advantage by setting properties apart from others. The availability of solar solutions enhances property value, reduces operating costs, and eliminates the need for buyers to seek out solar providers and solutions independently. However, it remains the buyer's responsibility to educate themselves about the basics of a solar unit and gain a clear understanding of its capacity and what it can power.
Q: Solar rentals are becoming popular. What happens when the property owner sells?
A: If a homeowner is renting a solar unit and decides to sell the property, the contract for the solar unit exists between the seller and the solar company, not the new owner. Due to this ownership arrangement, the property cannot be sold with the solar unit. The best course of action would be to arrange for a takeover by the new owner or for the seller to have the unit uninstalled, ensuring the property is restored to its original condition. This is crucial for maintaining the value of the property and reaping the benefits at the appropriate time.
Q: How should the solar proposition be presented in a sale?
The unique selling point of solar energy systems can be a decisive factor for buyers and tenants who are seeking properties that align with their everyday needs and goals. As a result, properties equipped with solar energy systems have a higher chance of attracting and retaining quality occupants, thereby enhancing their market competitiveness.
Property practitioners should be familiar with key details about a property's solar installation, including its output capacity, brand, number of solar panels, age, warranty information, and any associated contracts or agreements. This information helps potential buyers make informed decisions and assess the value of the solar investment.
Q: How do home loan providers embrace the value proposition?
A: Nedbank has developed a specific value proposition to make solar energy more affordable and accessible to consumers. Nedbank offer a unique financing option that grants customers a loan amount of110% of the property's value, with the additional 10% specifically designated for financing the installation of a solar solution. While these financing solutions are relatively new in the market, they solidify the market expectation that solar energy increases the value of a property. The idea is that when customers sell their homes, they can leverage the value created by including the value of for the installed solar solution in the sale.
There are also standalone solar solutions available for customers who prefer not to link the financing to their home loan. Both financing methods include solar installation costs as part of a packaged offering, although these costs can be considered separately.
The availability of financing options that support solar energy installations underscores the commitment of financial institutions to promote sustainable energy solutions and contribute to success in the property market. This symbiotic relationship between solar energy and the property market is poised to drive economic growth, environmental responsibility, and a more sustainable future for all.
