Assessing the value of rainwater tanks in Perth

An investment analysis of rainwater tanks installed by Western Australian householders has revealed a general increase in house prices after tank installation but questioned the focus of rainwater tank rebate programs.

In a paper titled The capitalized value of rainwater tanks in the property market of Perth, Australia, published in the Journal of Hydrology, CRC for Water Sensitive Cities (CRCWSC) researchers estimated that a premium of up to $18,000 was built into the sale prices of houses with rainwater tanks.

While governments in Australia have encouraged home owners to install rainwater tanks in response to frequent water shortages, often by providing partial funding for their installation, data from the Australian Bureau of Statistics revealed that only 5% of respondents indicated rebates were the reason for installing rainwater tanks.

The Valuation of economic, social and ecological costs and benefits (Project A1.2) research team based at the University of Western Australia, which included Fan Zhang, Maksym Polyakov, James Fogarty and Dave Pannell, used a hedonic price analysis to answer specific questions in this study:

• does a house with a rainwater tank sell for a higher price than a house without a rainwater tank?
• if so, what is the premium?
• is the premium larger than the value of water savings?

“The premium is likely to be greater than the costs of installation, even allowing for the cost of time that home owners must devote to research, purchase and installation,” the authors said.

“The policy implication is that governments should not rely on payments to encourage installation of rainwater tanks,” but should instead provide information to homeowners considering installing tanks as the best option for promoting uptake.

In Australia, governments and water utilities have implemented a variety of financial incentive programs to encourage the installation of rainwater tanks.

The researchers discussed programs such as the National Rainwater and Greywater Initiative, a nationwide program that ran from March 2009 to May 2011 and provided up to $500 for each household installing a rainwater tank. From July 2007 to June 2009, Water Corporation (Perth, Western Australia) offered a $50 rebate for the installation of rainwater tanks of at least 600L.

“In some Australian jurisdictions rebates covered more than half the purchase and installation cost of a rainwater tank.”

“Recent research indicate that subsidies are likely to increase the adoption of decentralised water collection systems such as rainwater tanks … however, it is not clear how important installation cost is a consideration for consumers purchasing a rainwater tank.”

The full article is available here.